Get ready for years of 'penal servitude'

An estimated 100,000 households will be told to live in what Fianna Fail leader Micheal Martin has described as the "fiscal equivalent of penal servitude" for between three and seven years.

Critically, the guidelines state that any decision to be made about the "reasonableness or otherwise" of living expenses under 15 separate categories will be a matter for "the creditors" to decide on a case-by-case basis.

Banks, therefore, will have the final say on what thousands of heavily indebted individuals and families will be allowed to spend on what are widely accepted to be household basics if they wish to avail of debt relief, settlement or personal insolvency.

Under the guidelines, a single adult is to be prescribed per month: food (€274.04), clothing (€35.73), personal care (€33.73), health (€31.09), savings and contingencies (€43.33).

ANALYSIS PAGES 2 & 24

When published next month, the insolvency guidelines are likely to create a political storm for the Government, and huge difficulty for Labour in particular, after it suffered a humiliating defeat in the Meath East by-election.

In the Sunday Independent today, Labour Senator John Whelan writes: "How this has got through a Cabinet, much less a Cabinet with Labour ministers, is beyond me.

"It will not only be the final nail in the coffin of so many people's lives and hopes and aspirations, but it will also be a final nail for the Labour Party.

"They demonstrate that the despairing cries of many people have clearly fallen on deaf ears. We have lost our way as a party and lost our support in the by-election.

"People feel we have abandoned them.We abandoned the disabled and the carers and low income families dependent on child benefit.

"It is high time – and past it – for senior Labour people, long-serving and experienced, to stand up and be counted. We promised and pledged to protect the most vulnerable. I can't see how we can stand over this."

Fianna Fail finance spokesman Michael McGrath said: "Ireland needs a domestic stimulus, and that can only come from families who traditionally have a lot of outgoings. If the domestic economy is to recover, people will need to have reasonable levels of income."

People who wish to avail of the new personal insolvency legislation will have their spending restricted not only on food, clothing, personal care, health, savings and contingencies, but also on household goods, services and energy as well as communications, education, transport, insurance, housing and childcare as well as what is called "social inclusion and participation".

Under social inclusion and participation, an allowance of only €28.97 a week, said to be "the minimum considered necessary", has been prescribed for "sports activities and social events such as visits to the cinema", the guidelines state.

The Insolvency Service of Ireland adds that its model "does not allow for the cost of a holiday"; only €2,000 is to be allowed for the cost of a car, but it will be prohibited if an applicant lives in an urban area with "adequate public transport links."

When a person works and pays for childcare as a consequence of employment, "the cost of childcare should not exceed income from employment", the guidelines add.

On the basis that child benefit payments are intended to be spent on a child, child benefit has been deducted from the "reasonable living expenses" of a child.

Michael Culloty of the Money Advice and Budgeting Service (Mabs) expressed a doubt that people will "want to go down this rather severely strictured route, which will last five, six or seven years".

Also in the Sunday Independent today, Dublin South TD Shane Ross writes: "It's official: evictions are back. It's official: the State can force you on to the dole. It's official: discrimination against women is government policy."

He adds: "The guilty bankers, who lent them the money, will be paying nothing. They are squatting on their featherbedded perches."

Fianna Fail leader Micheal Martin said yesterday: "The question of a progressive resolution of Ireland's mortgage arrears crisis is the real civil rights issue of our generation."

He said the proposed new scheme was offering citizens "nothing more than the fiscal equivalent of penal servitude", and added: "Under the scheme devised by the Minister for Justice, Alan Shatter, the banks are in the driving seat, the odds are stacked against the mortgage holder."

Michael McGrath said guidelines would create a "debtors' gaol" where more than 100,000 families will live "a subsistence-style existence" for up to seven years.

Mr Culloty said the guidelines were not set in stone, and individual circumstances would be taken into account.

"I think there is a lack of realisation that most people will come to a voluntary arrangement with their creditors, and they will not want to go down this rather severely strictured route," he said.

"When people see the terms and conditions att-ached, I don't know whether they will want their name in the public domain and to go into a relative straitjacket for quite a long period of time."

He said, however, that the measure will benefit those who are "badly insolvent".

"All these figures are indicative," he said.

"We have been doing this for two decades now. This is nothing new to us."