COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 1 Apr 2010

I welcome everybody. We are dealing with the 2008 Annual Report of the Comptroller and Auditor General and Appropriation Accounts; Vote 25 — Environment, Heritage and Local Government; Chapter 4 — Financial Commitments on the Public Private Partnerships; Chapter 9 — Termination of Major ICT Projects; Chapter 20 — Central Government Funding of Local Authorities; Affordable Homes Partnership Annual Report 2008; and Special Report 65: Affordable Housing Delivery.

I draw everyone's attention to the fact that while members of the committee enjoy absolute privilege, the same privilege does not apply to witnesses appearing before the committee and the committee cannot guarantee any level of privilege to witnesses appearing before it. I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside of the House or an official either by name or in such a way as to make him or her identifiable. Members are also reminded of the provision in Standing Order 158 that the committee shall refrain from inquiring into the merits of a policy or policies of the Government or a Minister of the Government or the merits of the objectives of such policies.

I welcome Ms Tallon, Secretary General, Department of the Environment, Heritage and Local Government, and invite her to introduce her officials.

The net charge to the Vote for the Department of the Environment, Heritage and Local Government was €3.2 billion in 2008. After taking account of contributions from the Vote, a further €1.1 billion net was paid from the local government fund, while a sum of €80 million was met from the environment fund.

Chapter 20 of my annual report outlines how the sum of €5.7 billion provided for local authorities from central government funds is sourced. The Department provides approximately 50% of all central government funding to the local authorities, with the Department of Transport providing a further 25% and motor tax revenue, 18%. The chapter also outlines how the money is applied.

Chapter 4 of my annual report deals with financial commitments in respect of public private partnerships. It draws together information from diverse sources to provide an overview of what has become an important mechanism for the delivery of public infrastructure and services. In the case of public private partnerships in the local government sector, the Department acts as the sanctioning authority for projects proposed by local authorities. Depending on the circumstances of each case, it may provide some funding in support of the capital costs of a project. The commitments shown in the chapter are those of the Department to local authorities. The longer term payment commitments in respect of public private partnership contracts entered into by local authorities are not monitored centrally and, consequently, are not included in the tables set out in the chapter. It is intended that the report will be updated each year and include relevant information on newly agreed contracts. What it shows is that local authorities have used the public private partnership mechanism to a significant extent. It lists 18 projects, in respect of which contracts had been entered into by the end of 2008, where each had an estimated capital investment value of €20 million or more. Most relate to the provision of sewage treatment facilities. The Department informed us that contracts had also been signed for a further 47 smaller projects, many of which are operating.

In the case of the electronic voting project, while ultimately there was a decision in 2009 to terminate the project, this came after a long period of close on six years during which the system was considered by the Commission on Electronic Voting and the Department, in turn, considered its responses to the commission's final report. In July 2006 the commission recommended against use of the system, pending a number of hardware and software changes being made. In 2009 the project was finally terminated by Government decision. The Department encountered difficulties in disposing of the equipment after the decision to terminate had been taken. The equipment is highly specialised and, presumably, has a limited market. In the meantime, storage costs continued to be payable. These added over €3 million to the cost of the project up to May 2009, bringing the overall cost to over €54 million up to that date. Costs continue to be paid for those storage facilities acquired under long leases which could not easily be terminated at low cost. The Department is examining the cost of terminating the lease agreements.

In 2005 the Government established the Affordable Homes Partnership, AHP, to co-ordinate and promote the delivery of affordable housing. A number of pre-existing arrangements were in place through the local authority system. As well as having a general facilitative role, the AHP has been directly involved in two main initiatives, including organising swaps of State lands which generated 304 housing units and direct procurement, under which 758 units were provided up to February this year. It also carried out a call for a lands initiative in 2005; however, that was not a success.

Overall, the examination concluded that the AHP had been a flexible instrument that had helped the Department to adjust affordable housing policy in line with market conditions in the period 2005 to 2008. However, as the report notes, the housing market had changed dramatically by the time it was finalised in May 2009. As we are all too well aware, the housing market continues in a state of depressed demand which poses new challenges for the Department in formulating and following a cost-effective approach to affordable housing.

In common with other property, affordable homes have proved difficult to sell. Local authorities have a significant number of unsold properties, while certain properties had to be purchased by them in cases where nominees had failed to complete. The current role of the AHP has again evolved and its more recent functions include assisting local authorities in the use of the stock of units that has built up, analysis of unfinished and unsold housing in the greater Dublin area and co-ordinating processes and legal arrangements for a new social housing leasing initiative. It is one of the agencies included in the rationalisation programme for State agencies. The Accounting Officer will be in a position to outline the guidelines issued to local authorities on alternative options for utilising surplus affordable housing stock.

I thank the Chairman and members of the committee for giving me the opportunity to make a brief introductory statement on the matters to be considered. I will comment first on the Department's activities in 2008, before addressing some of the matters covered in the reports before the committee.

As the committee is aware, 2008 marked the end of a period of sustained economic growth in Ireland. In that year GDP declined by 3%, the first such contraction in a quarter of a century. The level of economic activity continued to fall in 2009, by over 7%. As the year under review, 2008, progressed, the changing economic environment increasingly provided the context for the Department's activities. The Department managed the second largest capital allocation of any Department in 2008 and implemented major housing and water programmes under the National Development Plan 2007 to 2013 for these and other measures.

In terms of delivery, departmental programmes performed very strongly in 2008. Total expenditure of €2.4 billion on social and affordable housing and improvement and regeneration measures resulted in a record level of housing needs — some 19,500 households, up 14% on 2007 — being met through the full range of social and affordable housing programmes.

Focusing on a couple of specific items in the housing sector, 2008 marked a significant stepping up of delivery under the rental accommodation scheme, with 6,900 households transferring from rent supplement, well above the target of 5,000 transfers. That brought the total number of former rent supplement recipients accommodated through the rental accommodation scheme since its commencement in 2005 to over 18,000 and served to underline the increasingly prominent role of the scheme as a mainstream social housing delivery mechanism, as flagged in the Government's housing policy statement, Delivering Homes: Sustaining Communities.

With over €200 million invested in 2008, the priority afforded to regeneration and improvement measures in areas of social, physical and economic decline to end the cycle of disadvantage was further increased. This investment allowed the continuation of progress on the Ballymun regeneration programme and a number of other projects in Dublin, Cork and Waterford, as well as the beginning of vital enabling works in the Limerick regeneration areas, including the production of holistic physical, social and economic planning documents and a number of important social inclusion initiatives.

Exchequer expenditure of €496 million on water services infrastructure allowed completion of 41 schemes and commencement of 53 others under the water services investment programme. The rate of compliance in the provision of secondary treatment facilities at wastewater treatment plants reached some 92%. There was an increase to 95% in the number of group water scheme households covered by the rural water action plan which were in compliance with national drinking water standards at the end of 2008, compared to a figure of 85% at the end of 2007. In the period 2000 to 2008 we added 855,000 population equivalent to the capacity of water treatment systems and a 3.6 million population equivalent to wastewater treatment capacity. The focus on water conservation in the Dublin region has led to reduced leakage, from a figure of 42% in 1998 to about 30% on average now. Investment in mains rehabilitation will be a key priority in the years ahead.

Substantial funding was made available in 2008 for the provision of waste management infrastructure, enabling the municipal waste recovery rate to exceed the 2013 national recycling target for the second consecutive year and the attainment of the European Union's 2011 mandatory target for packaging waste recovery. The overall recovery rate of municipal waste rose from 9% at the end of the 1990s to 38% at the end of 2008.

The year 2008 was an important one for the climate change agenda, with the commencement of both the five-year commitment period under the Kyoto Protocol and the second trading period under the EU emissions trading scheme. Both developments are important in terms of the national climate change strategy 2007 to 2012. Work continued across Departments on the development of further measures to reduce national greenhouse gas emissions with a view to ensuring compliance with the Kyoto Protocol and preparation for more stringent reduction targets in the period to 2020 and beyond.

Substantial progress was made in the completion of designations for special areas of conservation under the habitats directive and special protection areas under the birds directive.

On policy development, important strategies and policy papers published by the Department in 2008 included a new strategy to combat homelessness, The Way Home; a Green Paper on local government, Stronger Local Democracy: Options for Change; planning guidelines on sustainable urban residential development, flood risk management and taking in charge of estates; a new public library policy, Branching Out: Future Directions, and a new statement of strategy for the Department.

From the corporate perspective, preparations advanced significantly in 2008 for decentralisation of the Department to Wexford. This process is now complete with the recent handover by the OPW of our new headquarters building in the town and the movement of staff to Wexford is under way.

Turning to the reports before the committee, the chapter of the Comptroller and Auditor General's annual report for 2008 which deals with public private partnerships is a valuable source of information on this important area. The projects within the remit of my Department relate, for the most part, to wastewater treatment plants. Our objective has been to accelerate the provision of key infrastructure and secure value for money, compared to more traditional approaches.

The section on central government funding of local authorities highlights the extent to which local authorities rely on Departments, including my own, for the resources required to meet the cost of local services. Local authorities, however, also have significant local sources of both capital and current income, including commercial rates and development contributions. The need for enhanced efficiency is well appreciated for local competitiveness, as well as other reasons. In this regard, the local government efficiency review group is looking at the cost base, expenditure of and numbers employed in local authorities and is to report by mid-year.

The chapter in the report of the Comptroller and Auditor General on the termination of major ICT projects analyses the circumstances in which the Government may conclude that it no longer wishes to advance particular projects of this nature — the electronic voting system, in the case of my Department — and concludes that reasonable steps are being taken in the implementation of the decision not to proceed.

Two reports before the committee relate to affordable housing. The first, part of special report No. 65, focuses on the delivery of affordable housing and, in particular, the role of the Affordable Homes Partnership. The report concludes that the establishment of the AHP has been worthwhile in the development of a range of options for the supply and provision of affordable housing.

While the full impact of the wider housing market correction on the demand for affordable housing had yet to manifest itself fully in 2008, it did so in 2009 when the numbers of unsold affordable units on the books of local authorities began to grow above levels that had been evident in recent years. The swift response of the Department in April 2009 to this emerging situation is recognised in the Comptroller and Auditor General's report. The comprehensive range of actions available to local authorities to ensure unsold units are brought into early and effective use have been successful, bringing the number of unsold units down from just over 3,400 this time last year to just over 1,100 at present. Local authorities continue to deploy the options available to bring the remaining units into use.

The 2008 annual report and accounts of the Affordable Homes Partnership detail the range of activities carried out by the AHP in continuing to provide support and assistance for local authorities across the range of affordable housing measures. While the original core function of the AHP — co-ordinating and promoting the delivery of affordable housing — is now of less relevance in many local authority areas, throughout 2009 and into 2010 the AHP has been assisting local authorities and the Department in addressing a number of issues emerging from rapid change in the wider housing market. These include dealing with unsold affordable housing stock, assisting in the implementation of the leasing initiative, centralising assessment and credit checking processes for all local authority lending activities and a review of local authority housing strategies.

To capitalise on the repository of skills and very considerable expertise built up by staff of the AHP since its establishment in 2005, it will be assimilated into the new Housing and Sustainable Communities Agency which is being established to provide for more flexible shared service support for the local government system and the Department in addressing housing priorities. It will replace the Affordable Homes Partnership, the National Building Agency, the Centre for Housing Research and the Homeless Agency.

As I said, we are now operating in a very different economic environment. In terms of my Department and its partner bodies, the downturn has required, among other things, the development of new approaches to meet rising housing needs; an enhanced focus on realigning our investment programmes with current economic as well as environmental priorities; and intensified work to achieve more with fewer resources. We also face particular challenges in a number of areas across our wide agenda. In pursuing our objectives and addressing these challenges the Department has a strong mandate and substantial resources, despite the difficult circumstances — nearly €2.2 billion in capital and current funding in 2010 — with which to achieve positive outcomes.

I will call first Deputy Broughan who will be followed by Deputies Ned O'Keeffe, Clune and Shortall. I bring to the public's attention the fact that yesterday the committee wrote to the Minister for the Environment, Heritage and Local Government, Deputy Gormley, regarding the Dublin Docklands Development Authority. This arises from correspondence we had with the Minister originating in our letter of 22 September 2009 in regard to the accountability and oversight of the authority and to the fact that he did not propose to bring the authority within the remit of the Comptroller and Auditor General by amending the legislation governing the authority.

The Committee of Public Accounts reviewed the issue again last week and having regard to the concerns expressed about corporate governance and the implications of costs arising to the State from the activities of the authority, it remains the strongly held view of the committee that the remit of the Comptroller and Auditor General should be extended to cover the authority. In that regard, we will again write to the Minister to ask him to reconsider the matter and we will again request him to take the necessary steps to place the authority within the remit of the Comptroller and Auditor General.

The committee does not have any jurisdiction over local authorities so this is one of the few opportunities we have, through Ms Tallon and her officials, to question what goes on at local authority level. I ask Deputy Broughan to begin questioning.

I welcome the Secretary General, Ms Tallon, the chief executive, Mr. O'Connor, and the officials from the Departments of the Environment, Heritage and Local Government and Finance. I turn to chapter 9 of the Comptroller and Auditor General's report, the termination of major ICT projects. I wish to ask Ms Tallon and the Department of Finance officials questions about that. In regard to the e-voting machines, what has been the total cost of this incredible policy disaster? What is the ongoing cost of it?

We have reduced that cost to the greatest extent possible. We employed valuers to look at 12 different areas. They determined that in seven of the 12 areas, leases should be terminated. In three of those areas, that has happened and in four areas, we continue to negotiate through our valuers in regard to the termination of the leases. However, we have brought down the cost of storage to the greatest extent possible. The storage was approximately €658,000 in 2004 while the storage cost incurred last year was €182,000.

This extraordinary situation goes on.

Have we tried to dispose of the machines? Have any negotiations started? Would any other democracy be interested in the machines? Have we tried to send them back to Nedap, the company which made them? Has any progress been made to get rid of them once and for all?

Government made a decision last year to terminate the project and we have been working in the intervening time. We have had discussions with the supplier. We fear there could be a cost rather than a sale in that context, that is, we would face a cost in terms of transport, and so on, for the supplier to take back the equipment. My mandate is to try to recover as much value as possible in these circumstances. Our view is that we should go to public tender to seek interest in the acquisition of this equipment.

I recognise, however, that there have been developments in regard to electronic voting internationally. Electronic voting machines are no longer in use in the Netherlands. Use has been compromised in Germany also. I have to be realistic about the prospects we have in this area. Nonetheless, there have been expressions of interest in the machines and it is important that the market is tested.

Ms Tallon mentioned Germany. The constitutional court in Germany ruled them unconstitutional because one needed to be computer literate to vote, which was a restriction on voting. Since the Netherlands, Germany and no other country are prepared to use these machines, has the Department thought of suing Nedap, the manufacturers?

We have not gone down the route of suing the manufacturers. The developments in terms of the Netherlands and Germany have been recent in the evolution of voting technology. The tendency internationally now is to look more towards forms of paper verification but the system was supplied in good faith as fit for purpose at the time.

I was one of the politicians who made submissions at the time. Our IT people felt because of the paper trail issue and so on that the machines were grossly deficient. The IT department in NUI, Maynooth began that investigation. In that context, will the Department seek a tender for disposal, or legal advice as to whether it would be possible to recover money? We have lost €60 million as a result of the termination of this, which is very serious. Will the Department proceed vigorously to attempt to recover some of our money?

That is precisely what we are doing at the moment. The system was supplied in good faith and was used successfully initially in pilots, which were well received. Subsequently, public attitudes changed and evolved and public acceptability of the system diminished or, effectively, melted away, so we were left in a situation where on the one hand, public acceptance was low and on the other, technology was evolving. I accept that was a very difficult situation with very unfortunate consequences. However, we are intent——

I do not really agree with Ms Tallon's analysis because many people, in particular people in political life, were not happy with this proposal from day one. It was a policy matter. We were reflecting that former Ministers' pensions perhaps should be attached in some way to try to recover some of this funding because it seemed that this was pushed through in a bull-headed way. That is a policy matter.

Is the Department determined, either through tendering for disposal or through some other method, or even to look with the Attorney General at the legal options, to recover some of the €60 million of a total loss of funding?

Neither do I agree with the analysis made. Deputy Gilmore and I were the Opposition spokespersons at the time who dealt with the matter. It was before Ms Tallon's time, but the Department behaved utterly irresponsibly. On the very day when we had an inquiry here and had asked major questions about paper trails, verification and the control of the software, or early the following day, the Department entered into a major contract with that company despite major questions outstanding arising from that hearing at the Joint Committee on the Environment and Local Government. I was always convinced that the Department — I cannot criticise the Minister because it was with the Department — pushed ahead and entered into a contract without answering the major questions, which proved subsequently to be genuine questions that could not be answered.

I suggest that the Department cut its losses. If the Department proposed to advertise for them, it is the scrap merchants' journal in which the Department should advertise because nobody else will take these highly defective machines.

Before I came here I flicked on my computer and went into www.electronicvoting.ie, which is a website telling citizens how to use these defunct e-voting machines. I estimate that the setting up and maintenance of this website cost us €52,000, which is an ongoing bill. It is a small amount of money, but why do we have a website this very day telling us how to operate these machines when we go in to vote when the Department has made the decision to terminate them? Is this not incredible incompetence that the Department has left this website up and it has no function?

I will respond at a broad level, first, to the Chairman's earlier comments. I cannot comment particularly on events before my time on this project, but I simply make the point that the Department has always operated under a very explicit mandate from Government on the electronic voting system.

On the equipment, the equipment itself cost €47 million and the balance is associated costs. There was a website set up a number of years ago——

I cannot judge who is hitting on the system, but it continues to be used.

For completeness in terms of the breakdown of costs, the cost on the website last year was of the order of €12,700, but we intend when the disposal is arranged to close down the website as well.

I do not know why it is not closed. I recall a few months ago that when a TD left this House his website was taken down within minutes of him leaving the House. I cannot see how this could be justified. It is a small amount of money but it seems indicative of this entire process.

May I turn to the Department of Finance?

But it ended up in their own property.

Could I turn to the Department of Finance on the other matter mentioned briefly, the Reach portal — the public service broker. I used be my party's communications spokesperson. Am I reading correctly from the Comptroller and Auditor General's report that we wrote off approximately €23 million on the Reach portal? This was a portal to which people who needed information about Government could go, starting with social welfare, and they could go through it to reach all areas of Government. We set it up and then we abandoned it, and in the process we seem to have lost €23 million. Is that the case? Is the net debt of this report by the Comptroller and Auditor General on IT failures approaching the order of €80 million plus?

I am just saying the Department of Finance is charged with managing e-Government. The fundamental point seems to be that it did not have the in-house ICT resources. The question I wanted to ask is: has the Department of Finance done anything about that in the interim given that there have been two major disasters in IT?

The cost is a matter for the Department of Finance.

To turn briefly to the affordable housing partnership to look at its achievements and its history, I ask the chief executive how many affordable homes at lying empty at present.

As outlined by the Secretary General, currently there are 1,100 affordable homes that are still vacant throughout the country. There had been 3,400 this time last year and the Department of the Environment, Heritage and Local Government took action on issuing local authorities with guidance on how to deal with unsold affordable homes. Measures were taken, first, to sell affordable housing where possible, and then to take alternative measures such as transferring over to the rental accommodation scheme or to social leasing. Of the 3,400, approximately 1,600 have been transferred to social housing on a temporary basis and any tenants taking up those properties will have the opportunity to purchase under incremental purchase, and the balance — approximately 700 of those properties — have been sold to affordable housing purchasers.

I note that at February 2010 the affordable housing partnership had directly procured 758 houses under two schemes, but 474 of those were secured effectively in bulk buying. However, the partnership ended up with a 2% discount. At a time of collapsing market prices, was this much of an achievement? What did that represent in monetary terms?

The Comptroller and Auditor General estimates in his report on the affordable housing that in total the agency in recent years delivered approximately 1,100 homes. I ask the delegation to address those two questions. Was this not a surprisingly small discount and a relatively small number of additional homes delivered by the agency?

The bulk of the purchase of affordable homes for sale by the Affordable Housing Partnership was done in 2006. A total of 502 homes were contracted to be purchased with the intention of being sold to affordable housing purchasers before we had acquired them. At that time in 2006, house prices were increasing. We were fixing house prices so as not to have further increases in prices. The discount was against achieving a fixed price and a 2% discount. This was at a time of rapidly increasing house prices.

There were certain aspects to this purchase policy by the agency. We were not purchasing in the sense that we were paying over money within a number of weeks or months of agreeing these prices. There were long periods in which those properties had to be sold. We were aiming to sell them on to affordable housing purchasers so we were not contracting to purchase and then sell on but rather we were contracting with options to purchase up to six months in the future. In the case of quite a number of those properties it was a longer period. We were effectively fixing prices.

I note the agency managed two land swops — one involving the exchange of Broc House in Nutley Lane, Dublin — for discounts involving almost €11 million on 89 properties in Blanchardstown and also I think the property on Harcourt Terrace which involved discounts totalling €35 million on 215 properties. Why was there a divergence of the advantage to the State in those two land swops with developers? The latter one seems to have delivered better value. I know it is a case of location, but the Harcourt Terrace land swop would seem to have delivered better value.

At the time the Harcourt Terrace property achieved a very favourable bid and very good and exceptional value was achieved. The location was particularly attractive. In the case of Broc House, the value achieved was not as great as that achieved in Harcourt Terrace but relative to the valuations carried out on it, we achieved greater return than was predicted for that site.

The Affordable Homes Partnership identified 47 sites on public lands belonging to local authorities as being potentially suitable for the development of affordable housing. However, none of these were developed. A total of five sites were selected on public lands with the final one being Magee Barracks in Kildare town. Basically, nothing happened. This affordable homes agency was set up with the intention of getting a great deal more development on our own public lands but this does not seem to have happened. It seems to have been a complete non-achievement.

On the point about the affordable housing initiative using State lands for providing affordable housing, the sites at Broc House and Harcourt Terrace were used for the provision of affordable housing. With regard to the other sites, the agency carried out detailed analysis of them to decide on what would be the appropriate use and whether they could be used for affordable housing and most important, obtain value for money for the State. It was considered premature to utilise a number of the sites and we would not be able to achieve value for money with regard to them. Much work was carried out on Magee Barracks in Kildare town. This was being progressed under a public-private partnership procurement. However, with the changes in the housing market, it was decided that we would not be able to obtain value for money. In cases where we did not think we would achieve value for money for the State, we did not proceed.

The Affordable Housing Partnership also announced the call for lands initiative which was to ask developers and builders to come forward with lands that could be made available for affordable housing. We ended up without a single development as a result of that initiative. The agency looked at two sites and nothing happened.

The calls for land initiative was commenced in November 2005. We sought expressions of interest from the market as to lands available for housing whereby we would enter into a partnership with private developers to develop those lands. We received 47 submissions and of those, we considered that 12 were in suitable locations — such as being close to public transport and in areas where housing was both needed and demanded. We entered into negotiations with the developers involved. In a number of cases, from a value for money point of view, what was being offered was not considered to be appropriate. We considered a total of five submissions as being appropriate. We then proceeded with two sites. It was decided by the Minister for the Environment, Heritage and Local Government and the Department and the Affordable Homes Partnership not to proceed with any site without the support of council members in local authorities. We recommended two sites for affordable housing. One site was in Killiney in Dún Laoghaire-Rathdown but the council members voted against it. We respected their decision and did not proceed. The other site was in Lucan. The members of South Dublin County Council had a lot of concerns about the proposal and asked the agency to withdraw the submission which we did. We respected the decision of the members of the councils.

No progress was made on public lands nor on the call for lands initiative. Was Mr. O'Connor directly involved in the home choice scheme? This was launched a couple of budgets ago with great fanfare. It was said it was launched at the behest of the Construction Industry Federation. Approximately €600,000 was expended on this new affordable scheme, the home choice loan and it seems we ended up with only four households obtaining houses out of the home choice scheme. There were 44 applications and four households housed.

The Deputy is correct. Let me explain the background to this. It was introduced for the 2009 budget. Home choice is a mortgage product available for first-time buyers. The background to introducing that is that there was concern that the banks and building societies were not, maybe, providing sufficient mortgage finance particularly to first-time buyers. The home choice was there, not to compete with the banks and building societies, but to have a fallback — a safety net — if lending was not available at a reasonable rate and at a higher loan to value ratio. In this case the loan to value ratio is 92% of the purchase price. It is intended that if the banking lending is not working, that is available. Perhaps most importantly, it is still available today.

It seems incredible that we set up a programme and spent nearly €600,000 on administration and at the end of it all we have housed are four families. That is the bottom line.

Before I pass over to my colleague, I have a final question on general housing policy for the Secretary General. I believe Dr. McCarthy recommended that the Affordable Housing Partnership should be effectively be scrapped. Ms Tallon has more or less told us now that it is being scrapped; it is being merged with a number of other agencies. Is the Department happy with the performance on this and its general performance? As often happens, last weekend I met a man who went on the Dublin City Council housing list in 1998, 12 years ago. He is one of the 56,000 households and individuals on housing lists in a country, in which according to UCD figures there are 350,000 empty homes of which 170,000 are available. They are empty and not second or holiday homes. I would regard housing as the number one policy of the Department. If I were ever in Government I believe I would try to rename the Department as the Department of housing and the environment, or perhaps the Department of housing and climate change. Given the very modest delivery of the affordable homes partnership, is it fair to say that the Department's housing policy is still in disarray and it is not delivering for people such as that man who has been on the list for 12 years? In my constituency in areas covered by Dublin City Council and Fingal County Council I meet several people who have been waiting eight, nine, ten or 11 years and they finally come to see somebody like myself. Does that not indicate a chaotic and dysfunctional housing provision system over which the Department is presiding?

I also ask Ms Tallon to set out the interaction the Department of the Environment, Heritage and Local Government will have with NAMA, given that so many empty housing estates will now come under the remit of NAMA. What action will it take to take some of these estates, finish them off and put them on the market for social and affordable housing?

I had briefly asked to intervene on the Deputy's previous question on the spend on the home choice loan and perhaps I might revert to that before coming to his second one. It is certainly not my understanding that it was set up in response to pressure from the Construction Industry Federation. It was a judgment by Government that it was available to make a line of credit available to those who might otherwise for their own reasons choose to purchase in the market but be unable to access credit at this particular time. A large part of the spend associated was of the order of €280,000, which was spent on setting up a loan processing system managed by the affordable homes partnership. That is now used for centralised assessment for all mortgage purposes across the local government system. So it has been a valuable — if one likes — shared service to put in place.

That is true, but it would never have been our wish that people would have been, if one likes, encouraged into buying at a time that might not otherwise have been of their own choosing. It was simply to provide a line of credit to those who within their own life and their own economic circumstances were choosing or needed at this time to buy but could not secure credit.

On the question of whether the Department is happy with its performance in the housing area, I would never want to give anyone the impression that the Department is complacent about its performance in any area. We regard housing as an extremely important part of the Department's brief — extremely important from a social and economic point of view. We have paid a huge amount of attention to the implications of the property collapse and the need to look forward to recovery and particularly to the circumstances of people who are caught in difficult situations within that collapse. At a broad level it is an area to which we devote a huge amount of attention. Between 2001 and 2009 the needs of over 125,000 households have been met across the range of housing supports that are publicly provided. That includes 45,000 new local authority units. It includes 13,300 units provided under voluntary housing programmes and it includes over 24,000 units provided under various affordable housing schemes. Separately over the period from 1997 to 2009, approximately 97,000 older people and people with disabilities have been assisted through the suite of housing adaptation grants to remain in their own homes and communities for as long as they can and to prevent premature entry into residential care.

Although there can be very difficult circumstances in particular instances we believe, taken in the round, the performance of the housing programme has been creditable. We have very specific targets in a number of areas for projected outputs for 2010, which again are designed to maximise the value of scarcer resources in the interests of the people we serve. We would hope that the total social housing output for 2010 will be somewhere in the region of 8,000 to 9,000 units.

We are also transferring people through RAS. We are maximising what we can do through the social leasing programme as well as gaining as much as we can through the local authority housing programme — the main housing programme — and voluntary housing. We are seeking to try to take a balanced position across different areas of need. We have prioritised the ending of homelessness. We need to try to achieve the target to end homelessness by the end of 2010. We want to try to continue to improve and expand on regeneration spend. We want to maintain Traveller-specific programmes. We want to maintain programmes for disability. There is a range of areas in which the Department and the housing programme need to be active. We are trying to take a balanced and strong an approach across the areas of priority need within the overall need.

The Chairman asked about engagement with NAMA. Within the housing area we have continued to maintain a close engagement with NAMA. We feel there is major potential for our own social housing remit to align with NAMA's objective to secure a return for the taxpayer. Now that NAMA is operational we would hope that the level of engagement we have can be intensified in the interest of achieving value for the social housing programme. It is an area of continued interest for us.

We have not advertised the machines as yet. We are working on a tender specification. We are taking legal advice from the Office of the Attorney General and the Office of the Chief State Solicitor in regard to that process. So we have not advertised as yet. We have had a number of expressions of interest, but we have parked those effectively because we feel the right way to go is to public tender.

I believe Ms Tallon stated that 7,400 machines were in storage. Has the Department investigated their use by other Departments? Would they be suitable for schools? Can they be modified given that they have no further use? Obviously based on the report, the Netherlands and Germany have found them of little value. I do not know who might tender for them.

They are essentially electronic voting machines. Their capacity to adapt to other uses may be quite limited. We have had some discussions with some Departments, including the Department of Education and Science, but there has not been a significant level of interest in terms of the capacity to adapt to other uses within Departments. In any event we feel that rather than pursuing individual expressions of interest at this point it is right to test the full market.

Electronic equipment goes out of date rather quickly. I take it that they are deteriorating by the hour rather than by the year. I would believe they would have little or no value other than salvage value. IT equipment in the Houses of the Oireachtas is updated on a regular basis as it goes out of date. Why are we holding on to these machines? They are costing the State at a time when we have little money to spend. The €50 million that was spent would have filled many potholes in rural areas.

The machines are depreciated at a rate of 5% a year in our accounts. That is how we deal with them in consultation with the Department of Finance. I would say that the technology is basic enough. It is simply a voting machine. So the technology might not change all that much. What has changed is public acceptance and voter preference. As I said earlier, there is more international interest now in paper verification systems and lower public acceptance generally of the electronic system. The machinery — the equipment — was designed and intended to have a lifespan of 20 years and it could have that without particular problem from an equipment point of view, but for the fact that public preference and public acceptability has changed.

On affordable houses, what is the status of the affordable housing scheme at present given the downturn in the economy? I am finding that many people are unable to meet the cost of the affordable house they purchased in recent years? In the downturn are many people failing to meet their commitments?

It is fair to say that the market conditions that necessitated the level of Government intervention to support home ownership through the various affordable schemes have eased very much. New house prices nationally are now back at 2003 levels or thereabouts. Mortgage interest rates are at low levels. Treatment of first-time buyers in terms of stamp duty and tax relief on mortgage interest have improved. All of that is reflected in the Department's affordability index, which shows that affordability has returned to the levels that were last seen approximately 16 years ago in Dublin and nationally. Rather than setting targets for delivery in this area, our emphasis is on continuing to progress measures necessary to deploy the already delivered but unsold affordable houses, including their use for social housing purposes.

The number of affordable homes that people occupy nationally would be of the order of 25,000. The bulk of the 1,100 homes that local authorities are still considering are in the Cork and Dublin areas. A total of 80% of unsold affordable housing is in either the Dublin area or the Cork area. They are in areas with large populations and therefore there is a large demand and need for housing. The local authorities are ensuring the housing is used appropriately. Some of it is being used temporarily for social housing and under social leasing-type arrangements.

I do not have that information. The majority of affordable lending has come from the private lending institutions in recent years. We have discussed whether people who purchased under that scheme have difficulties with their arrears. The reports we get back from the lenders is that affordable housing purchasers are faring better in general than other borrowers. The financial institutions report that their loan books for purchasers of affordable housing are the best performing loan books they have.

I have been told that it is not possible. I understood it would take an Act of Parliament to bring about the change. Such a change would result in a significant saving to the economy because many of the houses in question will not be secured through affordable housing because people do not have the means, regardless of how much the price of housing falls. Up to 14% of people are unemployed, especially in rural towns.

Part V, section 96 of the Planning and Development Act refers to housing provided under Part V, affordable housing, which can be utilised as social housing. Under section 96 of the Planning and Development (Amendment) Act 2002, it can be utilised. In some cases it is dependent on the Part V agreement that has been entered into between the particular local authority and developer. The change is allowed under legislation but each case has to be considered by the local authority in terms of the Part V agreement that was entered into with a developer. In some instances the agreement reached might preclude a change but that would only apply in a limited number of situations. We can provide the Deputy with more details.

I know of housing estates owned by the local authority where there are ten affordable houses and there is no demand for them based on the economic situation in the region. I and others have asked the council to make the houses available for social housing given that there is a demand for that and we were told it cannot be done unless we in Dáil Éireann change the situation. I am told it is up to the Minister to introduce legislation to amend the law as it stands. I do not know how one would go about doing that or what amendment is necessary. The Planning and Development Act is different to legislation governing tenancy and housing.

As I said, the provision exists in planning legislation so I am a bit surprised by what the Deputy has raised. I will certainly follow up the matter. Houses are taken in but in the current climate our first priority in terms of the use of the funding available to us is to take houses into social leasing rather than necessarily into purchase. I will follow it up and provide information to the Deputy.

Deputy O'Keeffe has raised a valid question. It is our experience that this is happening; one has empty houses that are earmarked for affordable housing but they cannot be sold. Questions are being asked by people on waiting lists about why the houses are empty. They are a source of scandal to people who are desperate for housing. We cannot give answers because we are being told one thing by the local authorities and now the Secretary General is telling us there is no legal impediment to what we propose. That is the interpretation I am putting on her remarks. We need a detailed note on the matter, not only on the legal position but on why it has not happened to date if there is no legal impediment to transferring affordable housing to social housing. We would like to know how many times local authorities have done that and if they have not, why that is the case.

I will confirm that for the Chairman and Deputy O'Keeffe. My understanding is that, first, there is no legal impediment and, second, approximately 1,500 affordable houses have moved over into social leasing at this stage. Third, it is a judgment call for a local authority to match vacant housing with need. Our primary concern, apart from the concern we have in terms of optimal use of the funding available, is to ensure that local authorities do pursue the sustainable communities agenda in terms of achieving a social mix and a tenure mix.

The point I was making about transferring housing from affordable housing to social housing is that a legislative provision exists to allow that to happen, but where there is an agreement with a private developer under Part V of the planning legislation to provide social housing and affordable housing, in some cases the agreement could be problematic but that would only apply in a small number of cases. As the Secretary General said about using social and affordable housing as social housing on a temporary basis initially, after five years the aim is to give a tenant the option to purchase or in the future sell those properties as originally intended as affordable housing.

I am surprised by the figure given of 1,100 for unsold affordable houses that are currently vacant. My information from Cork County Council is that it has 800 affordable housing units for which it had to borrow €168 million to purchase. The council expected to sell these on to affordable housing applicants but there is no interest in them with the current market conditions. Will the status of these units be changed from affordable to social houses? Will the Department of the Environment, Heritage and Local Government refund Cork County Council for the moneys borrowed for this scheme? The crux of the issue is who will refund the local authorities which made commitments to purchase these affordable units?

Cork County Council was one of the outstanding authorities in seeking social housing and affordable housing private developments under Part V which was the policy for achieving integration. Cork County Council is seeking to lease some of these 800 units temporarily as social housing and giving the option of incremental purchase. To provide for social and affordable housing, Cork County Council borrowed funds from the Housing Finance Agency on which it must pay interest. The interest rate is 1.5%. Where the units are used as social housing, the Department of the Environment, Heritage and Local Government will pay the interest cost. It might be best for me to provide the Deputy with a more detailed briefing on this.

Yes, the Department meets the ongoing costs of affordable houses transferred for social leasing purposes. Ultimately, the cost should be recovered in the sale of the house. If it is leased and the local authority must carry borrowing costs for five years, those costs are recouped from the Department. The ultimate objective, however, is that all affordable housing should be sold. We are continuing to see reasonable levels of sales in affordable housing. They did hold up in 2009 notwithstanding the overall difficult market conditions. Up to 1,300 affordable houses were sold in the first nine months of 2009.

This should be covered in the briefing note. Ms Tallon submitted figures to the committee for local authority housing acquisitions and second-hand purchases from 2004 to 2009. In 2006, €251 million was spent on second-hand purchases while in 2007 there was a large increase to €413 million. This then went back to 2006 levels at €268 million in 2008. What was the reason for this surge in costs in 2007?

At a broad level, the days of relying for the provision of housing solely on a local authority build programme are well gone. We do have Part V and turnkey acquisitions. Acquisitions have long been a part of the main local authority housing programmes. They provide a very useful means of ensuring that the range of delivery mechanisms is sufficiently broad to take account of local market conditions. In the local authority areas where second-hand acquisition numbers appear to be high, the number of units coming on stream through Part V in the same local authority in the same year tends to be on the low side. In those years, authorities tend to adjust the mix between different delivery mechanisms to take account of a low Part V yield and make provision through other acquisition means, so that they can achieve the maximum output for the capital available. Where delivery under Part V peaked in 2008, second-hand acquisitions decreased accordingly.

The figures contain prices. I do not have with me details of the units in the different categories in each year, but I can certainly provide them to the Deputy. They can be broadly deduced from the amount of money spent in different areas, but we will provide them. It will take us a little time, because this is something we are——

The property market would have been at its peak at that time. What was the thinking behind such a high number of purchases? Can we be provided with some idea of the number of units purchased and where they were purchased? I know Ms Tallon does not have the figures, but somebody must have some idea on where the money was spent.

Local authorities were not purchasing speculatively at a high price in a rising market. That would be a wrong impression to convey about the amount of money spent on second-hand acquisition. The data we have show that local authorities were pursuing value for money and that good value was achieved in second-hand purchases. Second-hand acquisitions in the local authority system averaged out at around €206,000 per unit in 2007. Average new house prices in the same year were €319,000. Average second-hand house prices in the same year were around €374,000, so local authorities were essentially operating at the value end of the market. The average price paid by the authorities for acquisitions ranged from between 29% and 45% lower than the average new house price between 2004 and 2007. In the same years, they ranged from about 41% to 54% lower than the average price of a second-hand house.

We advised authorities to take a planned approach to second-hand acquisitions. At every stage, our emphasis was on achieving value for money within what was a highly priced market. We set threshold limits for acquisitions by local authorities and we are satisfied that those threshold limits were met.

I do not think you are comparing the figures fairly. In my experience, when local authorities purchased houses in the private sector, especially previously occupied houses, there was a cost involved in bringing them up to standard. Many of the houses purchased in the private sector required maintenance and upgrading. The cost of that is not reflected in those figures. Has any study been done on the cost of upgrading houses that were previously occupied?

I would not have that level of detailed knowledge, nor would we second guess local authorities on that level of detail about every individual transaction. The expectation would certainly be that houses were being purchased for use. They were not being purchased for regeneration purposes in this context, nor was there a need for significant remedial work.

No, we would not have stated that in so many words in a circular, but houses were being purchased to meet need and meet demand. They were not being purchased to incur delay on further remedial works. The expectation is that if we are using money to meet need, we buy houses that meet that need, not to lie vacant while remedial works are being carried out.

Has any analysis been done on unoccupied houses? I have before me, just 11 local authorities and there are more than 2,000 houses unoccupied. That is housing stock worth in excess of €5 million or €6 million at least. These are houses, excluding the ones that are set aside for major refurbishment.

As the Chairman knows, we have a service indicator within the local authority service indicators on the extent of vacant housing stock. It is an issue in which we have a considerable level of interest and a degree of concern. We have monitored the situation over recent years as part of the service indicators. In 2007, the percentage of houses empty, if one excludes those which are empty for major refurbishment schemes, was approximately 4.3% of the housing stock. In 2008——

It is around 5,000 in 2007. In 2008, the number of units vacant, excluding refurbishment, was about 3.2% of stock. There was quite a significant improvement in bringing down the number of vacant units nationally. It works out at a 24% improvement between 2007 and 2008. If one looks at comparative experience, we could improve. The vacancy rate in England is about 2.6% but the vacancy rate in Northern Ireland is slightly higher than ours. We are comparable, but it is an area where the local government system can do better. There are good examples of areas where local authorities are in practice improving their performance quite dramatically.

Kildare has an initiative in place in recent times under which they have introduced a range of new measures to fast track remedial works and maintenance works and they have reduced the time taken to re-let vacant dwellings from 14 weeks to 7 weeks and are estimating quite a significant saving, a saving in 2009 of the order of €200,000. We regard that as positive.

When I was at the committee on a previous occasion I said we were asking the local government audit service to carry out a study on management and maintenance of the local authority housing stock, and expect to have that work completed reasonably quickly. I accept it is an area where a strong focus needs to be maintained to secure optimum use of the housing stock.

On that point about housing and refurbishing houses and so on, it is obviously a bone of contention with many people. Is a great deal of investment required to bring houses up to a standard? In many houses it takes a long time to do the work. They need ventilation, new kitchens, new windows and quite often potential tenants would ask if they could just sign something and accept the house in its current state to try to shorten the turnover period. Has anything like that been considered?

We are very interested and we are looking to the study by the local government audit service to come up with recommendations in that area. At a broad level, this is an area in which significant public money is being spent. We have some €45 million in the budget for 2010 for retrofit purposes which will be used, in part to upgrade and improve local authority housing stock. We would like to have a system where houses are inspected before they are vacated to minimise the liability on the local authority in terms of costs arising. This is something we would seek to put in place. It is also very important that we seek to minimise the period between a house being vacated and being re-let. Part of the Kildare experiment which has proved very successful has been a system of maintenance and maintenance contracts that effectively avoids houses having to be shuttered for a period. Once they are shuttered they begin to deteriorate and it attracts anti-social behaviour. If we can avoid a house being shuttered, but get the work done within a short period, that minimises or reduces the cost and helps to make better use of the property.

We saw similar figures last year. On the rental accommodation scheme. Media reports on the social affairs committee yesterday indicate that the figures have doubled in the past two years. I believe it is a progressive policy. Are there plans to move it on, perhaps through NAMA, to extend the rental accommodation scheme?

We are very keen to expand the RAS. As the Deputy observed, the expansion thus far has already been significant. Expenditure was in the order of €53 million in 2008 and the provision for 2010 is €125 million. We see the latter figure as allowing for a substantially improved capacity to increase housing supply.

It depends on the willingness of property owners and financial institutions to enter into long-term leasing agreements. The Chairman referred to our relationship with NAMA. Developers and bankers appear to be waiting for NAMA to settle the market and allow a picture to emerge in regard to values. It has been difficult over the past year to persuade property owners to engage with us in regard to long-term leases but now that NAMA is operational we hope to capitalise on the potential that exists for a social dividend through RAS.

The local government efficiency review group commenced its work in January or February and has met on a number of occasions during the intervening period. It has an active schedule of meetings and has issued an invitation for public submissions. All the local government associations have made submissions and the local authority members associations and the County and City Managers Association, as well as other stakeholders, have held meetings with the group. According to the group's terms of reference, it should report to Government by mid-year.

It is part of the background information for the review. Other interventions have since occurred, including a large-scale study of local government financing in 2006 and the report of the Commission on Taxation. Some comment was also made on local government by the McCarthy report. As the Indecon report placed a strong emphasis on achieving efficiency with in the local government system, it remains relevant to the review group's work.

What does that mean in terms of the necessary investment in this area? Is consideration being given to cross-boundary packages of work rather than asking individual local authorities to submit investment programmes in a piecemeal fashion? Last November's flooding certainly revealed the fragmented nature of water supply in Cork city and county.

The spend for 2010 will be the first part of a new three year rolling programme. As the Deputy will be aware, over the past ten years we have implemented water services investment programmes in three year tranches. The three year programme for 2010-12 has been subjected to intensive work over several months and I expect that the Minister will publish it shortly.

In recent years, expenditure has roughly divided into 60% on waste water treatment systems and 40% on water supply. Last year 41 projects were completed, of which 19 involved waste water treatment, 13 involved water supply and approximately nine involved serviced land initiative type schemes. The 60:40 ratio between waste water and water supply is being reconsidered in the context of the new water services investment programme because the urban waste water treatment directive requires us to place a stronger emphasis on waste water treatment.

For the current and upcoming period the context is being increasingly provided by the water framework directive, under which we have river basin districts which clearly follow the configuration of river systems rather than a local government system. In each of the river basin districts we have a lead authority and a very good co-operative arrangement among the group of local authorities within the area. The new investment programme will dovetail closely with the needs identified on a river basin district rather than an individual local authority basis. I expect to see increasing emphasis on cross-boundary engagement between local authorities in the delivery of services in the future.

I have some questions before I invite Deputy Shortall to contribute. When Ms Tallon was here last year, she spoke about development levies in the context of local government financing. We were told at the time that there was a substantial amount in development levies due from developers. In a letter to the committee in December she noted that the figure at the end of 2008 stood at in excess of €800 million. That was a massive jump of €668 million from the height of the boom. What is the current figure? Will Ms Tallon provide the information before the end of the meeting, giving a breakdown of the amounts owed to each local authority by developers? The amount owed is a more than a substantial figure in the context of local government funding and it is growing.

When I wrote to the committee recently about development contributions, I indicated that the gross uncollected amount was €848 million and that the local authorities had identified as doubtful debt — money which it might be difficult to recover — a sum in the order of €191 million. Also within that figure was deferred income. Development may be phased over a period. While the gross uncollected figure represents the total amount of debt, there is an element within it which reflects the fact that development may be phased and that contributions will fall due as phases proceed. The level of deferred income is of the order of €348 million.

The net debtors owe approximately €309 million, with the proportion varying across local authorities. The largest numbers of debtors are in the Dublin area. The figures I am using are for the period up to the end of 2008. The figure for Fingal County Council is €161.2 million and for Dublin City Council, €147.7 million. However, the figures are subject to the qualifications I have identified. At the other end of the scale, the figure for north Tipperary County Council is €1.59 million; Offaly County Council, €1.67 million and Clare County Council, €1.59 million. The majority are in the order of €3 million to €10 million. I will circulate a table to the committee giving a breakdown of debtors.

Yes, I am concerned, as I would like to see the income realised. Development contributions were put in place to achieve a public and community gain in the development of land. They are meant to meet the cost of services. We look to local authorities to engage actively in this regard and know that there are over 200 staff at local authority level occupied full-time in the collection of outstanding levies. We have asked local authorities to ramp up the inspection of developments and the work involved in securing as many of the contributions as possible. I mentioned Fingal County Council. There are approximately 50 cases at various stages of legal proceedings. Dublin City Council has issued nearly 100 warning letters, with ten court referrals. Local authorities are following up on the issue.

On the other side of the scale we must be conscious that development contributions constitute a significant burden on new activity in particular areas. Representations have been made, arguing that development contributions are a cost on competitiveness. They could be presented as an impediment to economic recovery.

No. As I said, there are over 200 staff occupied full-time in the collection of levies. Local authorities take the issue very seriously. Equally, we are looking to them to be reasonably flexible where businesses wish to locate on a basis that the associated costs would be minimised to the greatest extent possible. Local authorities are systematically pursuing debts.

I thank Ms Tallon and her colleagues. I am taken aback by the comments on development levies. We could talk about mixed messages to local authorities; on the one hand, they are being told they should pursue vigorously the moneys owed to the public purse as it is required for local infrastructure, while, on the other, there is an indication that they should be reasonably flexible. What exactly is being said to them, as I cannot understand it?

It is appropriate that the committee is examining this area, given what happened on Tuesday and the central role housing played in the collapse of the economy. The housing policy pursued up to the time the bubble burst has been likened to a pyramid scheme in so far as the aim was to keep building as many houses as possible in the belief that it would reduce prices. In effect, one built more houses and brought in more foreign workers which, in turn, created an unending demand until the pyramid scheme collapsed. I am very concerned and this issue cannot be examined in the few hours available to us this morning. At another time I would have said there was material for a tribunal but now I say that this committee needs to consider carrying out a major investigation into the entire housing area, including social and affordable housing, to identify the loss to the Exchequer in recent years. There is a major scandal bubbling away under the surface with which, in time, I hope we get to deal.

What professional expertise and advice was available to the Department in the housing area in terms of forecasting demand and developing a sustainable housing policy? This is not straying into the area of policy. I know the Minister of the day may have set policy but given that the Department is the primary one responsible for housing, what expertise did it have available to it to assess demand and how best to meet it?

It is one of the Department's own bodies involved in the area. Part of our rationalisation of housing agencies is to bring the particular areas of expertise we have in the Affordable Homes Partnership, the National Building Agency and the Centre for Housing Research together into a more composite approach. In addition, as the Deputy will know, a number of years ago our approach on the provision of housing would have been informed by what were known as the Bacon reports.

In terms of explicit advice, for example, somebody who is badged as a housing economist, the answer is that we do not have that kind of expertise. We have architects, quantity surveyors, planners and statistics and we rely on a number of contributions, be they from the NESC, the ESRI or dedicated consultancies such as the Centre for Housing Research.

We do not have the final figures for 2009 but in the order of 13,000 homes have been built since the establishment of the Affordable Homes Partnership. That figure relates to affordable housing. Approximately 10,000 homes were provided under Part V and of those 3,000 are social housing and the other 7,000 are included in the figure I provided just a moment ago.

The number currently unoccupied is 1,100. Some 1,600 of the unsold affordable houses have been transferred as social housing on a temporary basis under social leasing arrangements. Tenants of those houses will have the option to purchase under incremental purchase. When I say temporary, this means initially for a five-year period. At the end of that period the decision will be reviewed in terms of the appropriate action to be taken in regard to those homes.

Regarding the 1,100 houses about which a decision has not been made, local authorities continue to sell them and are also assessing whether it is appropriate to use them either as social housing or in other ways, be it renting on the market or selling the properties on the open market. Local authorities have a range of options and there is also the option of using those properties under the rental accommodation scheme.

We do not have the figure for mortgage arrears. The majority of mortgage lending provided to the Affordable Homes Partnership for affordable homes purchasers was from private lending institutions. The banks were involved and the EBS building society was involved in providing loans to affordable home purchasers. We have held discussions with the various lenders at various times and we have asked them how many affordable purchasers are in arrears. The response we have received from the banks indicate that the lending to affordable homes purchasers are the best performing loans they have in the mortgage market. This is primarily because the affordable homes purchasers borrowed less for mortgages than other first time purchasers.

As I understand it, the question is whether the value of properties held and owned by the local authorities is below market value. A large proportion would be at close to the current market value. The majority of properties under the partnership were provided through Part V and local authorities purchased these properties from developers at a discount from the market value. Some of the agreements date back several years. The authorities did not agree prices at the peak of the market. Without giving specific statistics, in general many of the properties would be effectively at market value now and a proportion of them, perhaps of the order of 10%, would be below market value because local authorities bought at a significant discount, typically of the order of 30%. However, authorities in high value areas purchased properties at perhaps 50% of the market value under Part V.

The homes were provided as affordable homes with the intention of selling them as affordable homes. The market has changed very dramatically. A policy decision has been made that they would be used initially, perhaps for a period of five years, as social housing, with the possibility or intention that they may be sold as affordable homes if the market changes or with the option for social housing tenants to purchase them under the incremental purchase arrangement.

The majority of the unsold affordable properties are in local authority ownership and some are still in the ownership of developers. Those in local authority ownership have borrowed funding from the Housing Finance Agency to pay for the properties or they have used finance from their own resources. The arrangement is that if they use those properties as social housing, the Department of the Environment, Heritage and Local Government will pay the holding costs, including interest, which is currently 1.5% from the Housing Finance Agency. I cannot speak for the Department on this matter but, essentially, there is no capital funding to provide for local authorities to pay the costs of converting the properties to long-term social housing. However, funding is in place to pay holding costs.

They are in the ownership of local authorities. Each local authority must assess whether it is appropriate to use such affordable housing as social housing. To get integration and a mix and to meet the sustainable communities agenda each local authority must examine its situation. Where it is appropriate to use housing as social housing, they will do so. In other cases, they continue to seek to sell them as affordable homes or to take alternative options.

I will outline what our staff are doing currently. I refer to what we have just been discussing in terms of the unsold affordable housing. We are working with local authorities to address the best options for them to deal with unsold affordable stock. That is the one of the major areas on which we are working. I refer to social leasing. Generally, those measures and initiatives have been introduced by the Department. We are assisting the Department and local authorities in respect of social leasing. Quite an amount of our work involves new policy in respect of the provision of social housing. We also provide advice to local authorities in respect of Part V. Many agreements have not been finalised and issues remain between local authorities and developers on which we provide advice.

Yes. The primary housing expertise rests with the local authorities. In recent years, the Affordable Homes Partnership has been especially good at utilising that expertise within the local authority housing system where we provide advice to local authorities or hold workshops with them in respect of affordable housing.

I refer to the strategy currently being pursued regarding housing. More than €500 million is spent on rent supplement every year, which is an entirely unsatisfactory situation, while at the same time there is a better scheme, namely, the residential accommodation scheme. It would seem to make eminent sense from everybody's point of view to transfer people on to RAS. In those circumstances everybody wins. It is better for the tenant and there are huge savings to be made for the State, especially given the current state of the market. Why is progress in transferring people from rent supplement to RAS so slow?

Absolutely not. In short, that is not the case at all. We have concerns that people may be in substandard accommodation within the rent supplement area and we would be very keen to see movement across into inspected, quality property under RAS, but there is no question of the Department prioritising or taking a different approach from social leasing in comparison with RAS.

I understand it, the Deputy is looking for an illustration in terms of leasing. If a Dublin authority were to lease a dwelling at a cost of €800 per month, the market cost of which would be €1,000 as the authority pays rents at prices below market level, over a 20-year period on a fixed-price basis it would cost a local authority in the region of €192,000 compared with a current average cost to purchase a new home in Dublin of approximately €290,000.

I cannot see any basis for a policy which states the Department spends money for 20 years on paying rent to a private developer and ends up with nothing to show for it after 20 years. I cannot see how that makes any sense and how it can be anything other than a waste of public money. What financial modelling has been done to suggest it is a better approach to providing social housing than purchasing properties now, when there is a great deal of value available, and putting them into local authority housing stock or having some kind of sales arrangement whereby the Department would purchase housing stock and offer long-term letting to local authority tenants? It is quite an important issue. A lot of public money will be spent on this over the next 20 years. It is likely that our successors in 20 or 25 years' time will be sitting in this room asking how on earth the Department allowed this to happen. Why would we spend money on 20- year leases at this point in time?

We are spending money on leases which give us property at a rent which is considerably lower than the market rent, as things stand. We meet significant levels of need in this way in a flexible manner whereby over a period people may move on and seek their own accommodation in the future. There is flexibility in this approach from a local authority point of view and value to be gained for the State in terms of the numbers of people who can be accommodated and the number of properties that can be secured over a long period on rents, which while they will undergo some level of review at intervals are nonetheless fixed at attractive levels as matters stand.

I do not accept that for one moment but I will not continue with this point. Will Ms Tallon provide us with the figures? In the case of, for example, a housing unit let for €800 a month, what agreement does the Department enter into in that respect? Can she provide us with the detail of such agreements after this meeting? I simply do not accept that what she is saying stands up; it is not in the public interest and it does not provide value for money.

In terms of land considerations in which we were involved, one related to the affordable housing initiative. Under that initiative certain State lands were identified as possibly being suitable for use for affordable housing. We were involved in considerations regarding two of those sites, the Harcourt Terrace site and Broc House site, which were used in exchanges to provide affordable housing — discounted affordable housing — elsewhere.

In regard to the other sites, in any site, in the consideration of which we have been involved, namely, those listed and a number of others, we have analysed whether it was appropriate for use for affordable housing. In several cases we considered it was premature to use the sites. We considered it was best to retain the sites in State ownership and that it was premature to develop them. In the case of the site at Magee Barracks in Kildare town — we are involved in a deal of work with Kildare County Council — in light of the changing market and the changing economic environment, we advised against proceeding with the development of that site. We analysed each site in detail.

We carried out a very detailed analysis of that site and advised the Department that it would not be appropriate to utilise it for affordable housing at this point. We provided the Department of the Environment, Heritage and Local Government with other advice about that site and it is a matter for it to decide on the future use of the site based on our analysis and recommendations.

None of these sites. I might defer to the General Secretary on this matter. A Government decision on the affordable housing initiative was made several months ago. A decision was taken that sites that have not been transferred would remain with the Departments, be it the Health Service Executive or other Departments and only sites that have been transferred to local authorities would be possibly utilised in the future.

Before I call Deputy Edward O'Keeffe I have a few questions. In regard to the submission to us an analysis of buying versus renting, surely the Department of Finance also has a view on this? Has it examined procedures being pursued by the Department of the Environment, Heritage and Local Government on buying versus renting?

The Department of the Environment, Heritage and Local Government is a policy Department in this area and we would have been consulted and would have agreed with the Department in its analysis in the current climate of the benefits to be gained from leasing in terms of the delivery of a sufficient number of houses.

I wish to ask Ms Tallon about what happened in the Dublin Docklands Development Authority, over which we do not have jurisdiction and this is a matter to which I referred earlier. Are there examples of crazy prices being paid by local authorities for land throughout the country? In other words, are there other examples of mini DDDAs around the country? What control does the Department exercise over the acquisition of lands? A local government auditor reports to the Department and our difficulty is that there is no examination of those reports by a public body such as this one. We have sought powers in the past to examine local government auditors' reports but we have been denied those by successive Governments. Is Ms Tallon happy that there are no other smaller versions of the DDDA debacle throughout the country? What assurances can she give us about that?

I would never use the word "happy" because that might suggest the Department was in some way complacent in the discharge of its business and we are not. I am not aware of a situation such as the DDDA situation in any other area. Our controls over local authority activity in the area of land purchase would be most specifically in the area of approval to borrow. Applications for approval to borrow routinely come to the Department and are assessed in terms of the service areas for which borrowing is required. Land acquisition by authorities, as the Chairman rightly said, are also the subject of oversight through the local government audit system. We would expect that if there are anomalies, they would be picked up, but our particular point of control is in sanctioning to borrow.

In the area of accountability, there is a serious blind spot in that the reports and concerns of the Comptroller and Auditor General can be expressed and examined by this committee, but in the case of the local government auditor, to my knowledge, there is no such airing of concerns. Elected members of local authorities can question themselves. While they have powers in the disposal of assets and properties and the procurement of property services, the acquisition of rental properties and the entering into contracts for rental properties are functions of the local authority manager. Is there accountability in this respect?

Ultimately, accountability rests with the elected members of the local authority. When a local government audit report is compiled, the local authority manager is required to respond to issues raised. The full report with the manager's response is tabled for the elected members to examine and question.

In recent years we have strengthened the audit function in local government by putting stronger legislative provisions in place that require external expertise in a local authority's audit committee. The capacity to challenge and respond to significant issues, if raised in the audit report, has also been strengthened. Reports are made available to the Department and circulated to the relevant sections. Issues are routinely followed up by the Department with local authorities where concerns are identified which may impinge on the programmes for which the Department carries responsibility.

I am glad to know that. I will be communicating with Ms Tallon on the procedures used by Cork City Council in renting a property to develop a library service in an area in which there was already such a service. The council shut down the existing library which was located near four schools and rented a property for the service in a retail shopping centre. In files obtained following the making of a freedom of information request I could find no trace of contracts entered into. Local authority members were informed there would be a penalty on the council if they reversed the decision. I will send the file to Ms Tallon because I want the matter to be examined.

The National Roads Authority issued its annual report two weeks ago. It is a well produced and expensive report, with photographs of the board members in all their glory, plans for the year ahead and a review of activities in the year gone by but no statement of accounts. Is the Department happy with this?

The Department has sought information and reports from all the authorities and bodies affected by the recent flooding. Most of the reports have been received and work is under way in pulling them together. Other detailed work is being undertaken. The Joint Committee on the Environment, Heritage and Local Government is making a detailed assessment of the flooding and has met several authorities and bodies. I understand a report will be available from the committee in the next month. It may be that the Minister will wait for the results.

The section on public private partnerships in the report of the Comptroller and Auditor General covers 18 projects — 15 sewage treatment plants, one water plant, a housing project and a harbour redevelopment project. The Department tends to use PPPs more in the case of water services, particularly design-build-operate projects for treatment plants, but tends not to use them for projects involving water networks, collection systems, etc. Schemes — three to ten smaller schemes, for example — are often bundled together to create critical mass. I do not have the exact figure to hand but it forms a substantial element of the water services programme.

Yes. Based on our experience so far, they clearly represent value for money in capital terms. We have also found that if one has a design-build-operate scheme, there is a single point of responsibility for design, construction, operation and maintenance issues. Therefore, one tends to have a strong emphasis on robust treatment processes, good quality technologies, including mechanical and electrical equipment, etc. In a sense, there is a vested interest in the operator doing the job well in terms of subsequent management and maintenance of the asset.

To return to Vote 25, putting it all together, we gave something like €5.7 billion. In all, almost €6 billion was transferred from the Department, either directly or indirectly, to local authorities, yet the Department does not have a service agreement with each of the county and city councils. Should it not have such an agreement in order that, to look at the Chairman's question the other way around, it can request the delivery of services? Is it not past time for it to have service level agreements with each local authority, with built-in targets for housing, drainage and water schemes?

We tend to look at things from a national point of view. We have detailed engagement with local authorities in a range of areas. For example, we meet every housing authority twice a year to discuss its housing action plan. We have a detailed profile in terms of what is intended for delivery in a given year which we monitor very closely. Of course, I can see where the Deputy is coming from at a broader level in terms of the achievement of efficiency across the board. The suggestion he makes is a fair one for reflection in the context of the local government efficiency review and the additional stress that should be applied in the system to secure delivery and measure performance. A lot of what we do is by way of a specific grant for a specific purpose. In the water services programme we will have a clear indication shortly when the 2010-12 programme is published of the projects that will be involved in a given year for a given authority. We have much lower levels of funding for other aspects, be they fire stations or public libraries, to which Deputy O'Keeffe referred. They are almost on a one-to-one basis.

If there was a service agreement, one could measure much more precisely how each county was performing in the achievement of targets. Last week Professor Drumm attended the committee. The Comptroller and Auditor General compiled an interesting report on the new health-stat system which we were told by our colleagues in the Department of Health and Children was developed in Baltimore where it was called city-stat. We identified a lot of problems with the health-stat system; it did not seem to provide for the very first time for a system of tracking to identify issues such as that in Tallaght one concerning waiting times. Is there a case for having a city and county-stat system, whereby the Department could ask each city and county manager, or elected mayor in the future, the question, "What are you delivering on each of the key indicators?" In other words, is there a case for copying what has been done in Baltimore and other American cities and the HSE?

It is an interesting consideration. Some of the work being done for the efficiency review group involves examining international experience in the achievement of efficiencies within local government services. I want to make two points. One is that in recent years we have used in the service indicators the performance of local authorities.

May I come back to the Deputy because I said there were two points I wanted to make? One concerns the fact that we use service indicators, imperfect and worthy of further development though they might be. This may be an issue that will be visited by the review group. The second point is that local government is an independent, democratic tier of government and we do have to respect and recognise the fact that there is local discretion and decision-making in terms of the shaping of policy.

Ms Tallon referred to the PPPs in regard to drainage schemes and water schemes. I refer to the recent history of this region and some other regions. On various days in recent months, the demand for water in the greater Dublin region, where 1.6 million people or approximately one third of our population live, could not be met. We were looking for approximately 570 million litres of water per day but the system in the region could only deliver 540 million litres. We are told we need a number of new treatment reservoirs and that we need the Shannon and other projects to be developed. Many of our constituents asked if the water which flooded people's properties in the Shannon region could be transported to the Dublin region, or to east Leinster, which would make everybody happy. Is the Department doing anything? This is an extraordinary situation.

Deputy Shortall and I were long-serving members of Dublin City Council. We always knew this was a knife-edge situation. I chaired the water and drainage committee of the council and we always knew cities such as Paris or comparable capitals often had a 10% reservoir of water for a dire emergency or in the case of a terrorist attack. This city, or the region of east Leinster, has no such fall back. People were deeply upset and citizens with disability and mothers of young children were literally screaming down the telephone that they had not had water for days. Tankers were sent around. I know the weather contributed, and I know about pipe leakage and so on. The city manager said he will go for a 20% fall back position. There are other issues in the Cork region, including drainage. In the same period, the city of Cork was almost completely flooded.

Is it not an indictment of the Department that we could not meet the water requirements of the capital and the Leinster region over a protracted period of time? People in parts of my constituency were without water for five or six weeks. In my area, Fingal County Council and Dublin City Council engineers were first class and did their work in an outstanding way. However, they were desperate that they did not have the resources to provide the region with a water supply. Embarrassingly, visitors saw us face a total crisis. What happened in regard to the water supply to east Leinster?

In the water supply area, through local government, we supply 1.6 billion litres of treated water every day. That is a huge operation. Some 540 million litres of that is water in the Dublin area. We accept that even though significant investment has gone into Leixlip and Ballymore Eustace over the past two decades, in particular, in terms of expanding in the capacity, water supply capacity in the Dublin region is finely enough balanced. We experienced particular difficulty during the recent cold weather, in particular when taps, and so on were left running on a fairly wide scale. Equally, we have been very conscious of the levels of leakage and the need for enhanced performance in the area of water conservation.

However, specifically, in the Dublin area, we recognise that enhanced water conservation and further investment to meet supply in the medium to longer term is essential . A study was carried out by the Dublin authorities in 2006 which concluded that the greater Dublin water supply area would require an additional 300 million litres of water per day by 2030 or thereabouts which means increasing by more than half the current demand. Strategies are under consideration.

Dublin City Council is the lead authority for the greater Dublin area. As members know, there is work under way. There are options. Admittedly, the options are difficult. One option being looked at is abstraction from the Shannon and the other is desalination of water for the Dublin area. Those options were costed in 2006 at somewhere between €575 million back to just over €500 million. Currently, the city council is doing a strategic environmental assessment and it is bringing that to conclusion. We expect to see a preliminary report on recommendations for the Dublin area some time before the end of this month. I give an assurance that it is the subject of active engagement in terms of the long-term design, development and financing of the level of increases necessary.

Citizens feel this is the most basic service they could possibly have.

In regard to the PPPs, what is the ongoing cost for 2009 and 2010 for all the outstanding PPPs in the area of drainage and water? The Chairman referred to the National Roads Authority. I suppose it will be before the committee at some stage with the Department of Transport. People often find it frightening that there are agreements or concessions which go to 2052. I hope some of us will still be around in 2052. In the area of drainage and the water system, are there ongoing PPPs costs?

I am not sure if I have the figures. We will look to see if we can provide information to the Deputy on that. We are involved in the capital cost of the PPPs in the water area. However, the operational costs are met directly by the local authorities, so I would not necessarily have figures on all of them. I have a broad view that tells me that local authorities are satisfied they are achieving value for money. I referred to 10% to 15% savings in operational costs. I do not have a figure readily available that would give the overall level of exposure going forward.

I refer to vacant local authority houses, an issue which came up earlier. We hear much about regeneration but local authorities play a big role in the degeneration of areas given the fact so many houses lie idle in estates. Sometimes two or three houses lie idle on the one street. Those vacant houses have a hugely negative impact on an estate. In many ways they can completely bring estates down and make it impossible for local residents to maintain their estates properly. Can Ms Tallon tell us how many vacant units there are currently, and the position on the Department providing grant aid to enable local authorities to refurbish them and bring them back into use? My information is that there are many areas in my constituency that have been completely blighted by vacant houses, the money is not being made available by the Department, and the local authority is left to do the work under direct labour, which is simply not working. What is the position?

That there are almost 4,000 vacant local authority houses at a time when there are long waiting lists is an indictment of the system. Apart from the damage those houses cause in local communities, no doubt many of them are subjected to serious anti-social activity and in many cases are being set alight. They are a significant drag on the public purse as well as being a blight on areas. What is the Department's business plan for bringing those back into use? What funding is the Department making available this year for that purpose?

On the funding the Department is making available, we expect that local authorities use their internal capital receipts where they have them. I accept that this is an increasing problem from a local authority point of view because of the shortage of resources. We have increased the funding to €45 million in 2010 for retrofit, which includes provision for remedial works as well.

I am not especially happy with the performance in this area. We asked the local government audit service to carry out a study on housing management and maintenance and we want to improve performance in that area. I want to look at ways and means through which we can avoid closing up houses altogether and have a system like the one I cited earlier in Kildare County Council, for example, where there is a very active system of maintenance repairs being carried out that has involved halving the time in which houses are turned over. Such a system would involve inspection of houses before they are vacated in the first instance to avoid to the greatest extent possible closing up and shuttering houses, and would involve allocation of the house quickly so that a tenant, to whom a house is allocated even if it needs repair and maintenance, is assigned and can be involved, and the repairs carried out quickly with his or her knowledge and input. In many instances houses are closed up, repairs are carried out and then one is into the process of allocation, but the practice in other jurisdictions such as the UK at which we have looked is that a house may be allocated before the repairs are carried out, the repairs are carried out in consultation with the prospective tenant, the house is tenanted quickly and the whole timescale involved in vacation, refurbishment and transfer is——

That is fine, but what about all of the other work that needs to be done? Increasingly, local authority houses are being trashed when they are vacated because often they are vacated because somebody is forced out. In cases of eviction, for example, it is quite common that the house is trashed before the people leave it. That is the kind of scenario with which we are trying to deal in the constituencies where there is this blight on the community and at present the local authorities are powerless to do anything because they have no money.

It is not realistic or reasonable to state that the local authorities have no money. Local authorities had €5 billion in terms of their current spend in the past year and it is simply not good enough to take refuge in the idea that local authorities have no money. Local authorities have money and have a role and function in prioritising the use of that money.

We need to find ways and means of making the money go further and that is why there is an efficiency review in the local government sector. It may well be that there are other approaches that should be taken to management and maintenance that would both improve and speed up the performance and make better value of the local authority housing.

It is not regeneration, but refurbishment of houses that were poorly maintained in the first place. Often such houses are damaged before people leave them. Those houses are now steeled up and a complete blight on the local authority estates. What is the Department doing about that issue? Apart from anything else, apart from the impact they have locally, it simply does not make sense from a value for money point of view to leave houses to go to rack and ruin, and often to be set on fire. This is a real issue in local authority estates and it seems there is no will to put in place the kind of funding needed to bring them back into use.

I can give an example of the reality. During the cold spell, for one part of the northside of Cork city there was one plumber. Where there were radiators and pipes bursting all over the place and people's houses were being destroyed, the answer was that the local authority had only one plumber.

I would bear out what Deputy Shortall stated. There are blocks of houses closed up and shuttered, some of which have been wrecked by anti-social behaviour, and they are a scar on the face of areas. It takes a long time to have them repaired and leads to downgrading of areas. The Secretary General referred to the assessment to be carried out by the local government auditor. Where will that report be sent?

Let me make a gentle suggestion to the Secretary General that she look at Table 33 in chapter 9 — current status of local authority housing stock. Would it not be far easier for people like us if there were absolute figures, rather than starting with the numbers of houses and then referring to percentages? Why not give simple statistics for the numbers of empty houses, those awaiting refurbishment and unavailable for letting, instead of getting involved in the percentages game? It is not user-friendly.

We should be able to draw conclusions from tables published by the Department, rather than engaging in labour-intensive work of interpreting percentage and absolute figures. Whether this is the standard methodology used, the figures are difficult to interpret. They are designed in such a way as to not give the full facts.

We have dealt with a large range of topics. One of the issues of interest is accountability for public moneys administered locally which amount to approximately €5.7 billion. Deputy Broughan asked whether there should be service level agreements to give a focus to spending and set objectives and targets. This sounds like a good idea. The bottom line is that all of the money is spent on national programmes, whether for housing or sanitary services. There is a need for a focus independent of the role of local government as a layer of government with its own audit service and local accountability. It is a question of whether we can develop a set of targets and indicators for each national programme and expenditure on it. It is to be hoped the efficiency review group will have something to say about this.

Turning to the areas reported on, in respect of public private partnerships, we have tried to provide some general information, on which we hope to build and enhance over time, especially on the financing of new initiatives in the current climate.

With regard to the write-downs and depreciation of the value of equipment for electronic voting, following the decision made in 2009, we will obviously need to enter into discussions with the Department on whether it has been substantially impaired in financial terms and whether there will be a need for an accelerated write-down in its statement of assets and liabilities.

With regard to affordable homes, I had planned to look at some of the new and emerging initiatives in terms of social leasing and the new purchase scheme. The information which the committee has sought today may dispose of some of these questions. I will decide in the next month or so, once the information has been supplied, whether we should extend or curtail our audit work on the 2009 accounts in that respect.

Is that agreed? Agreed.

I thank Ms Tallon and her officials for their attendance. I also thank the representatives of the Department of Finance for answering some leading questions and giving us as much information as possible. We await further information.

We will shortly commence a series of three meetings over three weeks related to the work of the National Treasury Management Agency: chapter 3, National Debt; chapter 41, National Treasury Management Agency — functions and performance; the State Claims Agency and the National Development Finance Agency.

The witnesses withdrew.

The committee adjourned at 2 p.m. until 10 a.m. on Thursday, 22 April 2010.