Savings bond 'can help buy first home'

The Small Firms Association (SFA) urged the Government yesterday to set up a savings bond scheme aimed at people wishing to purchase their first home.

The lobby group said the bond should be introduced next year as the special savings investment accounts (SSIA) mature as a way to encourage people to save and help first-time buyers get a home.

In its autumn economic statement, the SFA identified house prices as the single biggest threat to the economy. It said housing affordability was a significant barrier to labour market development, job mobility and wage inflation and needed to be addressed.

The SFA said its proposed housing bond should be eligible only for people planning to buy a home for the first time. It should guarantee a return of no less than the increase in the index of construction costs for new homes and be underwritten by the State, which should set aside €50 million as a reserve for the scheme.

Pat Delaney, director of the SFA, said people should be able to save up to a maximum of €10,000 gross earnings each year into a save-as-you-earn scheme fund managed by the National Treasury Management Agency.

These savings should not be liable for income tax or PRSI at source, in a similar way that people can make advanced voluntary contributions. A minimum of three years' deposit should be required and, provided the proceeds are used for buying a property for the first time, the savings should attract no tax, according to Mr Delaney, who added that the scheme could have enormous economic and social impact.

The SFA statement also identified high energy prices as a potential threat to the economy. It predicted that if oil prices remained at their current level of $60 per barrel, then growth forecasts of 5.5 per cent would be reduced to 4.75 per cent. "Crippling increases in energy costs continue to undermine the business sector and there is no competitive reason for production industries to develop bases in Ireland."