Vol. 498 No. 6
3 Mr. Noonan asked the Minister for Finance the reason for the discrepancy between the estimate of the national debt given by the chief executive of the NTMA, and his Department; the plans, if any, he has to arrange a bilateral meeting between senior officials of the NTMA and his Department to eliminate this discrepancy; and if he will make a statement on the matter. [28068/98]
The issue was the subject of discussion at a hearing of the Select Committee on Finance and the Public Service yesterday and I made a detailed statement to the committee outlining the correct position. For the benefit of the House I will reiterate the main points of that statement in response to the Deputy's question.
In the first place, Dr. Michael Somers, chief executive of the National Treasury Management Agency, advised me that, despite some reports to the contrary, the agency did not give any forecast for the surplus for the full year, nor did he give any figures for the projected level of national debt at the year end. A figure of £28.3 billion was given by the NTMA for the national debt, but this was the level as of 7 December 1998 and was not an end year forecast. This figure was valid as of that date.
The end year debt figure as estimated by my Department is approximately £29.6 billion. This estimate reflects our current view of the likely Exchequer surplus for the year as a whole, as well as other factors which affect the level of debt such as the impact of exchange rate movements on the Irish pound value of the foreign currency debt and net discounts or premia arising on bonds issued during the year. Accordingly, it should be clear to the House that there is no discrepancy between the NTMA's figure, which was for the debt as of 7 December 1998, and the Department's end of year estimate.
It is clear that statements made by Dr. Somers have given rise to the perception that the forecast for the 1998 fiscal outturn, which I included in my budget of 2 December, might have been inaccurate to a substantial degree. I assure the House this is not the case. The estimate of a full year surplus of £668 million published at budget time remains largely valid, although information which became available too late for incorporation in the budget day figures suggests that tax revenue may be £75 million higher than forecast. On the other hand, a recent review of the emerging expenditure outturn suggests that spending may be higher than the White Paper estimate by approximately £25 million. Taking account of these two factors, my current estimate for the overall surplus is now above £700 million.
Given that there was a surplus of £1.9 billion at the end of November, my full year forecast implies there will be a deficit of £1.2 billion for the month of December. I advise Members that there was an overall deficit of almost £800 million in the period from 1 to 11 December. Thus, a deficit of £430 million for the remaining days of the year is forecast. Considering that the comparable figure for last year was a deficit of almost £370 million, it can be seen that this forecast is not unusual.
Additional Information
My Department's estimates of supply services spending during the course of the year and the forecast outturn are based on information supplied to the Department of Finance by Departments as part of a well established monitoring system. Before the White Paper figures for the expected 1998 outturn were published, my Department checked with all Departments, as a normal element of this process, that the figures were the most reliable projections of the outturn that could then be made. These figures have now been updated and, apart from a shift of £25 million already mentioned, they remain largely as at budget time.
I emphasise four critical points. As I have already indicated and as Dr. Somers has confirmed, there is no discrepancy between my Department's national debt figures and those of the NTMA. Forecasts of the outturn for all spending and for all revenues are always made on the basis of the most up-to-date assessments possible. Updating is constantly under way. As Members will have noted, the anticipated outturn for supply service spending made in conjunction with the publication of the Abridged Estimates Volume on 11 November was updated in the interim between then and the White Paper. I am confident the outturn for the Exchequer surplus will be above £700 million when the final figures are published on 5 January.
From 1 January, when we enter the euro, much of the debt denominated in deutschmark, guilder or French francs will be exchange risk free. Is it the intention to transfer it to the domestic borrowing side of the balance sheet? Could the Minister indicate what proportion of the debt will be represented by euro currency debt which will be exchange risk free from 1 January?
All loans held in deutschmark, French francs or any of the 11 euro currencies will be reclassified as domestic debt rather than foreign debt. The figure given for the national debt at 31 December will be in the old format. I cannot tell the Deputy the percentage but it will be easy to ascertain on 1 January. The bulk of Irish debt at that time will be classified as domestic debt because all loans will become domestic debt.
Will this result in a big decrease in the activity of the NTMA? Has the Minister considered an extended role for the NTMA in other areas?
The Deputy may have put his finger on an issue which is on the minds of people in the NTMA and elsewhere and which may have formed the background for recent utterances. The NTMA has done a successful job since its inception some years ago. There will be less activity in the trading of debt from 1 January on account of the new structures. There must be good management of the national debt. The NTMA has various proposals on how to maximise savings to the State as a result of trading in debt and these matters are being considered.
I have heard the activities of some of the bond houses in Dublin over recent months have not been great and that some people who engaged in these activities have moved to other fields. There should be less activity, but there is still a clear necessity for an agency such as the NTMA because it has garnered expertise in this area and has done an excellent job. It will fulfil a useful function for many years to come.
Is the Minister committed to a strong Irish bond market, although bonds will be denominated in euros after 1 January?
As Dr. Somers outlined to the committee meeting yesterday and in various interviews, there will be increasing activity in Irish bonds. He has made contacts and changes to ensure there will be a good market in this area. I am confident he will succeed.
