Dáil Éireann díospóireacht -
Tuesday, 12 Nov 1985

Vol. 361 No. 8

Private Members' Business. - Committee on Public Expenditure Report — Public Debt: Motion.

Mr. O'Kennedy

I move:

That Dáil Éireann takes note of the Report of the Committee on Public Expenditure: Service of Public Debt.

As Vice-Chairman of the Committee on Public Expenditure I am very pleased to have this opportunity for a debate on the committee's report on the public service debt. The report is possibly the shortest we have produced to date but in my view, and in the view of the committee generally, it far outweighs in significance the brevity of its contents.

I welcome the fact also that for the first time in the Dáil we have an opportunity, not of discussing the issues in detail but of merely considering the potential role of the Oireachtas which must sanction expenditure and taxation in the area of foreign borrowing and the service charges that follow from that borrowing.

Because criticism of existing policies on domestic or foreign debt is outside the terms of reference of the Committee on Public Expenditure — and, I acknowledge immediately with reasonable constraint in our deliberations — the main concern expressed in the report is the need to establish a mechanism whereby this House, by way of Dáil debate or by way of one of the Oireachtas committees, should have an opportunity at least to discuss and comment on aspects of public debt which have a direct impact on public expenditure generally. This can only be helpful in that, while we recongnise the Executive authority and responsibility in regard to any expenditure that must be passed by this House, the Oireachtas should not be seen to be merely a rubber stamp in an area which has been growing in terms of public expenditure.

I should like to put my remarks in the following context: table 3 of the 1985 budget booklet indicates that between 1981 and 1985 the current Government expenditure on the service of the public debt rose from £884 million to £1,991 million, just short of £2 billion. That is a two and a half fold increase in that four year period. It is relevant to compare this enormous amount with the other areas of current Government expenditure. For example, the economic services estimate is £775 million. That is the estimate about which the public understandably are most concerned in many ways. Infrastructure which all of us in the House will acknowlege is of vital importance, costs £102 million. Likewise, we acknowledge that the social services in respect of which there is a social obligation on us in a variety of ways, totals the very signficant cost of £4,774 million. The increase in that respect can be a consequence of the policies of the Government of the day. The amount in respect of security is £609 million but that is an area in respect of which, unfortunately, we do not have as yet control as direct as we would wish, particularly in terms of the increasing cost of cross-Border security which is a matter of growing concern not only for the State but for the taxpayer also. If one includes all those items and the EC budget payments, the total is a gross figure of £8,949 million or, after receipts have been discharged to the Revenue, a total of £7,568 million. That is the total allocation of what we would regard as the expenditure programmes of the Government of the day. As will be seen from those few statistics, the very considerable amount being spent this year on the servicing of the public debt must be of continuing concern and something we must address ourselves in so that the Oireachtas, acting on behalf of the taxpayer, will ensure that the best possible decisions are taken in the area of domestic foreign borrowing.

In recent years high levels of borrowing have increased considerably the Exchequer debt. Consequently, its debt service payments, which are a first charge on current revenue, pre-empt this year almost 40 pence in every £ of tax revenue compared with 26p ten years ago. That is a measure of the growth of the problem and of the constraint it poses for economic policy. Even with increasing tax contributions there has been that level of increase. That is the amount required to service, on the taxpayers' part, our foreign debt. Obviously the first and basic objective of the service of the public debt programme is to curb the growth of debt service costs by reducing the level of Exchequer borrowing. The second objective is to continue to reduce the level of foreign borrowing particularly.

The cost of foreign borrowing is subject to considerable uncertainty and this is one of the areas that we in the committee were concerned to draw attention to. More than 60 per cent of the Exchequer's foreign debt is on a floating interest rate basis and for that reason is exposed to significant fluctuation and cost. For example, as was pointed out both in the bulletin from the Department and in the Central Bank bulletins, a 1 per cent increase in international interest rates would add £40 million to the Exchequer's debt service charges. Foreign debt is subject also to exchange rate losses. We have seen some very dramatic examples of the growth in our foreign debt as a result of the exchange rate fluctuations particularly regarding the dollar in the past 12 months.

Minister for Finance (Mr. Dukes)

I can hardly believe that.

Mr. O'Kennedy

The Minister's interjection seems to suggest that he does not understand fully the concern of the committee. We are prepared to take advantage of the luck that may turn with the wheel but we are very concerned also to ensure that we can guard against the excessive costs that follow the appreciation of the dollar, such as has happened in the past 12 months, vis-à-vis our currency, though I acknowledge that this has made a comeback in the meantime. More fundamentally, however, interest paid on foreign debt represents a significant outflow of resources from the economy and this outflow can be met only by way of increased earnings from exports or from other foreign receipts and by definition must be supported by an increased level of taxation. The significance of this is that the cost of foreign borrowing is governed by a floating interest rate system which can give rise to significant fluctuations and costs. That is one of the main reasons for the committee deciding to examine this question of the service of the public debt and to put it in context. We in the committee have been working in an objective and non-partisan way in considering the expenditure programmes of various Departments. The amounts concerned are significant in any event though they might not in any one case involve figures in excess of £10 million or £20 million or £5 million. Nevertheless, we considered ourselves constrained to address the impact of public expenditure in terms of the growing cost of servicing the foreign debt. We considered ourselves obliged to bring the matter before the Oireachtas so that it would at least have the opportunity of comment, if not effectively of changing the pattern of our borrowing strategy.

If the Minister, on the basis of the financial expertise available to him within the Department, decides to opt for a foreign loan in, say, US dollars rather than Japanese yen or German Deutsche Marks, a question must arise as to whether he has available to him the most up to date and relevant information on the economies and exchange rate systems in operation in those countries with which we negotiate for our foreign loans.

Mr. Dukes

I agree entirely.

Mr. O'Kennedy

We would like to have a degree of public discussion and public accountability, which is what this House is about. It was for that reason that the committee brought the matter before the House in what I hope is a non-partisan and objective way at this stage.

When the committee were considering this question of the service of public debt, the US dollar was extremely strong in relation to other currencies with which Ireland was dealing on a regular basis. The net effect of the strength of the dollar was that we were paying a very high additional cost in terms of extra interest arising from the ever increasing rate of the US dollar compared with the Irish punt. In fact, it is significant to note that the US dollar component in our external debt almost doubled from £1.674 billion at the end of December 1972 to £3.145 billion by 31 March this year. That by any standard is a major increase and one which we had to take note of to the extent that it could create an imbalance and an undue preponderance of the US dollar in our foreign borrowing portfolio. A balanced mix in our foreign borrowing portfolio would seem to be a prudent guard against undue fluctuations in the exchange rate with non-EMS currencies, such as the US dollar and the Japanese yen. We have a reasonable guarantee of stability in our exchange rates with the EMS currencies because we all operate within the bands established, but that guarantee cannot be provided when borrowing in non-EMS currencies. For that reason we were concerned to suggest to those with executive responsibility in this area, the Minister of the day and his advisers, that a balance within the portfolio of foreign borrowing would seem to be a prudent course.

Because of the significant additional amounts of interest we have had to pay on our foreign borrowing, this led to the obvious question, was there any mechanism whereby Ireland could renegotiate some of the loans or, more importantly, move away from over-dependence of loans in US dollars and Japanese yen? There was evidence at the time that loans were available in European currencies, particularly the German Deutsche Mark, and the opportunity should have been availed of to take up loans in money markets where these exchange rates were known to be more stable.

Let me acknowledge at this stage that I am speaking personally, and let me digress for a moment. I recall many occasions during the last 12 months when, as Opposition spokesman, I asked the Minister why we did not have a greater balance in our foreign debt portfolio and the Minister said, more than once, that if we were to borrow in currencies — and he mentioned currencies which could hardly be called hard currencies — it would not be very prudent. I recall on more than one occasion saying in this House that we are not talking about soft currencies but about EMS currencies in which we have traditionally had a certain balance in our foreign borrowing portfolio. I welcome the Minister's belated conversion.

I notice that in next year's programme for borrowing, we are balancing our foreign borrowing between the US dollar, the Yen and the EMS currencies and turning to the Dutch guilder and the Deutsche Mark. We welcome such a move because we will have a relative guarantee against the fluctuations which occur from time to time. Sometimes we might get lucky if we are dealing with currencies outside the EMS but at other times, as has been the case, we might be very unlucky indeed, either in terms of the exchange rates or the interest rates which apply from time to time. That is why we are suggesting that there should be at least a balance and a prudent mix in our foreign borrowing.

If we look at the trend — and this applies to all Ministers — we will see that there is a need to adhere to the targets we set in terms of borrowing, economic development and controlling the current budget deficit. Let us look at the trends since 1973. In 1973 external Government debt was less than £100 million; for 1977 that figure had escalated to almost £800 million, a multiplier of eight in four years; this year it will exceed £8 billion, a multiplier of ten since 1977. With a growth of that nature it is of vital importance that this House have at least a hand in discussing not just the economic policies in terms of current budget deficit, control of public expenditure and public sector pay, but also to be made aware of the strategy, without breaching confidentiality, which the Government of the day follow in raising their foreign borrowing. An increase from £100 million in 1973, to £800 million in 1977 and to £8 billion this year, is unsustainable in any economy, but particularly in an economy of our size where it now exceeds the total foreign debt by over £500 million, the total net allocation for Government expenditure.

If one were to look at any enterprise and see that the total allocation for expenditure in any one year would be less by a significant amount than the total amount being raised from its creditors, in this case foreign creditors, this would raise the fundamental question as to the viability of that enterprise. A fundamental question arises as to the viability of our economic enterprise. We are not arguing this evening as to how best in terms of economic policies to cope with this problem but it highlights the need to address this matter as one of extreme urgency.

Another very worrying feature is that within that figure two-thirds of the Exchequer borrowing of £2.1 billion this year would be required to finance the current budget deficit of over £1,300 million, which one can reasonably state will be the figure as far as we can ascertain leaving only one-third available for funding the capital services programme, which we all acknowledge was the original purpose of our borrowing programme. If one borrows for productive purposes, which in turn will generate economic activity, and which in turn will increase the revenue yield, then one is borrowing for a very positive purpose. If so much of it, in this instance two-thirds of it, is already pre-empted to meet the deficit in the current budget clearly a major question has to be faced.

The purpose of the report was to provide the House with an opportunity to discuss whether or not Ministers for Finance of any administration should be more amenable to Dáil Éireann in the control of decisions taken on the national debt. While respecting the fact that there will always be a system of negotiating domestic and foreign borrowing in an atmosphere of confidentiality I am uneasy that the taxpayer is committed to accepting decisions taken by the Minister for Finance in his corporate capacity on behalf of the Government and the people in relation to very significant loans which have implications for the taxpayer in terms of interest on current loans well into the next century. For that reason I welcome the fact not only that this debate has been launched in the House but that the Minister is here for what is an historic occasion because it is the first time that the elected representatives of the Oireachtas have had the opportunity, through the presentation of a committee report, of looking at the broad outlines of strategy and accountability to the House of the Minister for Finance. On other occasions the Minister and I, playing different roles, will have an opportunity to engage in a more political, perhaps partisan debate but this debate is not for that purpose. I hope that the fact that we have brought our concern as a committee to the House and that the Minister is here to respond will be of service to the taxpayer and the economy generally.

Mr. Keating

This is a significant and important issue. I am mindful that the Vice-Chairman of the committee is a former Minister for Finance and that the principle respondent is the current Minister. I speak as a representative of mere mortals who might not necessarily understand high finance but who have a concern about the issue which is whether or not we can make a better attempt at assessing in this House at regular intervals how certain public debt decisions are arrived at, whether in general terms these decisions were good or whether a better formula for evaluation of that decision making mechanism can be arrived at. This is important because the amount of public debt we are speaking about is truly gigantic. It is in the order of £600 per annum for every man, woman and child, a total of some £2,000 billion pounds. It is therefore strange that it is reasonable for this House to debate small sums whether in Private Members' Time, Question Time or otherwise at regular intervals but the decision making process which for understandable reasons largely operates secretly, but which can have major implications for the way in which the economy is managed, is never formally debated in this House, even if the rules of that debate were such as would preclude those participating from discussing the obvious sensitive market place type information and data which might very well make for very difficult operation by the incumbent Minister.

When we have a public debt of that magnitude and where borrowing decisions are made which are not accountable directly to the Dáil in the way in which certain other decision making processes are, it is reasonable for us to say that we should consider whether we can improve on this. The report is very small and its proposal is very modest. It does not plunge into telling the Minister how things should be done. It simply suggests that dialogue should commence between the Minister for Finance and the Minister for the Public Service on the development of a system to examine public debt servicing. The precise recommendation is that the lack of a specific formalised mechanism for Oireachtas discussion and analysis of decision making with regard to domestic and foreign borrowing policy be corrected. We suggest that some system of meaningful debate on this issue should be developed by discussions between the Minister for Finance, the Leader of the House and appropriate Dáil or Oireachtas committees, if necessary taking into account the sensitivity of those questions to our national economic wellbeing. We readily admit that we do not know the precise parameters of such a formula but such a formula should be developed. It is strange that that omission is a feature of economic and political life at present.

When the Vice-Chairman, Deputy O'Kennedy raised this issue first at the committee meetings and urged that we should develop an attitude to it there was some degree of trepidation as to whether we were overstepping our remit because when we were set up in 1983 we were charged with the task of reviewing on-going expenditure of Government Departments, offices and non-commercial State-sponsored bodies. We asked ourselves if this precluded us from examining the central fund services which covered payment of interest on the national debt and sinking fund and we decided on balance that we were entitled to make an observation. The issue this evening therefore is not whether or not this is borderline in relation to our terms of reference, it is simply a question of the increasing concern by a number of public representatives about the area of decision making by elected representatives which has not been traditionally open to analytical scrutiny in this House. It is valid for us to suggest that it is time that it should be open to scrutiny in this House.

The service of the debt for 1985 is estimated at just under £2,000 million or a quarter of net Government expenditure. We were right to draw attention to the fact that there is little or no opportunity for the Oireachtas to debate the issues involved in what amounts to an enormous outflow of taxpayers' money. Ultimately that is the remit of the committee, to attempt to justify to the taxpayer how his money is being used and to try to evaluate whether or not we might urge improvements on systems, or better value for money where that may be possible. It may be argued that Members can obtain information on the national debt by tabling parliamentary questions or by contributing on the Finance Bill.

In neither case is there a proper opportunity for systematic and considered evaluation of the issues involved. The Finance Bill is wholly unsatisfactory. On Second Stage it wanders all over the place and does not focus on or give significance to the issue in this report. Parliamentary questions are by nature somewhat truncated and while they are interesting in the context of ascertaining statistical and other data they are not an appropriate forum for considered evaluation as to whether major decisions made behind closed doors were the best decisions or were the fruit of the best decision making process.

We subscribe to the view that improvement is possible in all human situations and perhaps even in this context improvement is possible. We are not suggesting that there is any basic lack of order in the manner in which these decisions are arrived at. We do not know whether they are the best decisions or whether the mechanism for making those decisions is the best and we are suggesting that there are Deputies who would take the opportunity of assisting the Minister in evaluating that process so that we could be assured that that mechanism was the best available.

The traditional systems open to us for this evaluation seem to my committee to be inadequate for the purposes of this examination. We believe that Dáil or committee time, if that is the appropriate mechanism, should be set aside regularly to discuss all relevant matters relating to domestic and foreign borrowing, again leaving aside the very sensitive marketplace type data which could cause difficulty for a Minister in the crucial job of decision making at the heart of this area. We are not interested in that; we are interested simply in a system that operates and is used for these decisions.

We are not suggesting for a second that the Minister for Finance should be expected to tell this House or the public in the first instance about details of confidential negotiations that take place in securing our loans. That would be preposterous and irresponsible. It could not happen. The whole point of trying to have private negotiations is to obtain the best deal, and that cannot be done in public. It goes without saying that the very nature of such negotiations depends to a large degree on much behind the scenes planning, discussion and eventual agreement. There has been a long tradition, not only in Ireland but also in other countries, of delicate and highly confidential dealing with the financial institutions in Europe, Japan and the US. All we are interested in is our concern to ensure that the present systems used by the Department of Finance for the planning and securing of loans are the most efficient and effective available. In effect this means that the committee and the whole House need to be assured that the greatest possible expertise is available so that the best advantage may be gained for us in our domestic and foreign borrowing. Therefore, the kind of questions that the Minister would deal with in the context of this evaluation would be, for example, whether he was satisfied that the advisers available to him are formally trained in the financial skills and expertise needed to deal with the banking institutions at home and abroad, whether they are regularly updated and have access to the latest information and expertise available and whether the staff involved train with outside bodies who would improve those skills or have access to such self-improvement techniques.

Without going into the thing in detail, the committee are concerned because they have learned in their short existence that there is serious cause for concern about the technical expertise and the capacity in relation to marketplace decision making by many people making such decisions in the Departments of State at this time. Anybody who wants to drop in to any one of our meetings on a Tuesday afternoon at Setanta House will realise what we are talking about when we say that. There is serious cause for concern. Therefore we like to think that decisions made secretly, for understandable reasons, are made in the context of having the very best insight and expertise available. For example, we would be interested to know whether the Department of Finance study in a systematic, regular and moderate way the financial markets, exchange rates and so on to ensure that loans at the most favourable interest rates are negotiated. Can the Department of Finance pick the best, use the best and have the best expertise in order to progress this area of decision making? At the moment we are not suggesting that they do not. It is only fair to say that many of us have a great degree of respect for the present incumbent of the office and for the manner in which he has clearly attempted to tackle the enormous problems of his office. All we are suggesting is that these fundamental questions should be considered openly, helpfully and co-operatively in this House and that the House, therefore, would be able to accept in good faith arising from that discussion that the necessary expertise and advice are available to the Minister when he is making decisions which will have far-reaching effects not only on today's taxpayers but on the next generation as well. The amount of money we are talking about is enormous. There are huge implications for all of us and for our children and our children's children the way things are going. We believe it is reasonable to debate this situation to whatever extent is possible in this House and to try to come to grips with the decision making process so that the public, the taxpayer and all on this side of the House can be assured that the best is being done. The proposal in the report is very modest. It is couched generally and it urges the Minister for Finance to engage in discussions to procure such a system and have it put in place.

The foreign borrowing element has been falling in recent years but it is still accounting for a very large outflow of funds which should be available for more productive investment in the country. At present the area we are talking about is dealt with in a way which, to the committe at least, is unsatisfactory. Under existing legislative arrangements the payment of interest and principal on the Government's debt is not subject to annual approval by the Oireachtas in the way that most other types of expenditure are. The Oireachtas has enacted broad enabling legislation to empower the Minister for Finance to borrow money on the domestic and foreign markets without further reference to the House as to the amounts and terms of the loans. Legislation is enacted from time to time to ensure that the Minister is empowered to avail of whatever new borrowing instruments emerge on the capital market; but the legislation, while up-dated periodically, rests at that. The basic issues are not subject to scrutiny in this House further to that. The finance accounts, which are published annually, give details of all service payments on the Government's debt as well as information on all borrowings raised by the Government. They also give a statement of the Government's debt outstanding at the end of the year with a maturity profile and, in the case of foreign debt, an indication of the currencies in which it is held, a matter with which the vice-chairman was particularly concerned earlier this year. During the year an Exchequer statement is issued for the end of each week showing the broad categories of Government receipts, expenditure, borrowing and debt repayment. The information on the borrowing and debt repayment transactions shown in this statement is to a considerable extent in aggregate form and does not itemise each individual loan. Therefore, while Deputies may table parliamentary questions on any aspect of the Government's debt policy, the detail and the detailed scrutiny we are speaking of do not seem to be feasible under present arrangements.

Of course, all transactions relating to the Government's debt are subject to audit by the Comptroller and Auditor General, who reports directly to the Dáil, but he has no effectiveness function. His job is simply to ensure that money voted by this House is spent for the purpose for which it is voted. It is simply an accounting, audit function, although he has to some extent been urged into the area of suggesting efficiency measures also. In another context we should examine the possibility of trying to broaden the scope of his office to deal with those issues.

As I have said, we have reason to be concerned. Our committee are in discussion with the Revenue Commissioners at present and some of the data emerging is, from our point of view, a little hair-raising on occasions. The Minister probably is very familiar with this kind of data. For example, in cases where the Revenue Commissioners pursue people whom they describe to be defaulters, 95 per cent of cases which are pursued in this way do not come to payment or fruition — they do not pay up. In other words, about £295 million does not seem to be returned, according to the Revenue Commissioners. We are not going into all the cases and all the figures, some of them very speculative, in regard to tax due, tax cpayable and so on. All I will say is that if we could ensure that we could make savings and improve efficiency these figures would perhaps be on a much smaller scale.

I hope the Minister and the Government will take note of the central theme of this report. In our view there should be an acceptance of some procedure whereby this House, through the Dáil or through one of its committees, would have some opportunity to discuss aspects of the service of public debt on a regular basis. I hasten to add that my committee are not looking for more work, so I hope that if a committee are deemed to be appropriate some other committee will be formed for such deliberations. I suppose our basic concern is for the taxpayer, who is ultimately entitled to know in as much detail as possible how the taxes he or she pays are used. If the committee's views as set out in this report are accepted I have no doubt that the new procedures will provide welcome additional information which will allow the Oireachtas and the public generally to have access to details of how and where their taxes are spent.

I have no doubt that this proposal, which is submitted with respect and in a spirit of helpfulness, will evoke a mixed response. I do not think it is terribly important whether or not this is a borderline case in terms of the jurisdiction of a committee of the House and I have no doubt that there are Ministers, less worthy than this one, who might seek to utilise such a technical device as terms of reference to somehow put offside the submission in this document. I have no doubt at all that the Minister for Finance will not do that. Ultimately, it is not important whether a proposal is within or outside the terms of reference or whether it is proper or improper in some way or another. It is the combined attempt by a group of people working with a small backup team to assist in trying to enlighten the House and, in some modest way, the public on areas which might be open to improvement in evaluated technique. That is what we are after.

I should like to say to the Minister, on behalf of the committee, that we very much appreciate the time and trouble he has taken to give consideration to reports from our committee. Working in the committee system is difficult enough. Sometimes it is of dubious value but one does one's best. Therefore, it is heartening to have the opportunity to have this type of dialogue and to know that recommendations issued in this way will be given respectful and constructive consideration. It is heartening to know that they will be responded to with the standard of courtesy which we have come to expect from the Minister for Finance. We expect, therefore, that our request will fall on welcoming ears and that the Minister may find it possible to tell us he believes there is merit in what we say in this case that he will do something about it.

Minister for Finance (Mr. Dukes)

Out of deference to the work that the committee have done on this and other matters I have taken the liberty of preparing a series of remarks which I intend to circulate and which, with the permission of the Chair, I may embroider a little on as I go through them.

An Ceann Comhairle

My permission is not necessary.

Mr. Dukes

In keeping with the tradition of the House even where it is not required I would prefer to ask for it. I would be less than frank — it would be impossible for me to do it now in the light of what the chairman and the vice-chairman of the committee have said — if, in replying to the debate, I did not repeat the reservations which I previously expressed in the House about the entry of the committee into the area of service of public debt. The central task of the committee, and one which I wholeheartedly support — that is the official view of the Minister for Finance and the personal view of the current Minister — is to examine the justification for, and the effectiveness of, ongoing expenditure of Government Departments and certain State-sponsored bodies. I am very interested to note that Deputy O'Kennedy and Deputy Keating, vice-chairman and chairman of the committee, have an obvious question mark in their minds about whether or not this matter falls within the committee's terms of reference. It seems to me to matter whether or not the committee stay within their terms of reference. I would apply that remark particularly to the Committee on Public Expenditure because of the importance of the remit. I intend to make some more references to the importance of that remit.

The servicing of debt is not an activity which falls within any reasonable interpretation of the committee's mandate. Such expenditure is not discretionary; it is obligatory, contractual expenditure which the Government and the Oireachtas have no option but to meet. It is for this reason that the Oireachtas made it a permanent charge on the Central Fund rather than subjecting it to annual approval and appropriation by the Oireachtas. Expenditure on debt service is, therefore, fundamentally different from normal discretionary expenditure which may be proposed by the Government and submitted to the Oireachtas for approval. As is acknowledged in the committee's report, the cost of servicing the Exchequer debt is the result of decisions made by the Government and the Oireachtas about other expenditure programmes and the overall level of borrowing.

It seems to me that, in expressing themselves in the way they have, the committee have been putting the cart before the horse. What we should worry about is not so much the impact of debt servicing on public expenditure but rather the reverse. We should be worried about what the impact of public expenditure is on debt servicing. I note that Deputy O'Kennedy in his remarks laid some considerable emphasis on the need to reduce the level of borrowing and in particular to reduce the level of foreign borrowing. I agree with him in that concern. I sincerely hope that he can stick to it and can persuade other people to do so. I hope it will not simply be his personal view but that it will be a view shared by the other side of the House in general.

The borrowing programme, of course, also involves policy judgments and operational day to day decisions which fall to be made by me and my Department and in relation to which we are answerable to the House, to the Committee of Public Accounts and the Comptroller and Auditor General, each one with its specific part to play in the process. These decisions, and many of them are made in the course of the year, are very carefully considered ones. They are made on the basis of a very close scrutiny of all the opportunities offered by the market, and, indeed, by a very painstaking appreciation of the constraints imposed by market conditions at any given time. We have available to us to do this the widest possible range of up to date information from all financial markets. In addition — the chairman of the committee asked about this — we have available to us the expertise to do it. Of that I have no doubt whatever. We have the skills that are required to do it.

I might add that Ireland is regarded as a reliable borrower, as a very expert borrower and in many cases and in many quarters of the financial markets of the world is regarded if anything as a fairly aggressive borrower. I can fairly say — and this is something of which I have been very conscious over the last three years — that our borrowing operations are carried out in a manner which has increased both the respect in which the Irish Exchequer, and the Irish operation generally, are held and in a manner which had contributed in no small way to the improvement to our creditworthiness, a matter of some considerable importance to us.

If anything I find that our borrowing operation tends to be criticised for getting excessively fine terms. This is a matter we have had the opportunity to discuss in the House at other times. It seems to me that it is far better to have that kind of reputation in financial matters than to have any other kind of reputation. We have in place the expertise and the skills which are applied to the information that we have available on markets that give us the result in terms of the kind of management of our borrowing policy that we see from day to day.

Before moving on to that, for the benefit of the chairman of the committee — and I say this in a spirit of constructiveness — I am rather at a loss to think what mechanisms a committee of this House might have at their disposal to review day to day decisions, particularly given the confidential nature of some of these decisions which the chairman has mentioned. Despite these reservations about the report and this venture of the committee into that area, I should like to deal briefly with the concerns which are stated to lie behind the report that the committee decided to make. At the bottom of page 2 of the report, I find the following phrase:

The committee were asked to what extent this happened arising from decisions taken to switch an increasing proportion of Ireland's foreign borrowing to the US dollar market.

I wonder who put that question to the committee? The committee cannot answer it. Perhaps they should ask the question. That is possibly a more elegant way of putting it.

Mr. O'Kennedy

The question was asked by the committee. It was not just I.

Mr. Dukes

I am reading from the committee's report.

Mr. O'Kennedy

That is picking words. It is unfair.

Mr. Dukes

The committee say they were asked to what extent this happened arising from certain things that were alleged to have happened. Who asked the question? The committee cannot answer it, so there is no point in putting it to the committee. Otherwise the committee would not have been making the report.

Mr. O'Kennedy

Delete the word "were". They asked.

Mr. Dukes

The answer had already been given in this House and, indeed, elsewhere including the correspondence columns of The Irish Times long before the committee got around to publishing their report.

Mr. O'Kennedy

I do not always read those columns.

Mr. Dukes

I have here copies of a long, instructive and very entertaining correspondence involving myself and another Member of this House in the columns of The Irish Times dated 1 July 1985 about this subject. I do not draw any conclusion from that as to the committee's conclusions, but still wonder why the committee were so coy as not to say who asked the question.

Mr. O'Kennedy

I will give the Minister that name some time.

Mr. Keating

It was a rhetorical question, anyway.

Mr. Dukes

The basic concern lying behind the asking of this autonomous and self-generating question seems to be that the cost of debt servicing may have been increased as a result of an alleged switch in recent years towards borrowing more US dollars and Japanese yen at a time when these currencies were appreciating in value against the Irish pound and a move away from borrowing EMS currencies against which we have enjoyed greater exchange rate stability. I have to say quite simply that the alleged switch in borrowing simply did not take place. Official policy has been and continues to be to borrow in a well balanced portfolio of currencies, indeed, a view that was expressed here earlier on this evening by the vice-chairman of the committee, Deputy O'Kennedy.

It seems — and I say this in all sincerity — that he was about to arrive at the kind of conclusions that I have long ago arrived at if he pursued to its logical conclusion the train of thought he was pursuing. The committee might well have done the same thing, although I am not so sure that it is an appropriate matter for debate by the committee. The achievement of a balanced portfolio is the best way of ensuring that, over time, the exchange risks necessarily involved in our foreign borrowings are minimised, since appreciation of some currencies will tend to be offset by depreciation of others

Of course, the precise proportions of individual currencies in the debt portfolio at any particular time may not correspond entirely with our preferred currency distribution. Even were there to be at any given moment in time a preferred currency distribution, the last thing that I, or any Minister for Finance, would wish to do would be to say publicly what that preferred distribution would be. That would be an extremely bad tactic and a way of ensuring that we did not get the finest terms available on the market. The fact that the portfolio has not at any given time corresponded exactly with a preferred currency distribution simply reflects the obvious fact that we do not control conditions in the international capital market. A flexible approach is needed to respond to rapidly changing conditions in the various markets and to ensure that we can get the best possible terms.

There may be good tactical reasons also why we might wish to launch a borrowing operation in a particular market on a given occasion so as to demonstrate our ability to raise funding in that market at competitive rates. The very fact of carrying out an operation of that kind can quite often have a significant effect on a country's creditworthiness. We have had experience of that in the not too distant past. However, if we were to borrow too frequently in a particular market we would simply push up the price we would have to pay for funds. It is not possible, therefore, to raise all our requirements in any one market, other than, of course, the dollar market. We could not raise all the funds we need in EMS currencies. There are a great many reasons for this, many of which we have already discussed in this House.

The suggestion that there was a switch into US dollar borrowings seems to be based on the increase in the proportion of our total debt held in that currency from 32 per cent at the end of 1982 to 39 per cent at the end of 1984. These proportions are calculated by translating the various foreign currencies into Irish currency at the exchange rate in operation on the two dates mentioned. The proportions are determined, therefore, not only by the amount of new borrowings undertaken in particular currencies but also by the movement of those currencies against the Irish pound during the period concerned.

The fact is that the increase in the dollar proportion of our debt between 1982 and 1984 was due almost entirely to the appreciation of the US dollar by about 40 per cent during those two years. It is certainly the case that a number of important new dollar borrowings were launched during that period, but the higher proportion of dollar debt was brought about primarily by the change in the exchange rate rather than as a result of any deliberate policy decision to switch out of the EMS currencies. Deputy O'Kennedy has been worried about the balance in the portfolio and I am explaining just how that concern with the balance in the portfolio is given effect and what are the other factors which I gather the committee did not appreciate or refer to — how factors other than the simple amount of borrowing in a given currency can affect the balance of the portfolio.

I should like to repeat a point I made before in this House. When we compare our performance and the balance in our foreign borrowing portfolio with that of other countries, we find some rather interesting things. In December 1983 we had 39 per cent of our foreign currency borrowings in dollars, 40 per cent in the EMS currencies, 5 per cent in sterling, 8 per cent in Swiss francs and 7 per cent in yen. The dollar represented 39 per cent, EMS 40 per cent and the rest about 20 per cent. At that time we compared ourselves with some of the other borrowers in the market. Denmark had 69 per cent of its foreign borrowing in dollars and only 16 per cent in EMS currencies. France, a country which is widely held to have a very expert foreign borrowing programme, had 58 per cent of its foreign borrowings in dollars and 21 per cent in EMS currencies. Belgium, a country with which we could compare ourselves, had 31 per cent of its foreign borrowings in dollars, 41 per cent in EMS currencies and 23 per cent in Swiss francs. Even on the basis of the argument being made here this evening and the argument being made at the end of 1983 and throughout 1984, we had a better balance in our foreign borrowing portfolio than most of our neighbours in the Community and indeed——

Mr. O'Kennedy

Belgium is the country most comparable with us.

Mr. Dukes

——we had a higher proportion, I think it is fair to say, of our foreign borrowings in EMS currencies than most of the other EMS member states with substantial foreign borrowing programmes.

Mr. O'Kennedy

Including Germany.

Mr. Dukes

By the end of 1984 how had that position changed? We still have 39 per cent of our foreign debt in dollars, 30 per cent of it in EMS currencies and 10 per cent in sterling. Other countries had been tending to move away from the dollar but we had a far lower proportion of our foreign currency borrowings in dollars than most of our near neighbours. In the face of that evidence and in the light of other factors which I have pointed out, I cannot see how or why the committee, the chairman or particularly the vice-chairman, can continue with this repeated allegation which is totally without foundation that there was a deliberate decision at a given time to switch into dollars.

The weakening of the dollar exchange rate this year has resulted in a dramatic fall in the proportion of our debt held in US dollars, from 39 per cent at end-1984 to 32 per cent at end-September 1985. This is the same proportion as applied at end-1982. The proportionate fall has come about despite the fact that we have arranged some new dollar borrowings this year. It simply reflects the fact that the fall in the dollar exchange rate has knocked several hundred million pounds off the value of the outstanding debt in Irish pound terms.

The changes in exchange rates have of course implications for debt-servicing costs as well as for the proportionate distribution of our debt. As regards repayments of principal, losses from appreciation of the borrowed currency would arise only at the time of the capital repayment. With the rise in the value of the dollar our 1982 dollar borrowings would, at end-1984, have been showing significant but "unrealised" capital losses of this kind. These unrealised losses, about which great play has been made on the other side of the House, have been substantially reduced with the recent weakening of the dollar. Whether or not a profit or loss in Irish pound terms will actually be realised will be determined by exchange rate movements between now and when the debt is paid off.

As regards the ongoing cost of interest rate payments on the borrowings, it is true that in the past couple of years the higher dollar pushed up the cost of dollar borrowings from what it would otherwise have been. On the other hand, US interest rates have fallen considerably since 1982 and, because most of our dollar borrowings are at floating rates, we have been getting the benefits of these reductions. Had they been in fixed rates we would have been getting no benefit from the reductions. Equally we might have paid no price for the increase. Because most of them are denominated at floating rates, we are now getting the benefit of those reductions.

It is interesting to note that, with the reduction in interest rates since 1982 and the recent favourable movement of exchange rates, the interest cost of most of the dollar loans raised in 1982 is now less than it would have been at the time the loans were arranged. In the same way the increased interest cost of floating rate loans raised in Japanese yen, as a result of the appreciation of that currency, has been offset by the fall in Japanese interest rates since 1982.

All these things indicate that when one ventures into this field one has to be prepared to spend time looking at all the factors that influence the markets and influence one's obligations, not simply picking out particular ones and looking at them in isolation from the rest. That is precisely what our borrowing operation does. It examines all those factors scrupulously, conscientously and very quickly. In the nature of the operation one cannot spend five or six weeks scratching one's head and wondering whether to carry out a particular operation. We have a system which allows us, having absorbed all the information about the market, to make decisions quickly as market opportunities arise.

The House will be aware of the priority which I and my Department have accorded to the management of the foreign and domestic debt. The improvement in Ireland's credit standing on the international markets since 1982 speaks for itself. We have this year been borrowing funds — including Deutschemarks, ECUs and dollars — at the finest terms ever obtained by Ireland. We have also, starting in 1984 and at an increasing pace this year, been carrying through an extensive programme of prepaying older loans before their due dates and refinancing them with loans carrying longer maturities and cheaper interest rates: many millions of pounds in debt service is being saved as a result of this programme. So far in 1985 we have prepaid the equivalent of £1.1 billion pounds in foreign loans.

I would like to refer briefly to one other specific aspect of debt servicing mentioned by the committee, curiously overlooked by Deputy O'Kennedy and the chairman of the committee, that is the suggestion that sinking funds, should be replaced by a system of depreciation of assets. The committee advance no explanation or analysis of what exactly they had in mind. However, I can say that the use of sinking funds is kept under review in my Department as part of our wider reviews of Government accounting procedures.

While, as I have made clear, I share the committee's view about the importance of debt management, I repeat that the particular concerns that motivated the committee's report are unfounded. In the circumstances I do not see any need to set up new mechanisms for Oireachtas discussion on debt. Existing mechanisms are adequate for this purpose. The overall amounts of borrowing follow from budgetary and economic decisions which are already the subject of extensive debate in the Oireachtas. Details of borrowing operations are published in the Finance Accounts and in Central Bank reports. I have always been willing, in reply to Parliamentary Questions or in correspondence, in The Irish Times or elsewhere, to give Deputies as much additional information as it is feasible to provide, bearing in mind the confidentiality that must necessarily apply to some aspects such as dealings with individual banks and particular loan deals that may be in prospect. There is ample opportunity for discussion of these matters in the House. I would make the point that the Finance Bill debate would not seem to be a place for this kind of discussion. I would venture to suggest that the budget debate would probably be a far more appropriate framework within which to have this kind of discussion. The suggestion has erroneously been made that this is the first opportunity the House has had to discuss these matters. We have had this discussion on a number of previous occasions, both at Question Time and in the context of this year's and possibly last year's budget debates.

Mr. O'Kennedy

It was discussed among other things.

Mr. Dukes

We are not breaking new ground here. If Deputy O'Kennedy feels there has been a lack of discussion on this matter in the context and in a manner that he would regard as appropriate, it has been because he has not taken the opportunities that already exist within the procedures of the House to raise these matters in a properly structured way. On any occasion when he wishes to raise it I will be quite happy to debate the matter in the House, as I have shown tonight by a fairly extensive contribution to this debate, against the background of the fact that I do not believe this is an appropriate matter for the committee to deal with.

I wholeheartedly support the committee on the work they have been doing to carry out the remit of the Oireachtas. I hope the committee will apply themselves with energy to that task. The committee will find in me, particularly on occasions and matters properly within their remit, the most open interlocutor they could have, the most enthusiastic supporter of the lines they follow. I can assure the committee that I am a firm supporter, even on the odd occasions when perhaps the lines committee members take in this House are not quite the same as the lines they take during committee meetings.

Mr. O'Kennedy

I cannot imagine for a moment to whom the Minister was referring in his last comment.

Mr. Dukes

I think the message has gone home.

Mr. O'Kennedy

Though we regret that the Minister does not see the need for a system of reporting or explanation, we made it quite clear in the committee report that we were not purporting to supervise the Minister for Finance or his experts. Our main suggestion is that the committee should report to the Dáil occasionally throughout the year for the purpose of a debate of this kind. This is the first time we have had a debate here on this matter. Of course, we have discussed these matters on Finance Bills and budgets. We have discussed these matters during Question Time but, until we have revised the procedure, relevant questions do not arise more frequently than once in one and a half years.

Mr. Dukes

We are very anxious to facilitate committee members as frequently as possible.

Mr. O'Kennedy

Next week the Minister and I will lock horns on a different matter. During Question Time we have only about five minutes at a time in which to discuss foreign borrowing. Having regard to the impact our foreign borrowing has on the current budget, I am sure the Minister will agree that one contribution by each Deputy during the budget debate is not sufficient to deal properly with this vital matter. Neither can we have a satisfactory discussion during the passage of the Finance Bill.

I should like to emphasise again that in no part of our report did the committee suggest we have the expertise or the capacity to supervise what is being done by the Minister or his experts. What we want, if possible, is a public explanation and public accountability to the citizen taxpayer through this House. This evening the Minister went into considerable detail. He was interesting and informative and he said more than we were able to digest in one go. It was perhaps one of the most detailed explanations we have had on this one issue in my experience of 20 years here.

That, in itself, is not a bad thing, but what we in the committee want to achieve is a debate here every three months or every six months when we would report generally to the House on the exact trends in foreign borrowing, why these trends are developing in the way they are and what control we can possibly have over international trends. That is what we are seeking and I do not think it is too much to ask. Irrespective of who sits in the Ministerial chair, it is of great importance that we discuss these matters here at least once every six months so that we can test the consistency of Ministerial policy on this.

Mr. Dukes

The Deputy will find me entirely consistent.

Mr. O'Kennedy

I do not propose to depart from the non-partisan approach we adopted to this throughout the evening. Someone from these benches may be facing that responsibility very soon——

Mr. Dukes

What sort of committee will the Deputy appoint?

Mr. O'Kennedy

I shall just give a few of my opinions on the servicing of foreign debt. This is not a matter that falls within the committee's mandate and we never suggested it was. Though the servicing of our debt is very important, we are talking about an explanation to us of decisions that have been made, without prior sanction, to borrow in particular currencies. The Irish Times has a limited readership — it is not very big in my constituency — but the readers seem to be getting instruction and information from the Minister. It would be no harm if the Oireachtas, and the public through us, got the same type of instruction. That was our purpose in bringing this report before the House.

A currency which is appreciating consistently would have a pattern of falling interest rates. Therefore, we must make a measure judgment on the impact this would have on our capital repayments when they happen to be made. Falling interest rates would give us relief in the short term. These are matters which the Minister and his experts must consider.

We should like to know why judgments in regard to the currencies affecting our foreign borrowing were criticised in the way they have been. Personally, I think the Minister tends to ignore the fact that there has been a switch — though not dramatic, a significant switch — in the total portfolio towards the dollar. In his speech the Minister picked specific dates and specific currencies, particularly in relation to 1982. He might as well have mentioned the Federal German Republic, which would not be borrowing too much in EMS currencies. Belgium is the only country of those which he mentioned that could really be considered to be in a similar position to ourselves. Unfortunately for them, like us, they have a very high level of foreign borrowing. The United States dollar component has not increased proportionately to the same extent in their total debt as it has in our case.

Mr. Dukes

But they had a higher proportion of Swiss francs.

Mr. O'Kennedy

At a time when the same judgments must have been made by the advisers to the various Treasury Departments, whether in Ireland, Belgium or elsewhere, obviously they made a different judgment. We simply asked if we could have, perhaps on a regular basis, explanations as to why these judgments are made. It may well be the advisers presenting them to the Minister, but in the final analysis the Minister of the day should make the fullest possible disclosure to this House. Let us then be judged on the prudence of those decisions.

I believe the public are anxious that we will have fairly regular discussions on what has become perhaps the major component of the whole of our expenditure programme — and we acknowledge that — the service of the foreign debt. I would hope that it would not be confined to Question Time, the context of the Budget debate or that of the Finance Bill. On reflection when the Minister sees what we are at he might consider that every six months, either in this House or in a committee thereof, we would have the opportunity to debate on the basis proposed in this motion. While I regret that the Minister is not prepared to do so this evening, I appreciate the opportunity our chairman has given me to raise this matter. We welcome the fact that the Minister has come in to take the debate. As far as I know, he has already created a record, being the first Minister to appear before our committee to subject himself to what might not have been for him a very rigorous cross-examination but what was for us a very stimulating afternoon. Our thanks are due to him. Perhaps he will realise we have, as we had on that occasion, a common purpose to discharge irrespective of changes of administration and that this House will fulfil its role at all time.

Question put and agreed to.