Dáil Éireann Debate, Wednesday - 5 July 2017
81. Deputy Thomas P. Broughan asked the Minister for Finance when the Government agreed that funds realised from the sale of State assets must be used to pay down the national debt rather than be invested in critical infrastructure; and if he will make a statement on the matter. [31678/17]
View answerAs the Deputy is aware budgetary policy is a matter for each Member State subject to compliance with its obligations under the Stability and Growth Pact. As such, there is no discussion, negotiation, or agreement required in relation to individual budgetary items or policy.
The proceeds from the sale of ordinary share capital held by the government in AIB does not result in a beneficial impact to the General Government Balance (GGB) under the European System of Accounts 2010 (ESA 2010) framework. This is due to the fact that it is classified as a 'financial transaction' whereby it is essentially the exchange of one form of asset (shares, equities, loans) for another kind (cash).
As the sale of the shareholding in AIB does not count as general government revenue, accordingly, if the proceeds are then used for general government expenditure at any time, the general government balance will worsen.
These proceeds are lodged to the Exchequer and the NTMA will take them into account in their funding plans and will result in a reduced Exchequer borrowing requirement reducing and, consequently, Ireland’s gross debt and debt to GDP ratio will be reduced also in due course.
A lower level of debt is not only beneficial in terms of the fiscal sustainability of the State but will also result in reduced interest payments in future years. The strategy of reducing the national debt is consistent with the Government policy of repaying the borrowing previously undertaken to finance the recapitalisation of the banking sector during the financial crisis. It is my view, therefore, that because public indebtedness rose partly due to the recapitalisation of the Banks, it is appropriate to use one-off revenue from divesting the State of its banking assets to reduce debt. Although on a downward trajectory Ireland’s debt level is still comparably high and caution must be exercised due to the potential of rollover risk. We are a small and very open economy in a world that has more risks than usual and as such it is prudent to utilise these funds to better ensure the sustainability of public finances.
