Private Members' Business. - Building and Construction Industry: Motion (Resumed).

Wednesday, 13 February 1985

Dáil Eireann Debate
Vol. 355 No. 11

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The following motion was moved by Deputy V. Brady on Tuesday, 12 February 1985:

That Dáil Éireann calls on the Government to take immediate measures to reverse the decline in the building and construction industry and in particular to prevent a rise in house mortgage interest rates.

Debate resumed on amendment No.1:

(1) To delete all words after “Dáil Éireann” and substitute the following:

“endorses the Government's consistent adherence, as reflected in the [2536] National Plan, to a strategy of sustained and soundly based growth in the economy; recognises the importance of the building industry in this process and notes the continued high level investment in the Public Capital Programme in roads, housing and other services affecting the building industry; and supports the Government in its continued efforts to redress the undisciplined management of the economy in the late 1970s and early 1980s and to create conditions of enterprise in the economy generally, from which the building industry will benefit.

Acting Chairman:  I understand that Deputy Lyons has taken time from 7 p.m. to 7.10 p.m.

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  In supporting the motion and in view of the time limitation I will make as many points as possible so that many of my colleagues who wish to contribute to this debate will be afforded the opportunity to do so. True to form under a Coalition Government the construction industry is suffering depression. That is confirmed by members of the construction industry. Each time we have a Coalition the construction industry suffers depression. No amount of propaganda will distort the facts. Are the Government in touch with reality? The Taoiseach may claim in Cork and elsewhere that this Government will have all the idle rusty JCBs in working order. How naive can the Taoiseach be while presiding over an official unemployment figure of 234,000? We all know however that the official figures do not always represent the true figures. The people are looking for encouragement, for hope, for leadership, for credibility and for employment. The people are seeking the Government decision that will give impetus to the economy and not, for example, the recent decision to raise the VAT from 5 to 10 per cent. One does not need to be an economist to realise that [2537] the house building industry is going through the worst recession since the second world war. About 53 per cent of building workers in the Cork area alone are unemployed. Most builders subcontractors, builders suppliers and others associated with the industry are hanging on by their fingernails. One would think that the Government would do something to stimulate production in that area.

However, it would seem that the Minister for Finance and other Government Ministers who live in their ivory towers have lost contact completely with what is happening on the ground. They propose to double the VAT charge on all houses. What is rather frightening is that the Minister showed a disturbing lack of knowledge of the operation of the VAT system. When he spoke on RTE radio on the morning after the budget he gave some figures which indicated that he thought the amount of Government grant was deducted from the gross price of a house before VAT was calculated, whereas it is calculated on the gross price. He also seemed to think that the reduction in the rate of VAT charged on concrete blocks would help the builders. This is also a mistaken view, as builders and all other traders claim a refund of all VAT charged to them, whatever the rate. It is the rate at which they are charged VAT on their sales that counts, and the Minister proposes to double that rate.

A very sad experience for those selling houses is to find so many young people interested in buying a house, but when they sit down to do the sums with them they find it impossible to bridge the gap between the price of the house and the finance that is available to the purchaser.

The recent proposed doubling of the VAT——

Acting Chairman:  I would remind the Deputy that he is allowed to make a passing reference to VAT but he cannot make any detailed analysis of the VAT.

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  I hope that the proposed doubling of the VAT will not occur and that the Minister will change his mind about it when the Finance Bill comes [2538] before the House. The recent proposed doubling of the VAT and the expected increase in building interest rates on house loans will break the camel's back. The publicity given to the fact that the interest rates by building societies will not increase by 2 per cent as expected but by 1¼ per cent is not acceptable. That 1¼ per cent is too much to expect house purchasers and mortgagees to pay.

Many of those young married couples interested in buying a new home will find that the prospect has been put beyond their reach. If this doubling of VAT is not rescinded it will result in thousands of additional building workers added to the number of unemployed and scores of builders, sub-contractors and builders suppliers will be forced to close their doors with further unemployment. This decision to double VAT on houses should get into the Guinness Book of Records because of its insensitivity. The official figures for unemployment in the construction industry in December 1984 was 45,607. This represents an increase of 3,542 on the December 1983 figure. This amounted to an increase in the level of unemployment of 8½ per cent in one year.

In March 1983 the rate of VAT on the construction industry was increased from 3 per cent to 5 per cent. It is estimated that this resulted in an additional £25 million in VAT receipts for the ten months of that year. It is further estimated that in 1984 £75 million was collected in VAT from the industry as a result of the increase in March 1983. The effect of increasing the VAT rate from 5 per cent to 10 per cent is that an additional £63 million will be collected over the period March to December of this year. Overall, the projected VAT receipts in 1985 from the construction industry will be in excess of £130 million.

From whom do the Government expect to realise this amount of VAT? Builders cannot carry the increase as evidenced by the de-registration of 170 builders during 1984. Even this very day, two more building contractors are gone in Cork. The intending purchasers are unable to meet the present prices let [2539] alone consider further increases such as that intended by the proposed increase of 5 per cent VAT.

As a result of the increase in VAT from 5 per cent to 10 per cent further jobs in the construction will be lost. It is estimated that it could be as high as 5,000 jobs. Furthermore housebuilding companies and general construction companies will cease to trade. The Government strategy as outlined in the national plan and the Programme for Government, which set a target of 30,000 houses per annum, will not be successful as a result of this increase in VAT and other measures to which I had hoped to refer. The stark reality facing the construction industry in general and the housebuilding industry in particular point to a continuation in the decline in the level of building activity and a decline in the numbers of people employed. Over the longer term there is no prospect of any significant reduction in the level of unemployment.

Minister of State at the Department of the Environment (Mr. F. O'Brien): Information on Fergus O'Brien  Zoom on Fergus O'Brien  In his address to the House last night the Minister concentrated on the various measures taken in relation to the major programmes of his own Department — roads, local authority house construction and sanitary service — to increase output and employment in the building industry. In speaking on the motion and the amendment I will concentrate on the other initiatives that have been taken to restore the fortunes of the industry by the Government particularly in the area of housing.

These initiatives are designed to increase demand particularly in regard to new private housing and the important areas of house maintenance and improvement work.

Last April the National Planning Board published their report which recommended the abolition of the £1,000 new house grant, the £3,000 mortgage subsidy and the severe curtailment of mortgage interest relief. The Government, however, regard the grant and [2540] mortgage subsidy as indispensable incentives to private housing and despite the severe financial restraints which continue to beset the public finances decided to retain the grant, the mortgage subsidy and the tax relief on mortgage interest. This decision was of course announced in the national plan Building on Reality. The Government have now decided to increase the £1,000 grant to £1,750 at an estimated cost of up to £5 million in 1985. The provision for new house grants in 1985 is now £16.5 million; for the mortgage subsidy £25.4 million and the estimated cost of mortgage interest relief is £70 million in 1984-1985. This amounts to a total of nearly £116.5 million.

The Government also announced in Building on Reality a number of other measures of direct benefit to the building industry of which the most widely welcomed was perhaps the £5,000 grant to encourage local authority tenants and tenant purchasers to buy private houses. The CIF have stated publicly that from the evidence available to them this grant has generated a high level of interest and “is having a significant positive impact on the level of demand for new housing”. Indeed I can confirm this.

I understand that in the the Dublin Corporation and Dublin County Council areas alone a total of 340 applications have been received to date. The first grant payments have been made by my Department and I am confident that interest in the scheme will remain high as tenants and tenant-purchasers realise the benefits that it makes available.

One of the basic aims of the scheme is to encourage tenants who can afford to do so to acquire private sector dwellings. Earlier incentives with a similar aim such as the low-rise mortgage and special category loan schemes had a limited success in this context. It is, I think, generally accepted that the assistance now available to tenants and tenant-purchasers who wish to move to the private sector is exceptionally generous.

In addition to the £5,000 grant, a qualified applicant may also be eligible for both the mortgage subsidy of £3,000 and [2541] the £1,000 grant bringing the total available to £9,000. The total of loans and grants available to any applicant may equal the gross price of a house. The new grant has therefore, removed the necessity to obtain a deposit to bridge the gap between the loan available and the purchase price of the house, a requirement which previously prevented many tenants from acquiring a private sector house. The fact that the grant and subsidy are available for both new and previously occupied dwellings is a further bonus which opens up a wider choice of dwellings of varying price levels to the prospective purchaser.

The introduction of the scheme will undoubtedly lead to greater activity in the private housing sector of the building industry and will affect the market for both new and previously occupied dwellings. But I am confident that the scheme will play a significant part in enabling local authorities to reach the Government target as set out in the national plan of rehousing 9,000 households per annum on waiting lists by increasing the number of dwellings available for reletting. It will also be welcomed by those persons on the approved waiting lists of local authorities who will now be rehoused much sooner than they had hoped.

I have been aware for some time of the major problem which housing authorities have been facing in trying to remedy severe structural faults in dwellings which were mostly built under the low cost housing schemes in the sixties and early seventies. In addition, there are, particularly in urban areas, many older housing schemes which have deteriorated over the years and are now in a state that requires immediate attention if they are not to be completely lost to the authorities' housing stock. Because of the other demands on their housing revenue funds, it was obvious that authorities were not in a position to meet the sizeable cost of remedying the structural faults which are affecting these housing schemes and it was for this reason that the introduction of a new scheme to deal with the situation was proposed in the national plan.

[2542] That is something the Opposition should well remember because they themselves initiated those low cost or cheap housing schemes, for which we are now paying a very high price.

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  A poor excuse for Coalition mismanagement.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  They should be ashamed of themselves.

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  Will the Minister get down to the 10 per cent VAT?

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The Deputy should know about these low cost defective houses because he has many of them in Cork. Under the terms of this scheme, capital, the repayment of which will be subsidisable to a maximum of 80 per cent, will be made available to authorities to carry out essential remedial works of a structural nature to groups of houses in the two categories I have just mentioned. The works involved will, depending on the extent of the problem and the remedy proposed be costly to carry out. However, I envisage that the authorities involved will plan to do them over a period of years. Initially a priority system will operate to enable the most urgent cases to be dealt with first.

A special provision is necessary to cater for schemes which contain houses which are being or have been purchased under a tenant purchase scheme. Under the arrangements that have been worked out, such tenant purchasers will be required to pay only half the cost of the essential remedial works while the balance will be borne by the authority and subsidised in the same manner as rented dwellings. In this way it should be possible to achieve the full rehabilitation of all such structurally defective housing schemes. I am confident that this new scheme will be the means of solving the problems created by the defective condition of local authority housing estates to which it relates. Structural repair and maintenance work by its very nature is labour-intensive and the new scheme will contribute to the maintenance of, and [2543] indeed should increase, employment in the building industry.

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  What about the present state of the construction industry?

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  We have to carry the sins of the people opposite.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  It will cause 5,000 fewer jobs in the current year.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Deputies are aware of the success of section 23 type incentives in encouraging the provision of new private rented accommodation. The Government will introduce in this year's Finance Act a scheme of tax incentives which will encourage the refurbishing of existing accommodation——

Mr. Gene Fitzgerald: Information on Eugene Fitzgerald  Zoom on Eugene Fitzgerald  A new budget.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  ——which is now or was previously let in multiple occupation. If the Deputy had listened to the Minister's budget speech, he would know that the Minister announced that.

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  An increase from 5 per cent to 10 per cent in VAT; we heard it.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  But obviously they were dumbfounded.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  Five thousand fewer people to be employed under the new scheme.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Much of the accommodation which will qualify under the new scheme is located in inner urban areas and is often in obvious need of rehabilitation. The proposed tax incentives will provide much needed additional investment and employment opportunities for the industry. The Government have also introduced arrangements whereby local authorities can purchase new or existing private houses to augment their existing housing programmes——

Mr. Gene Fitzgerald: Information on Eugene Fitzgerald  Zoom on Eugene Fitzgerald  Who wrote that?

[2544]Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  Some faceless bureaucrat.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  ——and the Government have also extended the site subsidy scheme to joint venture housing projects. This means that sites for joint venture housing will now be available at cost price less a subsidy of up to £1,000 per site. That is not the work of a bureaucrat. That is the work of a caring Government.

(Interruptions.)

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I believe that the delays and expenses associated with private house purchase can be excessive and can increase in some cases substantially, the gap between the maximum mortgage loan and the total cost of house purchase. Naturally this can be a significant barrier to marginal house purchasers. Therefore, we have established a high level committee representative of my Department, the Department of Finance, the Law Society and the Irish Building Societies' Association to seek ways to streamline house purchase procedures and reduce the delays and costs involved. That is something that has been needed for a long time and I am glad to be able to say that it is coming.

The Government have been fully supportive of the housebuilding industry through their continued commitment to both the local authority house purchase and reconstruction loan schemes and the Housing Finance Agency loan scheme, both of which make undoubted and important contributions to the building industry.

Mr. Gene Fitzgerald: Information on Eugene Fitzgerald  Zoom on Eugene Fitzgerald  A queer way of showing it.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The Housing Finance Agency, established by this Government when previously in office and about which, if I remember rightly, the Opposition were fairly sceptical at the time, has made major contributions to the house construction side of the building industry——

[2545]Mr. Gene Fitzgerald: Information on Eugene Fitzgerald  Zoom on Eugene Fitzgerald  It has, with 44,000 unemployed and 5,000 more to come.

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  Some contribution.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  ——in allowing more people on modest incomes to purchase houses.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  At an increased cost.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Excuse me, at a level of repayment which they can sustain——

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  They cannot meet it with the increased VAT.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  ——unlike the contribution of the people opposite. Of course they can meet it as a percentage of their income. I was wondering why Deputy Lenihan had come into the House.

Acting Chairman:  Might I remind visitors to the Gallery that they are very welcome there but we must not have interruptions from the Gallery or any applause.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I was wondering why Deputy Lenihan had come in, to play to the gods. I was wondering why he was in here——

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  It is hard to block them they are so frustrated listening to the Minister.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The Deputy should show some sense of responsibility.

Mr. S. Walsh: Information on Seán Walsh  Zoom on Seán Walsh  The Minister has a few in his own constituency.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I will talk to anybody in my constituency or anywhere else.

(Interruptions.)

Acting Chairman:  Order, please.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Since it began operations in September 1982 this low-rise [2546] mortgage scheme has advanced no fewer than 7,455 mortgages valued in excess of £143.6 million to the end of October last. That is a positive contribution. As Deputies will recall, its establishment represented the first steps taken in this country to provide house purchase facilities based on a system or repayment related to the individual purchasers' income and also represented the first systematic attempt to attract money directly into housing from pension funds and other institutional sources. In this regard the agency's success can be measured by the continuing interest of house purchasers in its loan scheme. It is fair to say that the industry itself recognises the agency's major contribution——

Mr. Gene Fitzgerald: Information on Eugene Fitzgerald  Zoom on Eugene Fitzgerald  Who wrote the script? It is heavy going.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I can assure the Deputy that it is heavy going listening to them over there. It is fair to say that the industry recognises the agency's major contribution in helping to sustain activity over the past two years.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  Can the Minister read it all right?

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Indications are that there is a continuing high level of demand for the agency's loans——

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  Can the Minister read it?

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Deputy Lenihan does not like the truth. It is sickening him. He should be ashamed for himself.

(Interruptions.)

Acting Chairman (Mr. Wyse): Information on Pearse Wyse  Zoom on Pearse Wyse  Order, please.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  The Minister should not be reading a bureaucratic script.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The Deputy should be ashamed of himself; he is acting like a blackguard in the House.

[2547]Mr. S. Walsh: Information on Seán Walsh  Zoom on Seán Walsh  Through the Chair, I think that remark was uncalled for.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The building industry can, therefore, look forward to the continued effect of the agency's operations over coming years in demand for new private houses.

Acting Chairman:  Just a moment, please, Minister.

Mr. S. Walsh: Information on Seán Walsh  Zoom on Seán Walsh  I would not have expected that word to be used by the Minister; it is uncalled for from a Minister, irrespective of——

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  It is not surprising coming from him.

Acting Chairman:  I might interrupt the Minister for a moment. I think he should rephrase what he said about a blackguard and I want no further interruptions thereafter. I would ask the Minister rephrase that statement.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Why would you like me to rephrase it, Sir?

Acting Chairman:  The word black-guard——

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I believe this brings little credit to Deputy Lehihan and to the House.

Mr. Gene Fitzgerald: Information on Eugene Fitzgerald  Zoom on Eugene Fitzgerald  Does the Minister resent people in here listening to what he is saying?

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  No, we are all aware that people can come——

Acting Chairman:  Order. First of all, no applause from the gallery please; you may listen to the debate but no applause. I would ask the Minister to rephrase his remarks about a blackguard and then we will get on with the discussion. I want no further interruptions.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I would say that [2548] Deputy Lenihan is misbehaving himself in this House by playing to the gallery.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  Tell us the truth.

(Interruptions.)

Acting Chairman:  No further interruptions, please.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  As I have already stated the Government are also committed to providing a satisfactory flow of mortgage finance through the local authority house purchase and reconstruction loans schemes. A measure of their commitment is the increase in the amount provided in the Public Capital Programme for 1985 which is £90 million which represents an increase of some 9 per cent over that provided in 1984. Borrowers under this scheme have a decided benefit over building society and other borrowers in that the mortgage interest rate is fixed over the term of the loan. This contributes greatly to stability and does much to increase demand for houses. Also it should not be forgotten that, in the case of both these schemes, the people obtaining mortgage finance are people on modest incomes who would not normally be catered for by the commercial lending agencies, who, in the absence of these schemes, would not enter into the private housing market.

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  Tell us about the VAT.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The important point I wish to stress is that the Government have been and will continue to provide substantial funds for house purchase from public sources, thus enabling many people on lower incomes to buy their own houses.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  What clerk prepared that script for the Minister?

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  This will help in an important way to maintain the level of demand for new houses and the scheme will continue to be of considerable [2549] importance from the point of view of the building industry in the years ahead.

The building societies have over the years made a major contribution to the private housing sector in Ireland. In recent years they have been providing over 70 per cent of the mortgage finance for house purchasers and the amount provided in 1984 was in the region of £415 million. This funded about 17,600 loans, of which nearly 7,000 were for new houses. The availability of house purchase finance on such a scale is a major asset to society in that it enables an exceptionally high proportion of our people to own their houses. It also, of course, greatly benefits the building industry by funding the continuing demand of our young population for new houses as they set up home.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  The Minister is reading that page again.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The maintenance of an adequate supply of mortgage finance from the societies is, therefore, an important consideration. Societies must secure a good inflow of funds from investors, and here they are in competition with other financial institutions. Unless they can offer a competitive rate to investors they may lose existing moneys invested with them or fail to secure new investment, and this will ultimately be to the detriment of house purchasers and of the construction industry. While acknowledging the need for societies to continue to be an attraction to investors, the Government must also ensure that the impact of higher interest rates does not bear too heavily on present and future house purchasers.

The societies showed considerable restraint when in December last they acceded to a request from the Minister for the Environment to postpone a decision on an increase in their interest rates. Over the past week they discussed their position on several occasions with the Minister for the Environment and the [2550] Minister for Finance and these discussions culminated in last night's announcement of an increase in the mortgage rate of 1.25 per cent which is considerably lower than the 2 per cent widely predicted by many commentators.

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  Another blow against the industry.

Acting Chairman:  Order, please.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Yes, another blow against you. Deputy Molloy was talking about 2 per cent last night.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  On a point of order, we want to hear what the Minister has to say but he is muttering into a brief and we cannot hear him.

Acting Chairman:  That is not a point of order.

Mr. Gene Fitzgerald: Information on Eugene Fitzgerald  Zoom on Eugene Fitzgerald  There are 44,000 unemployed.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  All these initiatives which have been taken by this Government in the housing area are contributing to the maintenance of demand in the housing sector of the building industry and will increase output and employment over the next few years, despite Fianna Fáil's dismal predictions.

In the course of his contribution to this debate last night Deputy Molloy referred repeatedly to the effects on the construction industry of the increase in VAT on building output from 5 per cent to 10 per cent. I hope I will be permitted tonight to set the record straight on the effects of the VAT change on the industry particularly in view of the widely exaggerated and, if I may say so, irresponsible claims that have been made by Opposition Deputies. The increase in VAT on building output must be judged not as an isolated measure but in the context of the overall reform of the indirect tax system of which it is just one component. Unfortunately, the analysis of many of those critical of the VAT increase fails to [2551] appreciate the context of the change and the full extent of the alleviating measures taken by this Government.

The need for fundamental reform of the VAT system in Ireland has been obvious for some time. The system as it has evolved with its narrow taxation base, its bewildering array of different rates and the unacceptably high level of the so-called “standard” or 35 per cent rate has very little to recommend it.

Mr. Calleary: Information on Seán Calleary  Zoom on Seán Calleary  Who set up the 35 per cent rate?

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  The Minister should not be interrupted.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  At the very least, it is complex, inefficient, expensive to administer and it also provides a considerable incentive for evasion. By reducing the number of rates to three — zero, 10 per cent and 23 per cent — the system will be considerably simplified bringing with it——

Mr. Gene Fitzgerald: Information on Eugene Fitzgerald  Zoom on Eugene Fitzgerald  Five thousand out of work.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  ——an element of administrative and economic efficiency and the incentive to evade, a factor with all tax systems, will have been substantially reduced.

(Interruptions.)

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  This major reform of the indirect tax system will provide a substantial stimulus to output and employment across a wide range of activities. It is not surprising therefore that the reform of the VAT system has been so widely acclaimed by business and personal consumers alike and, if I may say so, by Members of the Opposition.

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  Is the Minister serious? Surely he cannot believe that?

[2552]Mr. Calleary: Information on Seán Calleary  Zoom on Seán Calleary  On a £30,000 house there is an increase of £1,500.

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  This is a confined debate and there should not be interruptions.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Having agreed on this course of action in relation to the VAT system the Government had to decide the appropriate rate to charge on building output given that the 5 per cent rate was to be abolished. The choice lay between increasing the present rate to 10 per cent or reducing it to zero, thereby removing building output from the taxable base for the VAT system. The Government decided against this latter course not only because the revenue loss would have been substantial but also, perhaps more importantly, because any erosion of the already narrow VAT base would have further distorted production and consumption patterns and increased inefficiency, which is the exact opposite to what the reforms in the VAT system are designed to achieve. Instead, the Government decided to charge VAT at the 10 per cent rate on building output and to introduce measures to alleviate, as far as possible, any adverse effects of this charge on the industry.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  That is the joke of the century.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  You are a joke. In assessing the effects of the increase it should be borne in mind that a considerable part of total building output will not be affected by the change. The output of direct labour units of local authorities and Government Departments will not be affected. Similarly, the output of private individuals building their own houses will not be affected. Demand for building in the agricultural sector, in the industrial and semi-State sector, and in the commercial sector is unlikely to be affected because most enterprises in these sectors can reclaim any VAT they pay including VAT on buildings.

[2553]Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  What about the public capital programme?

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The area of the building industry that will be affected is publicly funded construction work carried out by private contractors and private housing built by contractors.

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  Which is the bulk of the work.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  As regards publicly funded construction work, I am confident that the increase in the level of public capital programme expenditure affecting the industry over the three year period 1985 to 1987 set out in the Government's national economic plan is sufficient to compensate at least in part for any adverse effects of the VAT increase. This is particularly the case as regards the programmes of my own Department——

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  It shows a drop of 10 per cent.

Mr. Calleary: Information on Seán Calleary  Zoom on Seán Calleary  Who wrote that speech?

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  The Minister should be allowed to make his speech without interruptions.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  To alleviate any difficulties that might occur the Government have announced a 75 per cent increase in the grant for first time buyers of new houses from £1,000 to £1,750.

Mr. Calleary: Information on Seán Calleary  Zoom on Seán Calleary  For a £30,000 house there will be an increase of £1,500, or £750.

(Interruptions.)

Mr. Flynn: Information on Pádraig Flynn  Zoom on Pádraig Flynn  The Minister should dismiss the author of that document.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  For the house costing £30,000, the increased grant will offset by half the likely rise in price due to the VAT change. I am confident that in the [2554] case of many first time buyers relying on building society mortgages part, if not all, of the price increase will be absorbed by higher mortgages and the increased grant will result in a reduction in the balance the intending purchaser has to find; that is the amount of the deposit he or she will need.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  This is embarrassing.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The size of the difference between the price of the dwelling and the maximum loan available is often of greater significance than the actual price of the house. Indeed some independent commentators are forecasting an increase in activity in the area of the housing market catering for first time buyers as a result.

Mr. Calleary: Information on Seán Calleary  Zoom on Seán Calleary  Registrations are down 50 per cent already.

Mr. Flynn: Information on Pádraig Flynn  Zoom on Pádraig Flynn  The Minister should take a breath. He needs it.

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  The Minister should be allowed to make his speech without interruption.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Fianna Fáil are concerned about a 5 per cent increase but from 1978 to 1980——

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  It is a 100 per cent increase. The Minister should get his figures right.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  It is a 5 per cent increase.

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  It is a 100 per cent increase.

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  Order, please.

(Interruptions.)

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I want to put the record straight. Deputy Molloy did not come in until I had finished speaking about low cost housing. That is something he buried his head about. From 1978 to [2555] 1980 house prices increased by 80 per cent under the Fianna Fáil administration. Now they are lamenting a 5 per cent increase when they, as a Government, increased house prices by 80 per cent. They have a neck. They have a cheek to come into this House and say that.

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  The Minister is talking rubbish.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I am not talking rubbish. The facts are there.

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  Order, please.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  We have the price index link down to 6 per cent. We are stabilising house prices.

Mr. Lyons: Information on Denis Lyons  Zoom on Denis Lyons  Stabilising what?

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  Order, please. This is disgraceful.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The Fianná Fáil Government presided over an 80 per cent increase and they have a neck to complain now.

Mr. Calleary: Information on Seán Calleary  Zoom on Seán Calleary  Where is the real Minister?

Mr. Flynn: Information on Pádraig Flynn  Zoom on Pádraig Flynn  The Minister will be building one class of house — a dog house.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  We are now stabilising house prices.

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  Give us the facts.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  We built 7,000 local authority houses this year.

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  This is disgraceful. The Minister should be allowed to make his speech without interruptions.

[2556]Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The Deputies opposite have an audience and so they play to the gallery to make a mockery of this House. They should be ashamed of themselves. We have announced an increase of £750 on the grant.

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  The rules of democracy should be observed.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Fianna Fáil are smugly playing to the gallery but nobody will buy that from them. We will stand over our house building record.

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  The Minister should conclude. His time is up.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I was hoping for a few minutes injury time.

(Interruptions.)

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The figures are there if the Deputies opposite would take the trouble to look at them.

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  I am calling Deputy Fahey.

Mr. F. Fahey: Information on Frank Fahey  Zoom on Frank Fahey  It is very difficult to take in the points which the Minister has made and it is hardly credible that a Government Minister should make such statements in view of the situation in which the building industry finds itself as a result of policies pursued by the Government. Building on Reality stated that we would have a tax system which would be conducive to growth in the construction industry. Building on Reality went out the window recently——

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  It is still to the good.

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  In accordance with the rules of this House, visitors to the Gallery are very welcome but we have [2557] rules here which state that visitors are not allowed to contribute to debates either by applause or protest.

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  Unless I get cooperation, I will have no alternative but to rely on the rules of the House.

Mr. F. Fahey: Information on Frank Fahey  Zoom on Frank Fahey  The construction industry was dealt a severe blow recently when taxation was increased by 100 per cent. It is hard to believe the explanation given for this increase by the Minister for Finance, the Minister for the Environment and the Minister of State, Deputy O'Brien, here tonight. The Minister mentioned facts, but after the budgets of 1984 and 1985 the tax take on a £30,000 house has increased from £900 to £3,000. The attempt of the Minister for Finance to explain that it was only a matter of a couple of hundred pounds increase is blatantly incorrect and has been proved so by submissions from the construction industry. The statements the Minister made on the night of the budget are incorrect. Since the eve of the 1983 budget, the gross price of a £30,000 house has increased to £33,000. Is that the kind of tax system conducive to growth in the construction industry? If it does nothing else, it should bury Building on Reality once and for all. There are many consequences of the Government's decision to increase this level of VAT but the main one is that many housebuilding firms who had been hanging on by the skin of their teeth in the depths of a recession by reducing profit margins and allowing people to be made redundant will now have to close their doors. The Minister can talk about facts and figures but that is the reality.

I find it reprehensible that one Minister admitted to the CIF in his constituency that he did not realise the implications of the increase from 5 per cent to 10 per cent. It is difficult to understand how a Government Minister did not understand the implications. Indeed, it is clear that he was not the only Minister who did [2558] not realise the implications because the Budget Statement said that the price of concrete was being increased by 10 per cent. The Minister for Finance did not realise the impact of this decision. The CIF submitted recommendations to the Government before the recent budget but none of their proposals were found suitable to include in the budget. The Minister should take some facts and figures into account. The total tax take on a £40,000 house is £15,680. The Government are trying to kill off investment. What are they doing to replace it? The implication of the decline in house building which will take place as a result of the Government's policies will mean a rise in the demand for local authority housing. This means that the current level of local authority house building will have to increase by a minimum of about 3,500 units per annum. Public capital expenditure on local authority housing will have to be increased by a minimum of 55 per cent or £116 million per annum to build houses to make up for the decline in private building.

The Exchequer subsidy on new local authority houses will now have to be increased to £4,420 per house for every additional house completed. The housing waiting list, which currently stands at 33,000 will increase dramatically. Those are the direct consequences of the Minister's decision in regard to building in the private sector. The subsidy for local authority houses is 60p in every pound for houses built by the State compared with 10p in the pound for every private house. The Government are turning their backs on the little bit of investment into private housing and on the people who are on building society mortgages.

The Government were very kind in inviting the representatives of the building societies to meet them to discuss their submission. The Minister for the Environment sat down with them and told them how good they were to keep down interest rates. However, the Minister then stabbed them in the back by the way he dealt with them in the budget. The result is a 1¼ per cent increase for householders many of whom are unable [2559] to continue with their repayments because they are either unemployed or are experiencing a decrease in real earnings. What will this extra increase do to these people? The Minister put up a very strong defence tonight but there is no defence for the Government's attitude towards the construction industry. The Minister of State deserves the kind of treatment he will get from everybody in the construction industry be it sooner or later. It is clear that he is not too anxious to change his stance or see reality when he can make the kind of speech he made tonight. It is unfortunate that he cannot accept reality. He is taking people's lives in his hands and destroying them. I appeal to the Minister of State to change his attitude once and for all.

Mr. S. Walsh: Information on Seán Walsh  Zoom on Seán Walsh  I thank Deputy Fahey for affording me an opportunity to speak. I support the motion which was tabled by our chief whip, Deputy Brady. When the national plan was introduced the Taoiseach and a number of Ministers used one phrase more than any other when recommending the plan to the people. They said that as a result of the plan the JCBs would roll again. We heard that time and time again. They have rolled but it was into the builders' compounds at Christmas never to come out again. A number of them may have been taken out and used in the demonstration today. There is no point in the Minister of State accusing this party of renting a crowd to take part in the demonstration today. They were there to show their anger——

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  I did not say that.

Mr. S. Walsh: Information on Seán Walsh  Zoom on Seán Walsh  —— and their feelings on behalf of the builders.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Play to the gods.

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  I ask the visitors in the gallery to please observe the rules of the House.

Mr. S. Walsh: Information on Seán Walsh  Zoom on Seán Walsh  I have been associated with the building business in Dublin for [2560] the last 30 years and I have never rented anyone. I want that made clear. These people demonstrated through the city today to show their anger and their feelings against the Government and the sad situation of the building industry. In 1957, following three years of Coalition Government, the country experienced a recession in the building industry. There are a large number of small builders in part of the constituency which the Minister of State represents, that is, Walkinstown, Greenhills and Perrystown. If he went through that area he would see the plight of the many small builders there.

In 1957 we all felt the building industry had suffered the greatest recession ever. However, the building industry was never at such a low ebb as it is now. How many builders both large and small have closed their gates recently? What effort did the Government make to keep these firms going? It does not matter what constituency, town, village or county one goes to one hears of carpenters, bricklayers and builders' labourers being idle. It is the duty of a Government to provide work for the people.

The building industry was always taken as a barometer of the progress of the country. We always heard it said that if the building industry was going well everything else was going reasonably well. The Minister mentioned the Fianna Fáil Government of 1978 and quoted some figures and percentages. How many people were employed in the industry at that time? There were no demonstrations in the city. Today was the first time the builders ever came on to the street to show their anger against a situation which was created by the Government and no one can deny that. The Minister of State can quote whatever figures and percentages he likes but he must face reality. In their plan the Government spoke about building on reality. That has gone out the door. I ask the Minister of State to take some steps, even at this late stage, to give the builders and workers some hope. Almost 250,000 people are unemployed and 44,000 of them have been made redundant from the building industry. There is no point in trying to criticise [2561] other people. The Minister of State is part of the Government of the day and is one of the Ministers in the Department of the Environment. It is his duty and responsibility to give some lead to the industry and to forget about the figures and percentages.

As far as the builders are concerned they have always played a very important role and acted in a very responsible way. What have the Government done since taking office in November 1982? They have closed building firm after building firm. Many small builders have had to leave the country.

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  The Deputy's time is up and I must now call Deputy Leyden.

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  On a point of information, does the Minister for the Environment or the Minister for Finance intend to be present for the remainder of the debate?

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  They do not care.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The Minister for the Environment is in the Seanad to take a motion there.

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  What about the Minister for Finance?

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  It is not the area of responsibility of the Minister for Finance.

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  The Minister of State should be in the Seanad.

Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  The Minister for Finance really did it.

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  This is not in order.

Mr. Leyden: Information on Terry Leyden  Zoom on Terry Leyden  It was the Minister for Finance who increased the cost of building in the budget. I compliment the builders and workers who came here today to protest about this very unfair tax. I have a long association with the building industry from my constituency and through family commitments. The men [2562] who are here today would prefer to be on the building sites building houses for the people. They came here out of frustration and anger. I compliment them on their patience, commitment and the fact that they are present tonight. It was very hard for them to keep their patience when they heard what the Minister of State said tonight.

The Taoiseach made a famous statement last year that he would dust off the JCBs. That clear statement has now been overturned. How many U-turns can the Taoiseach make? He stated that unemployment was coming down. Last night he stated that the crime rate was coming down. Everything the Taoiseach said was wrong because everything is reversed. If he said that tomorrow would be sunny I would advise you to bring an umbrella. That is the kind of Taoiseach we have.

I would remind the Minister of State that this industry was dealt two major body blows in the last two weeks. The first was the proposed increase of 5 per cent in VAT on buildings from 1 May 1985 and the second was the increase in mortgage rates of 1¼ per cent from 1 March 1985. In the building and allied industries 47,000 people have lost their jobs over the last few years. Many of them have emigrated. Many went to the Middle East to obtain employment. As a result of the provisions in the budget it is estimated that over 5,000 people who are at present employed in the industry will be unemployed at a cost to the State of something in the region of £25 million per annum.

The Minister for Finance reduced VAT on concrete blocks from 23 per cent to 10 per cent. This will not have a beneficial effect on the building industry as all registered builders will reclaim that VAT but it will assist those who operate the black economy. They are in a position to work without paying tax. Builders who are registered, who are members of the federation and who are giving employment will not benefit by this. It was given as some kind of ploy to cover up the fact that VAT was being increased by 100 per cent in the budget. A healthy building industry is good for the economy. It is a [2563] labour-intensive industry and the majority of materials used are Irish. The present increase will add between £900 and £1,600 to the cost of a house. The proposed increase in grant of £750 for first-time house purchasers will not compensate for the increased cost of houses.

The role of the building trade in the economy should be recognised by the Government. It is a sad fact that every time we have a Coalition Government there is difficulty in the building industry. Every time we have a Coalition Government there is massive emigration. I should like to remind the Government that in the past 11 years there has been a Coalition Government in power for more than seven and a half years. That fact has not been recognised. Any difficulties that exist are the responsibility of the Government. They cannot put the blame on Fianna Fáil as the Opposition. When we were in power we always supported the building industry because of its contribution to the employment of male labour and the creation of employment generally.

In the past few years thousands of workers in the building industry have lost jobs and many builders have gone out of business. For the first time in 50 years a building firm in Roscommon has gone into liquidation. Associated businesses connected with the supply of goods to the industry are also in serious difficulty. We will be facing a very grave situation for the rest of 1985, in 1986 and beyond that date unless the Government relent and decide to reverse their decision. They should allow the building industry to thrive. The 5 per cent tax was accepted by the industry but the 10 per cent is the straw that will break the camel's back. We appeal to the Government to relent on their policy and to reverse their decision. I think the majority of the Cabinet were not aware of the hardship this tax will impose. I do not think members of the Cabinet are au fait with the problems facing the country. They live in ivory towers, unaware of the damage they will do by the imposition of this taxation.

[2564] The public capital investment programme has been reduced by 5 per cent as a result of this increase. Private investment has decreased. The section 23 incentive has been abolished and the increase of tax on building societies has led to a further increase in mortgage rates. I take this opportunity to ask the Government to reverse their policies and to give the builders an opportunity to create employment in their industry. They will do that if they are given an incentive. We ask the Government to go along with our motion and to support it. I can assure them it will have beneficial effects for the whole economy.

Mr. M. Cosgrave: Information on Michael Joe Cosgrave  Zoom on Michael Joe Cosgrave  I should like to congratulate the Government, the Minister for the Environment and the Minister for Finance on their efforts with the building societies in the past few days with regard to mortgage rates. The two Ministers spent the best part of three days negotiating with the building societies and they came out of it well. In England the building societies increased their interest rates recently and the commercial banks in this country also increased their rates before Christmas. Because of this there was severe pressure on building societies here to increase their rates even before the budget. The Ministers' efforts should be praised because they have done a very good job.

The Government's efforts are there for all to see. The scheme providing for a grant of £5,000 to local authority tenants has produced 340 applicants to Dublin Corporation and Dublin County Council. This is a fair measure of the activity in the building trade and it will improve as time goes on. With this scheme a house deposit is not necessary. In addition to the £5,000 grant, an applicant is also eligible for the mortgage subsidy of £3,000 and the £1,000 grant, making a total of £9,000. That must generate considerable extra activity in the trade.

There is no point in the Opposition calling for large amounts of additional expenditure to boost the building industry. That might mean some increased activity in the short term but it [2565] will not solve the problems of the industry in the medium or the long term. In a short time it would put public finances into disarray, increase the budget deficit and the public sector borrowing requirement and, worst of all, it would force up the already high level of taxation. That would be a recipe for disaster. The Minister is doing everything in his power to generate activity in the building trade and that is evident from the amount of grants that have been provided for in the budget and that have been in operation in the past year.

Mr. R. Burke: Information on Ray Burke  Zoom on Ray Burke  I am sure the House will excuse me if I do not fall over agreeing with Deputy Cosgrave about the good job the Government are doing. Since this Government came to power over two years ago, on a deal cobbled together after a general election but without any mandate from the people, every section of the economy has suffered — to the extent that now we have 234,000 people officially unemployed. Businesses are closing daily, there is depression throughout the land and the curse of emigration once again has been laid on the shoulders of the people. Every section has suffered but one of the principal victims of Coalition mismanagement has once again been the building industry.

Since this Government came to office the building industry has suffered a 25 per cent drop in activity and now at least 50,000 building workers are unemployed. In 1984 alone, the increase in unemployment was 8½ per cent as compared with the previous year. Unless the Government change their budget decisions, this year a further 5,000 people who are employed at present in the building industry will find themselves on the dole. These are not Fianna Fáil figures. They are the figures and the estimates of the construction industry.

I want to make one thing clear. It is the effect of budget and Government decisions that has the building industry in the shape it is in today. With the industry on its knees after two years of mismanagement, with a 25 per cent drop in activity when everyone knew it was [2566] in trouble, all people expected a major boost for the industry in the budget. What did we see? With the industry on its knees the Government imposed two body blows on it. First, they imposed a 100 per cent VAT increase when they raised the rate from 5 per cent to 10 per cent and there was also the proposal regarding increasing the composite tax rate for building societies. This was in addition to the crazy borrowing policy that has been followed by this Government in the past 12 months. All of this was at a time when the Government should have been helping the industry which is of prime importance to the Irish economy. It is the one sector that can give an immediate boost to employment prospects. If this Government, instead of taking the action they took, had given even a minor boost to the industry, the industry would have reacted and would have taken many thousands off the dole queue.

In 1983 this Government, again in their typical Coalition fashion apparently detesting everything about the construction industry, increased VAT from 3 per cent to 5 per cent. It is estimated that this resulted in an additional £25 million in VAT receipts for the ten months of that year out of an already damaged construction industry. It is estimated further that in 1984, £75 million was collected in VAT from the industry as a result of the increase in March 1983. The effect of the increase in the VAT rate from 5 per cent to 10 per cent is that an additional £63 million will be collected over the period March to December and the impact of deferring the increase until 1 May would reduce it to approximately £50 million. That is a further £50 million out of an industry which is already on its knees and not prepared to take any more and has demonstrated that in the manner in which it came to the streets today. It is the one sector of the Irish community that has really come on the streets. The surprise is that others have not done so before them. They are men who would prefer to be on their building sites doing a day's work, building houses to sell to young couples anxious to buy. They feel so strongly about this Government's action [2567] that they came out today with nearly 500 of their vehicles and in their thousands they marched down the main streets of this city.

The overall projected VAT receipts in 1985 from the industry that could do most to tackle unemployment, if this Government could only see the light, will be in excess of £130 million; and we are asked then in the Government's amendment to praise them and accept that the Government have been doing a good job in relation to the construction industry.

What did we expect from a Government led by a Taoiseach who at his Ard-Fheis speech last October-November spoke of dusting off JCBs? When I spoke on the budget here last Thursday I said that builders do not expect their JCBs to be dusted off; they expect them to be on a construction site moving muck because that is what they are built for and that is what they are involved in. The Dublin 4 mentality of this Taoiseach and Government has the construction industry in the trouble it is in today as a result of these budget decisions.

A further nail in the coffin of the industry and of prospective home buyers is the rise in mortgage interest rates brought about as a result directly of Government decisions, one in the budget with regard to the increase in the take on the composite rate on the building societies part of which they have had to back track on, and the other the crazy domestic borrowing policy followed by the Government in the last 12 months. Let us look first of all at the borrowing policy. This Government decided last year for ideological reasons to do most of their borrowing in two areas neither of which made sense. One was the American market when the dollar was very strong and this imposed massive repayments, away above what we should be making, on the Irish people.

More important from the domestic and interest rates point of view of the mortgage holders and also from the point of view of the interest rate having to be paid by the builders on their construction work, the Government have driven up [2568] interest rates on the Irish market to historic levels. They have no idea how the economy should be managed and as a result of their policies have driven up domestic borrowings. This in turn has had to be passed on by the building societies.

The building societies took a very constructive, positive approach at the request of the Government in December when they were entitled to an increase in their interest rate; they held back their increase. What response and thanks did they get in the Budget Statement? The Minister for Finance came into this House and in a most insulting manner talked about not only imposing the decision to increase the composite rate from 75 per cent to 85 per cent but said to the building society movement that if they did not like it they could open their books and we will let the Revenue Commissioners have a look at them. The building society movement responded rapidly. Then we had the farce of the Minister for Finance and the Minister for the Environment trying to undo the damage over a series of four meetings, and we have had a complete U-turn in regard to the budget proposals of only a fortnight ago. Despite what the Minister for Finance said in his Budget Statement, they changed the composite rate and because of their borrowing policy the building society movement have had no choice but to increase the mortgage rate by 1.25 per cent.

What is the effect of that and how do the community feel about it? Let me quote from this evening's Evening Press:

The mortgate rate increase was just another turn of the screw on a devastated building sector, a construction industry chief warned today, as contractors converged on the capital to vent their frustration.

There was never such anger from builders at the policies of the Government, which were strangling the industry, and today's protest march in Dublin was an inevitable demonstration of that despair, said Mr. Michael [2569] Green, director of the Construction Industry Federation.

“Quite simply the industry is in a shambles,” said Mr. Greene,....

That is not Fianna Fáil talking, I tell the Minister of State. That is the CIF director, Mr. Greene. He continued:

Over 25,000 jobs have been lost in the industry in the past three years and in all my years in the sector I have never encountered such a reaction....

As well as the damage done to the industry we have the social damage being done as a result of the budget decisions of this Government which have driven mortgage interest rates to the levels they are at today. Building society chiefs highlighted how the depressed industry and property market are leaving them with no option but to repossess houses from bad debtors. That is not Fianna Fáil's claim. That is the building society movement speaking for itself. They say that they regret that they must repossess homes from families who struggled to put a roof over their heads and who now through no fault of their own find themselves in difficulties because of total mismanagement by this Government who are insensitive to the problems of families and of the construction industry generally. Those families are faced with the threat of repossession of their homes and this Government and some of their Ministers and spokesmen are asking us to support an amendment which praises them for their management of the construction industry in the last two years.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  That is right.

Mr. R. Burke: Information on Ray Burke  Zoom on Ray Burke  The Minister of State has some brass neck.

(Interruptions.)

An Ceann Comhairle: Information on Thomas J. Fitzpatrick  Zoom on Thomas J. Fitzpatrick  I cannot have any interruptions.

[2570]Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  He has been sent in for that purpose.

Mr. R. Burke: Information on Ray Burke  Zoom on Ray Burke  The amendment asks us to recognise the record of the Government for the past two years. The recognition of that record is to be found on the streets today. It is to be found in every opinion poll that is published. The Irish people will not be diverted by the type of sham legislation the Government are trying to bring in. Let us consider the record. In the public capital programme, which affects the construction industry in real terms, investment has decreased dramatically. In real terms there was a 15 per cent decrease in this respect in 1983, a further 3 per cent decrease in 1984 and a further 3½ per cent decrease in 1985 — and that is before the 100 per cent increase in VAT. As to adjustments for changes in VAT, the public capital programme decrease was 16.5 per cent in 1983, 3 per cent in 1984 and 6.5 per cent in 1985. That level of the capital programme is a major factor in determining the amount of building activity in any year. The reductions I have outlined together with the sharp decline in private investment has resulted in the dramatic decline in the industry's fortunes. The sharp decline also in other building activity such as industrial and commercial and in projects funded by way of the public capital programme has increased the importance of housing in the total output of the building industry.

The housing factor is a table of disaster. In 1981, after four years of Fianna Fáil administration, housing completions reached a record 28,917. In 1983 the corresponding figure was 26,138. In 1984 the estimated figure is of the order of 25,000. In the private house building area the figures are even more significant and more damning of the Government and their policies. In 1981 house completions in the private sector numbered 23,167. For 1984 the provisional figure is 18,000. The speculative area is very important in the Dublin area because it provides young couples with the opportunity of buying homes for themselves assuming that interest rates are in any way within [2571] reach but in that area the reduction has been from 10,763 in 1981 — that was after four years of Fianna Fáil Government — to 7,435 in 1983 and to 6,650 in 1984. Yet in their amendment the Government ask us to praise the Ministers for the job they have done in building up the construction industry. The Government are living in ivory towers and of course if those towers were to be built today they would attract an extra 100 per cent in VAT. What happened to the Government's target of 30,000 house completions in the context of employment?

Mr. Molloy: Information on Robert Molloy  Zoom on Robert Molloy  Hear, hear.

Mr. R. Burke: Information on Ray Burke  Zoom on Ray Burke  The Tánaiste left the Department of the Environment because he did not like the workload there, but on his first day in the House as Minister for the Environment we asked him about the 30,000 completions. He assured us that he would ensure there were 30,000 completions and that if that target was not reached the Labour Party would be taking action in Government. Even the public housing programme is a disgrace. If we are to take the Public Capital Programme, in this year alone, it is estimated that 6,000 fewer houses will be built. This is from a Government made up of some Labour members.

The decline in the private house building sector has been most significant on the speculative market. This results directly from Government decisions. There has been a decline in disposable income because of Government policies. First there was an increase in VAT on building from 3 to 5 per cent and now there is an increase in this respect to 10 per cent. That represents a 100 per cent increase. There was a reduction in mortgage relief in April 1983. There has been the introduction of a residential property tax. Now there is to be an increase in mortgage interest rates as well as the VAT increase. In addition to affecting the house buyer, the increases in bank and mortgage interest rates will affect the house builder because he must borrow money in the market place. He must borrow, not from [2572] the domestic banks but from the commercial banks. As a result of Government decisions which have caused interest rates to increase up to 20 per cent, the builder must borrow money at that high rate and even at a higher rate because the commercial banks operate on a three month calculation basis so in their case the interest rate would be as high as 23 per cent.

In addition to the interest rates and other aspects I have mentioned, the cost of housing has been increasing also as a result of indirect Government taxes and levies. The level of direct Government levies and of local authority and semi-State charges has damaged further the construction industry. For instance, service charges in respect of water and sewerage have increased the cost of houses. A contributory factor also is the level of development bonds. Charges for ESB connections and for all other services have been a contributing factor also in this respect.

The decrease in housing construction has resulted in 170 building firms in 1984 ceasing operations. This figure is confirmed by the figures for the housebuilding guarantee scheme because for the first five weeks of 1985 there was a decrease of 50 per cent compared with 1984 in the number of homes registered under that scheme. In the real world, as distinct from the fantasy world in which apparently the Government live, everybody recognises the plight of the building industry. But even in three instances in the Government's economic background to the budget there is a recognition that the industry has declined. If it is not too late to avoid a disaster I call on the Government to make two further changes in the budget. They have already made a series of changes in their proposals in the past couple of weeks. I am asking them to admit that the increase in the VAT rate from 5 to 10 per cent was a disastrous mistake and should be rectified at this stage.

Deputies:  Hear, hear.

[2573]Mr. Lenihan: Information on Brian Lenihan Snr.  Zoom on Brian Lenihan Snr.  Deputy Burke is putting that right up to the Government.

Mr. R. Burke: Information on Ray Burke  Zoom on Ray Burke  I am asking the Government not to implement the VAT increase and to subsidise the mortgage rate while interest rates are at such high levels.

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  Is the Deputy telling us to borrow more money?

Mr. G. Collins: Information on Gerard Collins  Zoom on Gerard Collins  The Government should resign.

Mr. R. Burke: Information on Ray Burke  Zoom on Ray Burke  I am asking the Government to increase the capital programme by at least £200 million so as to give a shot in the arm to the building industry. Further, I ask that the Ministers for Finance and the Environment meet with representatives of the building industry with a view to putting together a proper package for the health of the industry, to put it back on its feet.

Now that the Taoiseach, the expert on figures, has arrived may I ask him to consider people rather than figures for once? There are families whose homes will be repossessed. There are fathers of families in jobs but who will not be employed by the end of the year because of these budgetary proposals.

[2574]Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  The people opposite could never get their figures right.

Mr. R. Burke: Information on Ray Burke  Zoom on Ray Burke  I entreat the Taoiseach, on behalf of the Irish people and our hard pressed construction industry. He has changed many things in this budget since it was published two weeks ago, he has done many U-turns. We will be the first to praise him for this change. The Taoiseach's dear wife voted Fianna Fáil in her time and I might talk to my wife and try to return the compliment, if the Taoiseach is really good. Would the Taoiseach do this for the building industry and for the people of this country, for those who want to buy a home——

Mr. F. O'Brien: Information on Fergus O'Brien  Zoom on Fergus O'Brien  We have made it possible.

Mr. R. Burke: Information on Ray Burke  Zoom on Ray Burke  ——for those who are in a home and want to try to hold on to it, for those who are in a job and have a fear of losing it. I ask the Taoiseach to drop the 5 per cent increase in the VAT rate.

Deputies:  Hear, hear.

Question put.

Allen, Bernard.
Barnes, Monica.
Barrett, Seán.
Barry, Myra.
Barry, Peter.
Begley, Michael.
Bell, Michael.
Bermingham, Joe.
Birmingham, George Martin.
Boland, John.
Bruton, John.
Bruton, Richard.
Burke, Liam.
Carey, Donal.
Cluskey, Frank.
Collins, Edward.
Conlon, John F.
Connaughton, Paul.
Coogan, Fintan.
Cooney, Patrick Mark.
Cosgrave, Liam T. [2575]Glenn, Alice.
Griffin, Brendan.
Harte, Patrick D.
Hegarty, Paddy.
Hussey, Gemma.
Kavanagh, Liam.
Keating, Michael.
Kelly, John.
Kenny, Enda.
L'Estrange, Gerry.
McGahon, Brendan.
McGinley, Dinny.
McLoughlin, Frank.
Manning, Maurice.
Mitchell, Gay.
Mitchell, Jim.
Molony, David.
Moynihan, Michael.
Naughten, Liam.
Nealon, Ted.
Noonan, Michael. (Limerick East)
Cosgrave, Michael Joe.
Coveney, Hugh.
Creed, Donal.
Crotty, Kieran.
Crowley, Frank.
D'Arcy, Michael.
Deasy, Martin Austin.
Desmond, Barry.
Desmond, Eileen.
Donnellan, John.
Dowling, Dick.
Doyle, Avril.
Doyle, Joe.
Dukes, Alan.
Durkan, Bernard J.
Enright, Thomas W.
Farrelly, John V.
Fennell, Nuala.
FitzGerald, Garret.
Flaherty, Mary.
Flanagan, Oliver J. [2576]O'Brien, Fergus.
O'Brien, Willie.
O'Keeffe, Jim.
O'Leary, Michael.
O'Sullivan, Toddy.
O'Toole, Paddy.
Owen, Nora.
Pattison, Séamus.
Prendergast, Frank.
Quinn, Ruairí.
Ryan, John.
Shatter, Alan.
Sheehan, Patrick Joseph.
Skelly, Liam.
Spring, Dick.
Taylor, Mervyn.
Taylor-Quinn, Madeline.
Timmins, Godfrey.
Treacy, Seán.
Yates, Ivan.


Ahern, Bertie.
Ahern, Michael.
Andrews, David.
Aylwards, Liam.
Barrett, Michael.
Brady, Gerard.
Brady, Vincent.
Brennan, Mattie.
Brennan, Paudge.
Brennan, Séamus.
Briscoe, Ben.
Browne, John.
Burke, Raphael P.
Byrne, Hugh.
Byrne, Seán.
Calleary, Seán.
Collins, Gerard.
Conaghan, Hugh.
Connolly, Ger.
Coughlan, Cathal Seán.
Cowen, Brian.
Daly, Brendan.
De Rossa, Proinsias.
Doherty, Seán.
Fahey, Francis.
Fahey, Jackie.
Faulkner, Pádraig.
Fitzgerald, Gene.
Fitzgerald, Liam Joseph.
Fitzsimons, Jim.
Flynn, Pádraig.
Foley, Denis.
Gallagher, Denis.
Gallagher, Pat Cope.
Geoghegan-Quinn, Máire.
Harney, Mary.
Haughey, Charles J.
Hilliard, Colm.
Hyland, Liam.
Kirk, Séamus.
Kitt, Michael.
Lemass, Eileen.
Lenihan, Brian.
Leonard, Jimmy.
Leonard, Tom.
Leyden, Terry.
Lyons, Denis.
McCarthy, Seán.
McCreevy, Charlie.
McEllistrim, Tom.
MacSharry, Ray.
Molloy, Robert.
Morley, P.J.
Moynihan, Donal.
Nolan, M.J.
Noonan, Michael J. (Limerick West)
O'Connell, John.
O'Dea, William.
O'Hanlon, Rory.
O'Keeffe, Edmond.
O'Kennedy, Michael.
O'Leary, John.
O'Malley, Desmond J.
Ormonde, Donal.
O'Rourke, Mary.
Power, Paddy.
Reynolds, Albert.
Treacy, Noel.
Tunney, Jim.
Wallace, Dan.
Walsh, Joe.
Walsh, Seán.
Wilson, John P.
Woods, Michael.
Wyse, Pearse.

[2577] Question declared carried.

[2578] Question put: That the motion, as amended, be agreed to.

Allen, Bernard.
Barnes, Monica.
Barrett, Seán.
Barry, Myra.
Barry, Peter.
Begley, Michael.
Bell, Michael.
Bermingham, Joe.
Birmingham, George Martin.
Boland, John.
Bruton, John.
Bruton, Richard.
Burke, Liam.
Carey, Donal.
Cluskey, Frank.
Collins, Edward.
Conlon, John F.
Connaughton, Paul.
Coogan, Fintan.
Cooney, Patrick Mark.
Cosgrave, Liam T.
Cosgrave, Michael Joe.
Coveney, Hugh.
Creed, Donal.
Crotty, Kieran.
Crowley, Frank.
D'Arcy, Michael.
Deasy, Martin Austin.
Desmond, Barry.
Desmond, Eileen.
Donnellan, John.
Dowling, Dick.
Doyle, Avril.
Doyle, Joe.
Dukes, Alan.
Durkan, Bernard J.
Enright, Thomas W.
Farrelly, John V.
Fennell, Nuala.
FitzGerald, Garret.
Flaherty, Mary.
Flanagan, Oliver J.
Glenn, Alice.
Griffin, Brendan.
Harte, Patrick D.
Hegarty, Paddy.
Hussey, Gemma.
Kavanagh, Liam.
Keating, Michael.
Kelly, John.
Kenny, Enda.
L'Estrange, Gerry.
McGahon, Brendan.
McGinley, Dinny.
McLoughlin, Frank.
Manning, Maurice.
Mitchell, Gay.
Mitchell, Jim.
Molony, David.
Moynihan, Michael.
Naughten, Liam.
Nealon, Ted.
Noonan, Michael. (Limerick East).
O'Brien, Fergus.
O'Brien, Willie.
O'Keeffe, Jim.
O'Leary, Michael.
O'Sullivan, Toddy.
O'Toole, Paddy.
Owen, Nora.
Pattison, Séamus.
Prendergast, Frank.
Quinn, Ruairí.
Ryan, John.
Shatter, Alan.
Sheehan, Patrick Joseph.
Skelly, Liam.
Spring, Dick.
Taylor, Mervyn.
Taylor-Quinn, Madeline.
Timmins, Godfrey.
Treacy, Seán.
Yates, Ivan.

Ahern, Bertie.
Ahern, Michael.
Andrews, David.
Aylward, Liam.
Barrett, Michael.
Brady, Gerard.
Brady, Vincent.
Brennan, Mattie.
Brennan, Paudge.
Brennan, Séamus.
Briscoe, Ben.
Browne, John.
Burke, Raphael P.
Byrne, Hugh.
Byrne, Seán. [2579]Foley, Denis.
Gallagher, Denis.
Gallagher, Pat Cope.
Geoghegan-Quinn, Máire.
Harney, Mary.
Haughey, Charles J.
Hilliard, Colm.
Hyland, Liam.
Kirk, Séamus.
Kitt, Michael.
Lemass, Eileen.
Lenihan, Brian.
Leonard, Jimmy.
Leonard, Tom.
Leyden, Terry.
Lyons, Denis.
McCarthy, Seán.
McCreevy, Charlie.
McEllistrim, Tom.
MacSharry, Ray.
Molloy, Robert.
Morley, P.J.
Moynihan, Donal.
Calleary, Seán.
Collins, Gerard.
Conaghan, Hugh.
Connolly, Ger.
Coughlan, Cathal Seán.
Cowen, Brian.
Daly, Brendan.
Doherty, Seán.
Fahey, Francis.
Fahey, Jackie.
Faulkner, Pádraig.
Fitzgerald, Gene.
Fitzgerald, Liam Joseph.
Fitzsimons, Jim.
Flynn, Pádraig. [2580]Nolan, M.J.
Noonan, Michael J. (Limerick West).
O'Connell, John.
O'Dea, William.
O'Hanlon, Rory.
O'Keeffe, Edmond.
O'Kennedy, Michael.
O'Leary, John.
O'Malley, Desmond J.
Ormonde, Donal.
O'Rourke, Mary.
Power, Paddy.
Reynolds, Albert.
Treacy, Noel.
Tunney, Jim.
Wallace, Dan.
Walsh, Joe.
Walsh, Seán.
Wilson, John P.
Woods, Michael.
Wyse, Pearse.

Question declared carried.

The Dáil adjourned at 9 p.m. until 10.30 a.m. on Thursday, 14 February, 1985.


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