The Fine Gael-led minority Government will be forced to proceed with legislation designed to reduce mortgage rates even though Minister for Finance Michael Noonan has warned it contains serious flaws.

A Fianna Fáil Bill giving the Central Bank the power to regulate mortgage interest rates will be the first demonstration of how much power now resides on the Opposition side of the Dáil.

The Government is facing almost certain defeat in its efforts to delay the Bill until it can be put through a detailed pre-legislative scrutiny phase.

The Bill will have the support of Sinn Féin, Labour and a number of left-wing Independents when a vote on the second stage of the legislation is taken in the Dáil tonight.

There were ill-tempered exchanges in the Dáil on Tuesday night, with Mr Noonan claiming bank shares had fallen by 10 per cent on foot of the Bill’s publication.

Fianna Fáil finance spokesman Michael McGrath dismissed the suggestion and accused the Minister of “scaremongering”.

Earlier, Mr Noonan said the Bill contains three serious flaws. He said some of its provisions appeared unconstitutional and the European Central Bank would have to be consulted.

He also said the Central Bank governor and his predecessor had stated they did not wish to regulate interest rates.

“As an independent body, even if the Central Bank were given the power to regulate interest rates, they could not be required to exercise this power.

“In addition, competition is not a function of the Central Bank; it falls within the remit of the Competition and Consumer Protection Commission.”

The Minister added that for these reasons, and the need for an assessment of other unintended consequences, it was essential that the Bill go through a pre-legislative scrutiny phase as provided for in the programme for government.

He said he had been authorised by the Government to propose an amendment allowing for a pre-legislative phase, but if that were defeated he would allow the Bill to go forward to committee stage.

Time limit

Under the Fine Gael-Fianna Fáil agreement for a minority government, there is a time limit that allows any Opposition Bills that pass second stage to proceed to committee stage within 10 working weeks.

Mr McGrath denied the claim the Bill was unconstitutional and rejected the suggestion it should be referred to the pre-legislative process.

“I find it bizarre that Minister Noonan would refer to constitutional issues because this very Bill was debated in the Dáil last July and the government responded to the Bill then and raised no constitutional concerns,” he said.

Seán Sherlock announced the Labour Party would support the passage of the legislation to committee stage.

He said the spirit of the Bill was well intentioned in that it sought to speak for people who bought houses at the top of the market and found themselves paying over the odds for their variable rate mortgages.

“There is no point in kicking back this important issue for further legislative scrutiny, it would be better if the Bill proceeds to committee stage so that there is an opportunity to at least interrogate the constitutional impediments and flaws that Minister Noonan has stated are inherent in the Bill,” he said.