Shane Ross: Middle Ireland will not pay, because it cannot pay
As the economic crisis stretches on, poverty has invaded middle-class Ireland, writes Shane Ross
Published 30/09/2012 | 05:00
One of the last measures to pass through the Dail before the summer recess was supposedly aimed at helping citizens in debt. We had waited a long time for the wise men among the mandarins to defuse the next banking time bomb.
Bankrupts were now to live in a more lenient regime. Homeowners in debt were destined to be released from bondage. Committees galore, expert groups comprising a lethal cocktail of bankers by the bucketful, civil servants and accountants had struggled with the problem.
On the night that the dreaded Personal Insolvency Bill was passed, most of the bankrupts could be counted sitting smugly on the government benches. They were bankrupt of ideas, bankrupt of solutions, bankrupt of interest in the subject. They simply wanted to pass the problem on to the various discredited institutions and individuals entrusted with sorting out Ireland's increasingly impoverished middle class.
Real poverty has now invaded middle-class Ireland. Those with maxed-out credit cards, cars on hire purchase and mortgage arrears are now sinking into the economic swamp. Many of them do not qualify for social welfare, housing subsidies or medical cards.
Others depend on their middle-class parents to support them, pick up the tab for part of their mortgages or even to put bread on the table. Many rose from working class roots, lifted themselves into better futures, but are now sinking in a sea of debt.
Some have been made redundant. They can no longer pay their mortgages. Others over-extended themselves with commitments to impossible repayments on cars that they can no longer afford, others were indulged in foolish luxuries by their ruthless banks.
The Government's solution is a cop-out. They have set up a procedure that enables negotiation -- and a new deal -- between the borrower and the very same banker who lent them the money. The bank gets a veto. The borrower has a choice: accept the banker's final offer or go to the wall.
This Government is still a prisoner of an unreformed banking sector. Nowhere is it more apparent than in their craven deference to the bankers on the personal debt front.
Earlier this month a piece of window-dressing was introduced to decorate the measure. The borrower in difficulties is to be given an hour's free advice about the merits of the bank-dictated "agreement" on mortgage debt from an accountant of his or her choice.
And who will pay the accountant? The banker of course. €250 a throw.
Funnily enough, the adviser is not allowed to give much advice! He is not allowed to advise on alternatives, or to suggest consideration of other factors. The adviser will simply be holding the hand of the distraught borrower facing bankruptcy, pointing out the merits of the banker's proposal.
The advice will be toxic, poisoned by the identity of the banking piper calling the adviser's tune.
Has anyone ever heard of an accountant advising a client (who is not paying him) to tell a banker (who is paying him) to stuff his loan offer?
Now that we know that one in five mortgages is in difficulties, we realise that the extent of the problem threatens to overwhelm the banks again. To date there is clear evidence that the banks have not made honest adjustments to their balance sheets to recognise that their mortgage books do not yet reflect the depth of defaults. While hundreds of thousands are in difficulty, by last June the banks were only in possession of 961 homes. A backlog of repossessions looms, made up of those who stand up to their banks and defy their proposed "agreements" on arrears.
That is Ireland's solution to the personal debt problem. Hand the weapons to the old suspects. Carve up the cake between accountants and bankers. The authorities could so easily have created a body of honourable citizens including guys from FLAC, New Beginnings and Mabs, people with a sympathy and understanding for the sinking middle classes.
Instead they have handed the baton back to the bankers. That gives them the freedom to say that the matter is out of their clutches.
It also gives them the space for further pursuit of middle Ireland. Now that they have parked the personal debt crisis with others they can extract a property tax from the same people who cannot pay their mortgage on the same houses.
Property tax and mortgage debt repayments are incompatible bedfellows. The Government's belief that the struggling families of middle Ireland can resume paying their mortgage arrears to their bankers while digging even deeper to find funds for a property tax on the same home is deluded.
Middle Ireland will not pay. Because middle Ireland cannot pay.