That Dáil Éireann:
is confident that capital investment can provide both social benefits as well as economic growth, rather than presenting a false choice in relation to such investment;
together with the International Monetary Fund, the Irish Congress of Trade Unions and the Irish Business and Employers Confederation believes that, in order to tackle infrastructural bottlenecks, make up for historical underinvestment, deal with the rapid growth within the domestic economy, deal with a growing and ageing population, as well as tackle the particular challenges posed by Brexit, much greater capital investment is required than the €2.65 billion envisaged in the Capital Plan;
notes that the Irish national debt-to-Gross Domestic Product (GDP) ratio continues to fall at a rapid pace, due to economic growth and continued achievement of budgetary targets, the costs of servicing the national debt have consistently been declining and the banking system poses no systemic threat to the economy;
is concerned that the Government’s debt-to-GDP target of 45 per cent, significantly below the Stability and Growth Pact target of 60 per cent, and its commitment to establishing a €1 billion per year rainy-day fund from 2019 are unnecessary obstacles to tackling our significant public investment deficit;
further notes that the State’s long established rainy-day fund, the Irish Strategic Investment Fund, has a discretionary portfolio of €8.1 billion and a directed portfolio valued at €12.6 billion, consisting of State shareholdings in Allied Irish Banks (AIB) and Bank of Ireland that were paid for out of the National Pension Reserve Fund;
believes that the directed portfolio, as it grows, should be made available for commercial investment in projects of national significance and commercial potential in the public sector and asserts, in particular, that the proceeds of a sale of bank shares should be used for additional capital investment;
further asserts that the European Union (EU) Stability and Growth Pact and fiscal rules currently prevent appropriate levels of investment and should be amended in order to facilitate a much needed increase in capital spending;
notes, with approval, efforts currently underway to achieve these reforms and calls on Irish political parties to advance this agenda through their EU political groups and also on the Government to vigorously pursue the issue at the European Council;
in the circumstances believes that, in advance of such changes to the fiscal rules, the sale of shareholdings in AIB and Bank of Ireland should not proceed; and
calls on the Government to postpone the sale of AIB shares until the fiscal rules are changed to permit enhanced capital spending, rather than remit the moneys to the Exchequer simply to pay down debt.
This motion is not just about economics or about cautious fiscal plans and prudent public spending, this motion is also about basic morality. It is about an economic collapse, brought about by our profligate, property-speculating banks, and it is about the enormous price people paid to rescue the banks and to rescue the economy.
The previous Government, with much difficulty, managed just about to reverse the economic engines and to rescue the economy. When we went into government, we took charge of a country whose economic foundations were under threat, where public services could not be guaranteed, unemployment was rocketing, the numbers working and paying tax were continuing to fall and the banks were continuing to drain the public finances. I acknowledge the work done by Deputy Michael Noonan as Minister for Finance in managing the banking crisis. We replaced the hated Anglo Irish Bank promissory notes and achieved Exchequer savings of €3 billion in payments each year. By cutting the interest rates on our programme loans and stretching out their maturities, we saved the State €30 billion. We burned junior bondholders to the tune of €15 billion and we set the State on a course to recover almost entirely the cost of our investment in the pillar banks, which would halve the overall cost of the bank rescue, none of which is to say that we should or even could do any of that again.
Those were truly desperate times and we imposed desperate remedies. Inevitably, a lot of very hard decisions had to be made, with very hard consequences. Burdens were shouldered and people suffered in their incomes and their quality of life but always in the hope and expectation that conditions would improve, debt would be brought back under control, that our financial institutions would recover, that economic activity would pick up, that unemployment would be brought down again to acceptable norms and that people who had endured so much in times of hardship would get dividends on the back of recovery.
Our enforced investment of money we had to borrow to invest in our two pillar banks now looks set to provide the people of Ireland with a return. To borrow a crude slogan, which is more than justified in the circumstances: "It's payback time". It is not a payback in the terms that so much appeals to Fine Gael, namely, a handful of euro in every pocket, too widely dispersed to be significant and too soon dissipated, but a payback of spending on the infrastructure of our country. If Donald Trump was right about one thing in his campaign - God knows he said enough that he must have been right about something - then he was right to stress that a principal duty of government is to maintain, repair and improve a country's infrastructure. The people need roads, bridges, broadband, schools, theatres and performance spaces, not to mention houses and hospitals. They look to government, from public resources, to build those things. The Government has the resources but it does not want to do the building. Thank God, the country is now well on the road to economic recovery. The recovery created as many jobs in the past four years as were created between gaining independence and 1996. That is an extraordinary fact. However, what we are facing now are emerging infrastructural bottlenecks in transport, housing, hospitals and schools.
We are told the initial public offering of AIB shares could happen as soon as the end of the month. What we in the Labour Party are saying is that we should delay this sale until the total proceeds can be committed to address the infrastructural needs of the country. Currently, under European Union fiscal rules and system of accounts, the proceeds would not count as general Government revenue, and could not be used for any purpose other than to pay down debt. The Ireland Strategic Investment Fund, ISIF, holds a discretionary portfolio of €8.1 billion and a directed portfolio valued at €12.6 billion. The directed portfolio consists of €11.3 billion worth of shares in AIB and €1.1 billion worth of shares, amounting to 14%, in Bank of Ireland. A total of approximately €16 billion came from the old National Pensions Reserve Fund and €4.8 billion came directly from the Exchequer. The State has already received a total of €3.453 billion from the sale of its investments in AIB to date, and a further €920 million has been received in income from its AIB investment. A further dividend of €250 million will also be paid to the State during the course of this year. If we sell now, in effect, the proceeds of holdings in the strategic investment fund would be used simply and solely to pay down debt. That is based on the current fiscal rules and the requirements of the agreements within the European structural framework.
In reply to a recent parliamentary question, the Minister for Finance estimated that the sale now of 25% of AIB would reduce the national debt by 1% of GDP. We strongly believe that would be a wasted opportunity and truly a waste of significant and vital money. Any proceeds from a sale of AIB shares should be directed to the purposes for which we set up the strategic investment fund, which as the Minister for Finance will recall, was a Labour Party proposal for investment in the Irish economy. There is no pressure on us to sell the shares right now. Everyone here knows that it is not the size of the national debt in absolute terms that is important, it is the size of the debt relative to the size of the economy as a whole that matters. If one owes €50 and one's income is €1,000 the debt is small but if one owes €50 and one's debt is €60 then the debt is significant. It is not the size of the debt that is important; what is important is the size of the income that matches it.
The policy of selling off our bank shares as soon as we could was negotiated and discussed in the previous Administration. It was a policy that originated in the urgent need at that time to reduce the national debt. Members may recall that our debt peaked at 120% of GDP but because of the recovery that situation has changed dramatically. The Irish national debt-to-GDP ratio continues to fall at a rapid pace due to economic growth and continued achievement of budgetary targets, thankfully, over many years. The cost of servicing the national debt has consistently been declining as well.
As I mentioned, diverting everything we get from selling a quarter of the shareholding we have in AIB would only reduce our debt by 1% or so. The social good we could deliver if we invested that money in public infrastructure would be much more significant than reducing the national debt by such a marginal if not downright irrelevant amount in economic terms. For many months now, I have been making the case for changes to the Stability and Growth Pact in order to allow for greater investment in public infrastructure. The Government has resisted the idea. It has failed to make any sort of case at a European level. I made the case again directly to the Taoiseach during the Brexit discussion we had earlier and I think he is beginning to agree that this is the way to go.
The result, to date, is that we are caught in a bind now that is largely of the Government's own making. Until we get the rules amended none of the proceeds from the sale of AIB can be invested in the things we so vitally need, such as houses, hospitals, schools and all the other infrastructural deficits that everybody in this House could list with great clarity.
The financial advisors working on the sale will stand to gain at least €40 million and the Irish people will see no tangible benefit at all. It is the sheer waste involved in diverting our assets to such a pointless exercise that makes me despair of the fiscal ideology that currently prevails in Government thinking. I ask people I worked with closely to think long and hard about this. If they do not want to take my word for it, they should ask the International Monetary Fund, which is hardly a bastion of socialist thinking. They should also ask ICTU which is arguing for the same thing, or IBEC which would normally agree with Fine Gael's viewpoint.
A further €2.66 billion is due to be allocated in the mid-term review of the capital investment plan. Capital spending this year will equal just 1.6% of GDP. By any international comparison that is a very low level of investment for a growing economy. We have a growing and ageing population unlike many of our sister countries within the European bloc. We are also faced with the existential threat of Brexit. These things require us to prepare ourselves to address structural deficits that have been built up over the years and to provide whatever resources we can put our hands on for the infrastructure our people need.
Investment will, admittedly, increase modestly to 2.2% of GDP by 2021. However, 2.2% is well below the normal OECD investment ratio. We believe strongly that much greater capital investment is now required. As I have indicated, that belief is not confined simply to the left. There is now a nearly universal consensus that capital investment in Ireland must be increased to tackle the difficulties that all of us can recite. There is not a single individual in this House who could not, even within the confines of his or her own constituency, identify the need for schools, roads, public transport, health infrastructure, hospital extensions, primary care centres and so much more. That would not only make an enormous impact on the social well-being of our people, but would also underpin economic growth and the country's capacity to work.
We must deal with infrastructural bottlenecks, historical under-investment, rapid growth in the domestic economy, and a growing and ageing population, not to mention the unique challenge of Brexit. We need to invest in our ports because the UK landbridge may well be under threat. We must ensure well in advance of any potential hard Brexit that our ports have sufficient marshalling space. We must have direct ferry links to Europe and the capacity to deal with container traffic that will be generated to bring our goods directly from this island economy to mainland Europe. We need the capacity and the money to do these things.
However, the austerity fetish that prevails in current Government thinking-----