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Dáil Éireann debate -
Thursday, 1 May 1997

Vol. 478 No. 6

Ceisteanna — Questions. Priority Questions. - National Debt.

Rory O'Hanlon

Question:

5 Dr. O'Hanlon asked the Minister for Finance the changes, if any, he anticipates in the total national debt figure between the end of 1996 and the end of 1997, including such changes as may occur as a consequence of exchange rate fluctuations; and if he will make a statement on the matter. [11853/97]

The national debt stood at £29,912 million at the end of 1996. Generally speaking, the main factor affecting the year-on-year change in the national debt is the Exchequer borrowing requirement which was estimated on budget day to be £637 million for 1997. However, other factors such as discounts or premiums on bonds and, in particular, exchange rate movements can also either increase or decrease the stock of debt outstanding. Given the sensitivity in the financial markets to any indication of official expectations for interest or exchange rates, it is not the practice to publish forecasts of national debt. Nevertheless, if these latter elements are assumed to be neutral in their effect on the national debt, it would be expected that the debt would rise by the amount of the target EBR of £637 million to £30,549 million at end-1997.

The Minister in his Budget Statement told us the national debt had fallen by £300 million. He attributed this to the high value of the punt against foreign debt currencies. Do I take it from the Minister's reply that with the punt on the slide we can expect that type of improvement will no longer continue, that we will have the reverse and the national debt will increase, and if the Exchequer borrowing requirement of £637 million is added we may have a national debt increase of £1 billion in the current year?

It is not possible at this stage to make that kind of forecast because one has to make all sorts of assumptions. As we have seen, the movement of various currencies is a matter for the markets. Clearly they have fluctuated and presumably could continue to do so during the course of this year. Therefore, it is premature to try to forecast or project what the national debt might be in absolute terms.

Is tax revenue more buoyant than expected? Is public spending increasing in line with revenue or is it being contained within the £13.391 billion outlined at budget time? What impact will the rise in public expenditure have in the years 1998-99? Is the Minister for Finance satisfied that Ministers who have been making untold promises by the day over recent months have sufficient funds within their allocations for the current year to meet the commitments given?

The Deputy has asked a number of questions which I hope I can answer. Tax revenue is running ahead of forecasts as is evident from the first quarter. With regard to the increased funding for the nurses pay award, I obtained savings which were subsequently published in the revised Book of Estimates. It is my intention to adhere to the Estimates as published in the revised Book of Estimates following the budget. There are expenditure pressures, some of which the House will be aware of, in relation to hepatitis C and other matters. It is for the Government to decide how it will address the financing of those issues.

Is not Deputy O'Hanlon's thesis correct that in addition to the expected EBR of £600 million this year, one is also dealing with an apparent significant slide — now a desired slide — in the value of the Irish pound which, if it has the effect it is supposed to have, will push the increase in the national debt this year towards £1 billion, unless tax revenue is very buoyant? Will the Minister agree when he and his pals are taking the alkaseltzer tomorrow morning, after the party in Lansdowne Rugby Club to celebrate Tony Blair's victory, that English money market people will probably be at work dealing with a boost in the value of sterling, based on the landslide? The situation will not get better, it will get worse. Will the Minister agree that if the general prevailing interest rates in Ireland increase as a reaction to currency movements, this would be another reason to believe the cost of funding the national debt is on the increase, quite apart from the absolute level of national debt?

These are all speculative questions and we simply have to await the out-turn of events.

When the Minister is cheering tonight I ask him to remember what will happen tomorrow morning.

All the Deputy's questions are postulated on what may happen. The underlying trend is that the debt ratio to GDP is falling satisfactorily and it is possible, in light of the circumstances outlined by Deputy O'Hanlon, there could be shifts in the size of the debt. It is definitely probable, if not certain, that the debt to GDP ratio will fall significantly this year. Recent calculations are that it will fall to somewhere in the order of 69 per cent. The reference criteria in the Maastricht Treaty is 60 per cent. The debt to GDP ratio is below the European average. A number of factors will alter the size of the debt but the critical factor is the ratio of debt to GDP. In that respect we are moving, as the European Commission has adjudicated, in a satisfactory manner towards the reference criterion.

In reference to the Minister's earlier reply about public spending and the pressures on public spending, will he elaborate on where the pressures are? While he took account of the settlement of the nurses' dispute in the revised Book of Estimates, what will be the impact of the proposed settlement for the paramedical staff announced yesterday?

We are costing its full effect and looking at the way in which we will respond. The strike has been suspended and the matter is with the unions. It will be for the unions to indicate their response. In the meantime we will do our own calculations as to the full cost and any connected costs there might be. I am not in a position to give the figures because we have not completed the exercise. It was only yesterday evening we got the recommendation.

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