Committee Reports > List of Committees > Dáil > 1940 > Committee of Public Accounts > Interim and Final Report - Appropriation Accounts 1938 - 1939

APPENDIX V.

METHOD OF CALCULATION OF CONTRIBUTIONS TO LOAN CHARGES PAYABLE UNDER SECTION 6 OF THE HOUSING (FINANCIAL AND MISCELLANEOUS PROVISIONS) ACT, 1932.

I. The rates of contribution payable under Section 6 of the Act are as follows:

Housing of the Working Classes.

(a) 66⅔ per cent. of the annual loan charges where the houses are provided to accommodate persons displaced from their former dwellings by an operation of the Local Authority under the Housing of the Working Classes Acts.

(b) Not exceeding 33⅓ per cent. of the annual loan charges in other cases.

Labourers Acts.

(c) Sixty per cent of the annual loan charges.

II. Houses at I(a) are generally referred to as “slum clearance” and houses at I(b) “normal.”

III. The amounts of loan charges in respect of which the contributions above referred to are payable are subject to the following limitations:—

(a) In the case of “slum clearance” houses erected in urban and Town Commissioners’ areas, the loan charges shall not exceed an amount per house equivalent to the annual charges on £300. (This was extended to £350 per house in 1937.)

(b) In the case of “slum clearance” houses erected in County Boroughs and Dun Laoghaire Borough the loan charges shall not exceed an amount per house equivalent to the annual charges on £400. Where “flats” were provided the limitation was extended to the charges on £500.

(c) In the case of “normal” houses erected in urban and Town Commissioners’ areas the loan charges were limited to an amount per house equivalent to the charges on £350, and in the case of “normal” houses erected in County Boroughs and Dun Laoghaire Borough the charges shall not exceed an amount per house equivalent to the charges on £450.

(d) In the case of labourers’ cottages the loan charges shall not exceed an amount per house equivalent to the annual loan charges on £300.

IV. The majority of housing loans borrowed by local authorities are obtained from the Commissioners of Public Works. The loan charges are payable half-yearly and the Commissioners of Public Works furnish a statement to the Department on each gale day showing the amounts of charges accruing on each loan. In the case of stock issues and “outside” loans certified statements as to the loan charges are obtained from the local authority.

V. In the case of “Board of Works” loans the full amount of the loan is not normally taken up by the local authority at once. The loan is issued in instalments at intervals to meet the actual liabilities incurred at the time. These instalments normally cover the period within which building operations are in progress. It follows therefore that the amounts of loan charges payable will vary considerably in the early period of the loan and will represent charges on varying amounts.

VI. Schemes undertaken by a loan authority are used either entirely for (a) “slum clearance,” (b) “normal” purposes, or (c) in part for slum clearance and in part for normal purposes—such schemes being generally referred to as “mixed schemes.”

VII. Where schemes are used as at VI(a) and (b) and the loans are obtained from the Board of Works, little difficulty is experienced in assessing the amounts of contributions payable. The total amount of loan issues at any time is known. The charges stated by the Commissioners of Public Works represent the charges on this total and provided the limits prescribed at III are not exceeded, the amounts will be subsidisable in full. If the prescribed limits have been exceeded the Commissioners of Public Works are requested to state the subsidisable loan charges.

VIII. In the case of “mixed” schemes it is necessary to ascertain (a) the proportion of loan charges in any financial year which will be subsidisable at the higher rate, and (b) the proportion of loan charges which will be subsidisable at the lower rate. Provided the total loan issues do not exceed the product of the total number of houses by the lower subsidisable limit, the charges will be subsidisable in full at the higher and lower rates in the ratios of the number of “slum clearance” houses to the number of “normal” houses. Where the loan issues represent a sum in excess of the product of the total number of houses by the lower subsidisable limit, but not exceeding the “normal” subsidisable limit, the portions of the loan issues subsidisable at the higher and lower rates respectively will be as follows:—

(a) The number of “slum clearance” houses multiplied by the maximum subsidisable cost per house prescribed for “slum clearance”; and

(b) The number of “normal” houses multiplied by the average cost per house represented by dividing the total loan issues by the total number of houses provided.

The loan charges accruing on the results obtained are ascertained from the Commissioners of Public Works.

IX. In the case of “mixed” schemes where the cost per house as ascertained by dividing the total of loan issues by the total number of houses exceeds in any financial year the “normal” subsidisable limit, the portions of the loan issues subsidisable at the higher and lower rates respectively will be as follows:

(a) The product of the number of slum clearance houses by the maximum subsidisable cost per house prescribed for “slum clearance”;

(b) The product of the number of normal houses by the maximum subsidisable cost per house prescribed for “normal” houses.

The loan charges accruing on the results obtained are ascertained from the Commissioners of Public Works.

X. The basis of calculation outlined in paragraphs VIII and IX has been adopted at all times in the making of subsidy payments. Formerly, however, the calculation of the subsidisable portion of loan charges was undertaken without reference to the Commissioners of Public Works—the method usually employed being to apportion the charges in the ratio of the amounts of loan issues subsidisable at the higher and lower rates to the total of the loan issues. When it is realised that the instalment (or instalments) of loan issues sufficient to bring the cost of the houses over the subsidisable limits may bear interest for a very short portion of the normal half-yearly period (see V) it will be appreciated that any calculation based on a proportion of the total loan charges at the time would not represent an accurate figure.

XI. During the year 1937 the Exchequer and Audit Department expressed the view that the amount of loan charges in any financial year should in all cases be abated in the proportion of the subsidisable portion of the loan to the total loan raised in cases where the full amount of the loan was in excess of the prescribed subsidisable limits. In the application of the procedure outlined in the foregoing paragraph it was found that the method of abatement proposed by the Exchequer and Audit Department had in fact been followed in some cases by the Department before the method outlined had been adopted generally. The matter was referred to the Department’s Legal Adviser, who advised that contributions to loan charges may be made at the prescribed rates on the full amount of loan charges until such time as the instalments of the loan drawn exceed in the aggregate the prescribed subsidisable limits.

XII. As a result of this decision the whole question of the method of calculation was examined with a view to arriving at a uniform system. After consideration of all the factors affecting the position, a basis of calculation has been laid down which it is held is strictly in accordance with law.

Department of Local Government and Public Health.

20th May, 1939.