Nothing to see here, as callous ministers look the other way
Published 21/05/2015 | 02:30
The marriage referendum debate obscures confirmation of this Government's greatest failure. Last week's personal indebtedness non-announcements will haunt Fine Gael and Labour in the 2016 election. The expectations of tens of thousands in debt distress were low; the belated package announced failed to even match Government leaks. Protection of powerful vested interests (bankers and lawyers) takes precedence over struggling families. I trawled the weekend newspapers for analysis of Government's announcements, to find none - there was nothing to analyse. It's the disgrace of this administration; its inability to understand how household debt will hold back the economy and the future dire consequences of mass evictions.
The sum total of Michael Noonan, Frances Fitzgerald and Alan Kelly's collective package was minor window dressing. Allowing a legal right of appeal to a circuit court judge where banks vetoed a Personal Insolvency Arrangement (PIA) is a welcome development. It had relevance for a mere 111 cases where 65pc of creditors had agreed a scheme prepared by a PIP. These debts earn/work-out terms apply over a six-year period, involving very confined living standards, while income is extracted to repay debts. At the end of which the debtor is released, involving write-downs of outstanding balances. PIAs don't usually involve mortgages; rather a complex range of different debts with secured, unsecured and trade creditors. This will have little relevance to hard-core mortgage arrears cases.
Most focus has been on the 37,778, owner-occupier mortgages with more than two years arrears. This ignores what's coming down the track, namely a further 19,317 cases with more than one year in arrears. These conveyor belts work through forbearance processes applying under statutory arrears Code of Conduct, overseen by the Central Bank. Despite established breaches, not one sanction/fine has ensued. Fast forward to repossessions: between 482 court orders and 608 voluntary surrenders occurred up to the end of 2014; 8,000 civil bills for repossession are before courts. Cabinet has just passed up their last opportunity to prevent this debt crisis becoming a homelessness tsunami. Physical evictions of parents and children will inevitably become commonplace in the months ahead.
Ministerial rhetoric about "85pc of mortgages not being in arrears" is akin to telling tens of thousands of people on hospital waiting lists and trolleys that more than four million of the population are in good health - it's irrelevant to addressing resolutions. Government fails to allow the Insolvency Service of Ireland's meagre measure of issuing protective certificates, rather than through court processes. No attempt was made to raise the €20,000 limit for Debt Relief Certificates. There was no decision on the reduction of bankruptcy term from three years to one year; incredibly it's been referred to the Oireachtas finance committee to produce a report - a total abdication of responsibility of authority, fudging a simple remedy due to bank lobbying.
The stubborn refusal by the Economic Management Committee to confront impaired SME business debt after four years in office and seven years of recession isn't accidental, explained by official ignorance. Submissions and reports by FLAC, Association of PIPs, MABS, Land League, New Beginning, IMHO and ISI are binned; as the furtive muscle of banks is repeatedly flexed in corridors of power.
Central Bank data for business debt represent 25pc of a €22.6bn loan book. AIB has €3.4bn and Bank of Ireland €2.5bn of such impaired loans. Wheels keep turning, but there's no forward momentum in dealing with unsustainable legacy property debts.
The Mortgage-to-Rent scheme was supposed to allow 3,500 households keep roofs over their heads, by becoming tenants, relinquishing original equity investment and renovation expenditures. Eighty eight cases benefitted. Raising the eligibility threshold from €220,000 to €350,000 in Dublin provides a smokescreen deception. There's no official revised budget, beyond €13m originally allocated. Thresholds outside Dublin remain to be approved for increase. The catch here is prior pre-condition eligibility for social housing; it's a universal means test income limit. Mortgage cases involve people at work, typically one earner and a few children with a salary over €40,000 - enough to disqualify social housing candidature. Banks only agreed to 11 cases under the scheme, effectively neutering it. Also no mortgage supplement scheme appears.
The final derisory joke is to herald the arrival of Step Change, a British-based debt charity, onto the Irish scene. It seems they have no office or personnel based here. Instead, a telephone helpline is to be made available. Ask any PIP how time-consuming, complex and detailed serious debt cases are; you quickly realise how superficial this Government is about personal debt terror. No change either in 23pc VAT applicable to PIP services for those who are literally insolvent. Any consideration of law reform in the area of Personal Guarantees remains completely off the radar.
Each passing week reveals the extent of multibillion Nama write-down deals for big developers. As they re-emerge, similar terms of their write-offs aren't available to little people, be they families with mortgages or family businesses. Banks benefited from €64bn in taxpayer support; AIB have yet to repay one cent of the €20bn invested, while they actively pursue 5,709 repossessions. Now Noonan engages in more semantics with the domestic banks over standard variable rates. Average SVRs here are 4.2pc, while 2.09pc in the Eurozone; costing an additional €1.2bn in interest charges to customers.
The Central Bank deliberately camouflages this excessive profiteering by averaging out interest costs to include tracker mortgages. This offset effectively downplays a rip-off of 300,000 households. Government could have introduced an extra bank levy proportionate to this surcharge and enacted legislation to empower the Central Bank to regulate rates. They didn't and won't because they're sticking to a callous policy of "save banks and screw people".
Irony? This administration is set to reap the angry electoral whirlwind of debt destruction, while the next one will be rewarded with enhanced dividends proceeds of bank share sales.