Vol. 405 No. 3
21 Mr. Quinn asked the Minister for Finance whether he proposes to include the proceeds from the sale of shares in State-owned companies in calculating (a) the current budget deficit and (b) the Exchequer borrowing requirement for 1991; and if he will make a statement on the matter.
The Government's policy, as I have previously informed the House, is that the sale of State assets will be used to reduce borrowing, and thus to help ease the burden of the national debt and of debt-servicing costs.
The accounting practice adopted is to treat the proceeds of such sales, whether of shares in State-owned companies or of other assets, as ‘Exchequer capital receipts' which enter the calculation of the Exchequer Borrowing Requirement (EBR). This is entirely consistent with the Government's stated objective. As far as this objective is concerned, it makes no difference whether these proceeds are applied directly to debt-redemption, or used to keep borrowing lower than would otherwise be necessary.
This accounting treatment means that the proceeds of sales of shares, like those of other assets, do not directly affect the current budget deficit; of course, to the extent that borrowing for capital purposes is kept down, subsequent servicing costs, which appear in the current budget, are thereby reduced.
The Irish Life share flotation has been the subject of some comment. The proceeds of this flotation, which is planned to take place this year, will be dealt with in precisely the same way as those of other asset-sales — as I made clear in my financial statement. The absence of a specific provision in the budgetary arithmetic was motivated solely by considerations of prudence, particularly in view of its unique scale. However, when the flotation takes place, the proceeds will accrue as ‘Exchequer capital receipts', and thus clearly reduce both borrowing and debt.
Is it the clear intention of the Department to contribute the proceeds of any sale of State assets off the top of the capital sum of the national debt as distinct from the interest repayments in any one year?
I have already made it quite clear I hope that the sale of State assets, or shares in State companies, will be applied directly to reduce the debt. It will have some effect on the ongoing servicing costs of the current budget deficit but will not be used for day to day purposes as some commentators seem to suggest.
Can the Minister assure the House that it will not be used explicitly for current account and that that is a clear commitment the Minister is giving to the House.
The only implication it will have in its application for current receipts is that there will be a consequent reduction in the servicing of that portion of the debt which is paid off. That is the only effect the sale of State assets will have on current expenditure and none other, and I want to make that abundantly clear to the House.
Since the Minister has concurred that there is a certain amount of confusion in this area, let me put it in a slightly different way and ask him if he can confirm that it is the Government's intention to reduce the mortgage rather than to get a free ride for a few months with the monthly payments. Is that the intent? Is that how a lay person is to understand it?
The lay person should understand quite clearly that whatever figure we get in from the sale of Irish Life will go to reducing the debt.
The gross sum, not the monthly payments?
The gross sum.
Was this intention of the Government clearly indicated to the social partners in the course of the negotiations on the Programme for Economic and Social Progress?
That is a separate question. I would not want to mislead the Deputy but I will find out exactly what the position was.
I suggest that they have been deliberately misled.
I could not accept that statement.
I refer the Minister to the supplement in the Sunday Business Post.
I do not believe everything I read in the newspapers. I hope the Deputy does not. I do not believe he does.
