OUTSPOKEN TD Deputy Luke ‘Ming’ Flanagan has accused Minister of Finance Michael Noonan of being ‘cruel’ in his handling of the country’s mortgage crisis.
Speaking in the Dáil on Wednesday on a report by the Interdepartmental Group on Mortgage Arrears, the Leitrim/Roscommon TD said the recent Keane Report into the matter favoured bankers over the ordinary person and refused to accept that debt forgiveness “must form the major part of the solution.”
Speaking on about the report, he said: “The Keane report favours bankers over the ordinary person. This is hardly surprising considering the make-up of the group which put together the report - 17 officials from Departments, three Central Bank representatives, one AlB representative and one EBS representative.
“The fact that the Money Advice and Budgeting Service, MABS, was not consulted in any way says it all. The report refuses to accept that debt forgiveness must form the major part of the solution even though current mortgage costs are driving people over the edge.
“How can the Minister for Finance be so cruel?
“There is an underlying problem in that there is a notion that people should not be allowed to avail of debt forgiveness because they do not deserve it. The thinking is that the people who are now in trouble are where they are because they were reckless or stupid in some way.
“Obviously, no group of people is entirely homogenous and some home buyers were indeed reckless. However, those people are a real minority. The rest, the vast majority, only bought a house to give shelter and comfort to themselves and their families.
“The Opposition, now in government, certainly did not give any warnings. Its Deputies were so sure the boom would continue they insisted the Government should increase spending, a massive chunk of which would have had to come from building industry revenue. The truth is the State is at fault for leaving people with mortgages that are between two and a half and three and a half times above a sustainable level - at any time. The State caused this problem and therefore must rectify it.
“Solving this problem should not mean destroying people’s self-esteem. However, that is what the Keane Report would bring about if it were put into practice. It would make people work all their lives in order to pay the equivalent of a mortgage without, in the end, owning the house. That is the best case scenario in some cases. If the housing market does not rise by an average of 2% during the next 30 years and if mortgage holders do not get pay rises not only will they have nothing after 30 years of payments but they will end up owing a small fortune. How can this be fair?
“The principal reason for the high cost of mortgages was the actions - more properly, the inaction - of the State, the greatest of which was the failure to regulate the banks. “Furthermore houses prices were driven yet higher by cartels dealing in building materials, helped by Government.
“We are told that the country cannot afford to provide debt forgiveness. The reality is we cannot afford not to provide debt forgiveness. Everybody knows the State has access to €9.7 billion for dealing with mortgage debt yet it refuses to use it. The Keane report states that writing off negative equity for all Irish mortgage debt will cost in the region of €14 billion.
“In a newspaper article Mr Constantin Gurdgiev showed that this figure of €14 billion is not relevant in dealing with what matters most, namely, the problems of ordinary first-time buyers. He stated that if debt forgiveness were targeted at this group the cost would be closer to €6 billion to €8 billion. He also tackled the issue of so-called “reckless” people, suggesting that debt write-down should be done on the basis of average house prices in any given region. This would mean a person who built a mansion would not get as big a write-off, which might be called punishment. In such cases people might be left with some negative equity but the affordability of the mortgage would be greatly increased.
“If the Government were to use between €6 billion and €8 billion to write off debt that would not be the ultimate cost to the State. People whose mortgages were seriously reduced would have money in their pockets to spend, which would go back to the Government through taxes. As a result of this spending, employment would be stimulated and the State’s social welfare bill would be reduced.
“People who were no longer in negative equity could sell their houses if they wished to move, for example, to take up a job opportunity. As things stand, mortgage holders are forced to stay where they are because they cannot sell their house. The recommendations in the Keane report would reinforce this problem rather than alleviate it. If the report is followed through it will make permanent a lack of mobility in the work force. This will cost the State money,” he said.