Dáil Éireann Debate, Wednesday - 19 October 2016
17. Deputy Thomas Byrne asked the Minister for Public Expenditure and Reform if his Department favours putting in place a borrowing framework for institutes of technology, IOTs, or for technological universities, that give institutes autonomous borrowing powers outside of general government; and if his Department is of the view that it would be legally possible to put such an autonomous borrowing framework in place under EUROSTAT rules. [30729/16]
View answer30. Deputy Thomas Byrne asked the Minister for Public Expenditure and Reform the reason there is no borrowing framework in place for IOTs, as there is for universities, whereby they can borrow autonomously from private sources independently of general government, in view of the fact that there is no statutory distinction between IOTs and universities; and his views the introduction of a borrowing framework for IOTs to enable them to borrow autonomously. [30730/16]
View answerI am raising an important issue which has implications for public expenditure and education and housing sectors, which is the lack of borrowing power for IOTs. This key issue has been raised with me by sectoral representatives since my appointment as education spokesperson. They cannot borrow to build student accommodation, the result of which is the rental markets in the areas around the institutes is out of sync, even more so than the general market, because they cannot build accommodation.
I propose to take Questions Nos. 17 and 30 together.
A key consideration in relation to the scope for independent borrowing by institutions in the higher education sector is whether the subsequent expenditure funded by the borrowings is classified as falling inside the general government sector and, therefore, whether it impacts on the general government balance. A detailed framework is in place under EU law, implemented at national level by the CSO, for classifying what entities in the economy are part of or outside of the general government sector and how their expenditure impacts on the general government balance. It is, therefore, not just a matter for the IOT sector in term of whether institutes can borrow. One of the questions is how that borrowing would be classified on the national balance sheet.
Universities have traditionally enjoyed autonomous borrowing powers on account of their classification as outside general government. Borrowings by universities are off-balance sheet and do not impact on general government debt and this reflects a combination of the autonomy of such institutions and their capacity to generate own income, allowing them to meet the so-called "market test". However, these considerations do not apply to IOTs. Unlike universities they are classified as inside general government. Consequently, their expenditure impacts on the general government balance and their borrowing contributes to the general government debt.
The Deputy referred to the impact on the rental sector and accommodation. I have some appreciation for this matter because of the prominence and scale of DIT within my constituency and I am aware of the accommodation needs of students and the impact that has on the rental sector.
The Minister for Housing, Planning, Community and Local Government recently published the Housing (Miscellaneous Provisions) Bill 2016 which includes an enabling provision that would facilitate higher education institutes to borrow moneys from the Housing Finance Agency for the purpose of financing student accommodation provision. However, we still have to resolve the issue of how that borrowing would be classified and the impact it could have on other expenditure plans by the State.
Many Members, including myself, have been vocal about the need for a borrowing framework to be put in place for IOTs. DIT is building student accommodation in Grangegorman but the mechanism it is using to finance it is costing more than it would if DIT had the same borrowing power as universities. That will feed into increased rents for students, which means this is a lose-lose scenario.
Thankfully, the general government debt is very much on its way down. Surely there is scope to provide for modest borrowing by IOTs. Ten years ago, it was envisaged that they would have the power to borrow but this has not been acted on. This is an urgent issue. Ministers and officials can have all the meetings they want, with the Department of Education and Skills meeting the Minister's Department and the housing Department pushing another provision but action is needed quickly.
I spoke to one IOT president who had visited America. He met students who wanted to attend his institute but their parents asked him where they would stay and he had nowhere to put them. If he were able to borrow money, he would be able to put them up and it would be a win-win scenario for everybody.
I hoped the Deputy would acknowledge that we are trying to create the legal provision to deal with this matter. I acknowledge the case he is making, which has been made to me by the Minister for Education and Skills. This is the reason an enabling provision has been included in the Housing (Miscellaneous Provisions) Bill 2016. We still have to resolve the matter of who would be able to borrow and how it would be classified but we have included a provision in this Bill.
Which Bill?
The Housing (Miscellaneous Provisions) Bill 2016, which has just been published. I will then need to deal with the issue of IOTs being able to access that borrowing because they do not all have the same financial health and cannot borrow in the same way. Great strides have been made in delivering more student accommodation around DIT and elsewhere but in recognition of the challenge this has created, the enabling provision has been included in the Bill. My officials and I are engaging with the Department of Education and Skills on this matter. We will keep the Deputy informed. No doubt he will raise it again in the coming weeks.
I acknowledge the Bill and the efforts that have been made and I also acknowledge the legislation that was put in place ten years ago. I want to see action. As I understand it, DIT is paying more than it should to build the accommodation in Grangegorman through the creative mechanism it has with other State authorities.
Others do not have it all. We want a proper student rental sector which has less impact on the general sector and I think the Minister wants that too. Members on all sides want to let this happen in the best way possible. Let us work it out. It would really help those institutes of technology that are able to do it. I acknowledge what the Minister said about certain ones that will probably not be able to do it.
I agree with the Deputy. I hope we can reach a classification of the borrowing levels that will ensure this can be done in an affordable and sustainable way. I agree with the sentiments the Deputy has concluded with.
