Nat O'Connor: Peter Bacon has suggested that semi-state assets be sold, and the money used to pay off the negative equity part of mortgages, where younger households are struggling. (Interview in the Irish Independent, and further article on mortgage debt). On a purely economic level, this is an argument to increase demand and boost the economy. But on a social and political level, it represents an appalling machination that could damage the economy in order to bail out only a small part of the population.
Bacon is correct to identify a need to do something about huge mortgage debt, although the articles do not give a lot of detail about what economic reasons motivated his suggestion. However, one can speculate. On a purely economic basis, bailing out our 'prodigal' sons and daughters would increase their spending, and thus boost aggregate demand in the economy. Releasing younger people from some of their debt would help maximise the productive capacity of the younger generation, and this could benefit the whole economy. But it is not clear that such benefits outweigh the inequality of the suggestion.
Young households who rent, or who bought smaller homes, or who are still living with their parents would receive nothing. Worse, their share of our semi-states would be given over to those younger households who bought more than they could afford.
And selling semi-states at the bottom of the economic cycle is like selling the family silver when everyone else is doing the same, and the price for silver has hit rock bottom in the market. These strategic assets have a role to play in generating annual revenue to bailout the entire country, and should not be sacrificed for the benefit of a minority group.
There are good economic arguments for the state doing something to help those struggling with mortgages, but there are far better methods. For example, the state could subsidise interest rates, so that people continue to pay back their loans, but are not overwhealmed. Keeping the mortgage repayment money flowing to the banks would reduce the cost of bank recapitalisation while helping people pay their debts. Alternatively, the state could set maximum amounts that householders have to pay on their housing costs, like a third of net income, through a deferral scheme. They'd still pay their debts, but more slowly.
Dr Nat O'Connor @natpolicy
Dr Nat O’Connor is Assistant Professor of Social Policy at UCD, a fellow of the UCD Geary Institute for Public Policy and former Director of TASC. Nat also previously worked at Age Action, the Labour Party, Ulster University and the Homeless Agency. You can find him on LinkedIn (natoconnor) and TwitterX @natpolicy.
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