Is there anything new in section 152?
SECTION 152.
Question proposed: "That section 152 stand part of the Bill."
I am informed that it is a standard provision in capital services redemption accounts. I can elaborate if the Deputy wishes.
Does the Deputy require any further elaboration?
What are capital services redemption accounts?
The capital services redemption account was established under section 22 of the 1950 Finance Act, on foot of a decision by the then Government that borrowings for voted capital services should be amortised over a period of 30 years so that they would involve no permanent addition to the public debt.
A new annuity is calculated each year which is designed to provide the annual sum which, when accumulated over 30 years, will repay the expected expenditure on voted capital services for that year. The annuity calculated for the previous year is also revised in the light of the outturn for that year's voted capital services and both annuities are given statutory effect each year in the Finance Bill.
The annual payment from the Central Fund into the account is comprised of a principal and an interest element. A sum not exceeding the interest portion of the annuity may be paid from the account each year towards meeting interest on the national debt. The balance of the annuity may be applied to any of the ways set out in section 22 (7) of the Finance Act, 1950. In practice, the balance is applied towards funding debt redemption. The overall effect is that the interest and principal received from the Central Fund into the capital services redemption account in any one year are not retained in the account but are expended in that year.
Could the Minister or some of his officials give an example of what is meant here?
I have an additional note that might be helpful.
The CSRA annuity system is basically a product of an era when the only borrowing undertaken was for capital purposes. The prevalent view then was that the Exchequer should be openly seen to be placing aside moneys each year from the current budget which, over a 30 year period, would fund the full cost, interest and principal included of the capital borrowing undertaken for the expenditure in question.
In practice, the system charges the cost of capital projects to the current budget over a 30 year period thereby increasing the current budget deficit or reducing the current budget surplus. However, given that the cost of the capital projects has been included each year as they are incurred, it is necessary to credit the capital budget with the amount charged to the current budget in order to avoid double counting. Thus, the net result is to increase the current budget deficit and to reduce — I will confuse Deputy McCreevy even further if he will let me——
The Minister is doing very well already.
——the capital budget deficit by the same amount, leaving the Exchequer borrowing requirement unchanged. Accordingly, termination of the system would not confer any benefit on the Exchequer borrowing requirement.
A Government decision that it no longer considered it appropriate to set funds aside each year to repay over time part of that year's EBR could be viewed in certain quarters as a softening of its resolve to keep down borrowing and this would be an unnecessary risk to take for a measure which would convey no benefit in fiscal terms.
I do not want to waste much time on this, but could the Minister get some of his officials to send me the briefing notes on this subject because it seems to be a concept from another era. The principle may apply to semi-State companies, the ESB for example, who may transfer some of its money each year to redemption accounts. In the light of Government accounting, the publication of the Estimates and the capital budget, I cannot understand the purpose for it now. I know what the original theory might have been. However, I am not voting against this provision but I would be happy if the Minister could send one of his officials to me to explain it further.
It would not be possible at the moment because of the heavy work load both myself and my officials are under. When the Finance Bill is completed, perhaps an official could get in touch with the Deputy and each member of the committee in this regard. I am not averse in principle to giving members briefings, subject to the normal constraints of time, on any technical aspect.
Question put and agreed to.