Coalition relations strained in row over bankruptcy terms
Published 20/04/2015 | 02:30
Relations between the Coalition parties are at their most strained in almost a year over Labour proposals to slash the maximum term for bankruptcy.
The plans are being met with major resistance from both the Department of Finance and Fine Gael ministers, who fear any move will spark an acceleration in repossessions.
The escalating split means the Government's much-anticipated package of measures to address the mortgage arrears crisis has now been delayed several weeks.
The package was originally due to be announced in early April, well ahead of the spring statement on April 28.
But it will now not be announced until after the spring statement, senior Government figures have said.
Sources have said Labour leader Joan Burton and her key team of advisers are meeting with "stonewall" resistance from the Fine Gael side on reducing the bankruptcy term.
But several TDs, including former minister Willie Penrose and parliamentary party chairman Jack Wall, suggested that changing the bankruptcy law is a "red-line issue" for the party.
Mr Penrose launched an extraordinary attack on Fine Gael, accusing the party of being too close to the mainstream banks.
He said: "Fine Gael don't own the Government. It's about time they realise that they can't keep demonstrating antipathy to any proposal that doesn't emanate within their think-tank.
"This is a deep red-line issue for us. The banks seem to have a grip on Fine Gael in some shape or form but it's now time to give something back to people."
Labour party chairman Mr Wall said the move was being demanded "from top to bottom, from leadership to the backbenches".
He added: "I have yet to hear one dissenting voice. There is unanimous support within the Labour Party."
However, Finance Minister Michael Noonan has been warned by his officials that slashing the bankruptcy term from three years could backfire.
Well-placed sources said there was serious concern that it would result in a flurry of repossessions. Figures last week showed that 70pc of bankruptcies result in people forfeiting or losing their homes.
Mr Noonan's department is leading the opposition to the Labour plan, as officials see little merit in changing the law so soon after the term was reduced from 12 years to three.
"Not enough time has been given to see how the system works - and there is reluctance to enter into a sphere of moral hazard," said one Finance source.
And senior Fine Gael sources say the bankruptcy issue is way down the priority list, in terms of the overall picture of tackling the mortgage arrears crisis.
One minister said the move would have "zero economic benefit" and that more time needed to be given to the current three-year system.
"Alan Shatter reduced it to three years from 12 already - why is there such a rush to reduce it again?" the source said.
Another Fine Gael TD said: "We can't create the perception that it is OK to slip into bankruptcy just because you will be out in a year."
The Fine Gael stance is evident in remarks made by both Taoiseach Enda Kenny and Transport Minister Paschal Donohoe over recent days.
Mr Kenny talked down the proposals, insisting the Government was far more interested in improving the personal insolvency process.
And Mr Donohoe said the current three-year bankruptcy system "strikes a good balance".