Backbenchers 'will not accept any watered down proposal' on maximum bankruptcy term decision
Published 22/04/2015 | 21:28
The Coalition remains divided over proposals to slash the maximum bankruptcy term from three years to one.
Senior Labour figures, including Tanaiste Joan Burton and Public Expenditure Brendan Howlin, were tonight warned against backing down on plans to introduce such measures.
The issue was discussed at length at the party's parliamentary party meeting amid reports Fine Gael ministers are cooling on the idea of reducing the term.
Sources at the meeting said the leadership was told backbenchers will not accept any "watered down" proposal.
However, there is a growing feeling within the Labour ranks that the overall mortgage package being thrashed out will be one that will address the current crisis.
Tanaiste Joan Burton said the issue of bankruptcy is still being teased out by the Economic Management Council (EMC), which also consists of Taoiseach Enda Kenny, Finance Minister Michael Noonan and Mr Howlin.
The Department of Finance is still resisting the Penrose proposal for two reasons. Firstly, officials are concerned that the move would result in an acceleration of repossessions given that 70pc of bankruptcies result in this outcome.
And secondly, Finance officials believe the current three year term needs to be maintained for a longer period so that it can be be properly assessed.
A Fine Gael Cabinet Minister last night warned mortgages for first-time buyers could increase if the Government reduces the term of bankruptcy to one year.
The minister said colleagues in the Labour Party should be “care what they wish for” as cutting the term would reduce competition in the mortgage market.
“If there is a higher risk of default among mortgage holders there will be more risk for banks and the mortgage prices will increase. In the long run this could affect first-time buyers,” the minister added.
The minister said 70pc of bankruptcies result in repossession and insisted the Government want to keep people in their homes.
However, there are some elements within Fine Gael who are warming to the idea as long as it helps address the mortgage arrears crisis.
A Fine Gael source said the main issue facing the Government is reducing the variable mortgage rate.
At Fine Gael parliamentary party, Agriculture Minister Simon Coveney briefed colleagues on the party's Marriage Equality Referendum and there was also discussion around autism services.