THE GOVERNMENT is set to resist growing calls for a debt forgiveness scheme for homeowners in mortgage distress.
Minister of State for Finance Brian Hayes said yesterday a proposal to write off up to €6 billion in personal mortgage debt was not a realistic option.
A spokesman for Minister for Finance Michael Noonan also indicated such a scheme was highly unlikely.
Their comments followed a call last week by UCD professor of economics Morgan Kelly for a debt forgiveness scheme for homeowners unable to pay their mortgages.
“We are talking sums in the region of €5 billion to €6 billion which would be necessary to spend on mortgage forgiveness, which by our standards are not very large,” he said.
His comments received support from other economic commentators at the weekend, while Minister of State for Housing Willie Penrose said the Government should give serious consideration to the proposals.
Mr Hayes, however, said there were “two huge problems” with the proposal.
“With any debt forgiveness, it will raise questions of fairness for people paying 100 per cent of their mortgages who are not getting any help from the State. It’s a huge issue for that group, who are already straddled with huge mortgages and who have not sought debt forgiveness.
“Secondly, the Government has put huge store behind the two pillar banks. To introduce debt forgiveness totalling €6 billion at a time when the Government is bringing those banks out of the A&E wards would be very difficult to justify,” he said.
A Department of Finance spokesman said Mr Noonan would look at any “realistic” proposal to alleviate the burden on those who find themselves in difficulties with mortgages.
But he said a widespread debt-relief plan could not be defined as “realistic”, because of cost and moral hazard. “It is very important that there is fairness for those requiring assistance with mortgages but also for taxpayers who are paying their mortgages in full,” said the spokesman.
The programme for government contains a commitment to help homeowners facing difficulties. A review group headed by KPMG accountant Declan Keane is examining further measures to help distressed mortgage-holders. Its report, due in late September, is not expected to recommend widespread debt forgiveness.
Separately, the Government is to outline more detailed information in the autumn on its tax and expenditure plans between 2012 and 2014.
In a departure from previous policy, the Department of Finance will lay out its options for tax increases and spending cuts over the remainder of the bailout programme overseen by the European Union and International Monetary Fund.
The three-year outline will be published after the Government’s comprehensive spending review is completed at the end of September.