Cut mortgages to current values and then cut pay

IN recent months l have become more and more disillusioned as our collective standing, economically and psychologically, takes a hammering with the glut of bleak economic news and the complete absence of leadership from the Government.

That the recession should have come as a surprise to the Government (the Minister for Finance realised it might be happening in July, 2008) is enough to warrant its immediate removal. How detached from the everyday trials of the people can it be?

As the social partners who built this house of cards with the help of financial institutions and developers discuss a recovery plan to deal with the problems they created, they should remember their responsibilities in finding a way out of them.

The need for creativity and lateral thinking by all is obvious. Our long-term difficulties will only be solved by regaining competitiveness. Pay cuts in public and private sectors will be necessary to achieve this.

Private sector workers are already facing wage cuts and increasing job losses, while extended dole queues are now common in all towns and cities.

I think the following actions would go some distance towards solving our problems. Recapitalisation of our banking sector in its current form will see us the citizens, through the Government, give €7 billion for shares which are essentially worthless due to the lack of confidence and realism in our approach.

These shares may be of some extra value when the country is run by the IMF. A more beneficial use of this €7bn (and another €5bn if needed) would see the same institutions receiving the cash but those citizens who had the misfortune to purchase a house in the boom period 2003-’08 would get a writedown on their mortgage to current market value.

The mortgage repayments would only be made to single mortgage-holders and, due to the nature of our property boom, would see a typical three-bed semi in Dublin written down by some €100,000 and in the regions by €30, 000 to €70,000.

In return all public servants would be expected to take a 15% pay cut and a pay freeze for three years. Private sector unionised workers again would take a 10% cut and agree to a pay freeze for a three-year period.

Those who fall outside the partnership agreement should have the option of applying for a similar package with the State agreeing either lower pay or an income levy on what for these should be an interest-free loan.

The net saving from reduced mortgage repayments should be greater than the agreed pay cuts to create some extra disposable income and increased consumer confidence and help the retail sector which will spin into free-fall in the next few months if people aren’t reassured they can survive.

Other immediate steps that are necessary include:

Government capital expenditure should be expanded to complete all agreed primary and secondary school projects.

85% grants for mandatory insulation programme across our entire housing stock.

VAT on all industry-used electricity, oil and natural gas to be abolished

All future mortgages should be provided on the basis of a maximum of four times one’s salary. No phantom rental room value or assumed wealth should be included.

Martin Keevers

Trade Development Manager

PJ Carroll & Co

Warren Street

Dublin