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Saturday 23 August 2014

Labour ministers 'aghast' at Fine Gael mortgage plan

Daniel McConnell and John Drennan

Published 18/05/2014 | 02:30

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The proposal has been discussed in Government circles for almost two months
The proposal has been discussed in Government circles for almost two months

SENIOR Labour Cabinet ministers say they are "aghast" at the Government's new initiative to subsidise first-time mortgages, dismissing it as a "Fine Gael stunt".

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Despite its presence in the Coalition's high-profile new construction plan for 2020, the Sunday Independent has learnt that doubts are rife, amidst Labour in particular.

Given the extent of inter-coalition squabbling in recent weeks, Labour ministers – who themselves approved the plan at Cabinet – said they were anxious to avoid a public spat with their partners in government over the issue.

The proposal has been discussed in Government circles for almost two months, with no outward sign of dissent from Labour.

But in private, senior members of the party are scathing in their criticism of the plan, which was also criticised by Prof John McHale, chairman of the Fiscal Advisory Council.

One senior Labour source told the Sunday Independent: "Labour ministers were aghast. It smacks of electioneering – of being a stunt. But worse, it does nothing to address the real housing problem."

Social Protection Minister Joan Burton said Labour was adamant that the way to address the housing crisis was by building more homes, not by guaranteeing mortgages for young couples.

She said: "Our priority is supply and credit from banks to small builders, the only way you ease a housing shortage is by building houses, not expanding mortgage credit."

Under the scheme, a portion of the mortgages to first-time buyers of new houses will be guaranteed by the State in order to allow banks give out more loans. This scheme will allow the first-time buyers to buy their houses with smaller deposits, by giving out mortgages worth up to 95 per cent of the value of the home.

There is also some disquiet within Labour as to how this scheme has made its way into the public domain.

"There has been no work done on this, Fine Gael threw this in themselves to give the launch thing a bit of fizz," one source said.

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The Department of Finance is also believed to hold strong concerns over the proposals.

Senior Government sources said that was very much a Taoiseach's initiative.

"Enda's department is the one driving this entire proposal, Finance had a canary when they heard about this bright new idea," one source told the Sunday Independent.

Communications Minister Pat Rabbitte has also warned that one of the key problems that needs to be addressed is that builders are still being denied credit by banks.

Mr Rabbitte told the Sunday Independent: "The unexpected constraint is that those builders left standing are being refused credit."

Sunday Independent

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