Dáil Éireann díospóireacht -
Wednesday, 5 Apr 1995

Vol. 451 No. 6

Written Answers. - Public Indebtedness.

Helen Keogh

Ceist:

55 Ms Keogh asked the Minister for Finance whether the sale of Government assets on receivables to semi-State or State sponsored bodies, such as NTMA and HFA, amounts to a reduction in public indebtedness where the sale is financed by borrowings; whether such transactions reduce or effect the EBR; the effects, if any, they have on the PSBR; and if he will make a statement on the matter. [6958/95]

Minister for Finance (Mr. Quinn)

The exact details of any sale transaction between the various sectors of the public sector would have to be examined carefully to establish the appropriate classification under the various budgetary aggregates. Subject to the foregoing, I have attempted to address the issues raised by the Deputy to the fullest extent possible.

There are two basic aspects to the scenario outlined in the Deputy's question — firstly, the effect of the receipts accruing to the Exchequer from the sale of an asset or receivable to a semi-State/State-sponsored body and, secondly, the consequential impacts of the borrowing undertaken by that body to fund the purchase. Both aspects are addressed under each of the following headings: The proceeds from the sale of a State asset or receivable would normally accrue to the Exchequer as a capital receipt and therefore have a positive impact on the Exchequer borrowing requirement in the year of sale. However, the resultant loss of any dividend or other stream of revenue which might have accrued to the Exchequer had the asset or receivable been retained will subsequently have an adverse impact on the EBR. The borrowing undertaken by the semi-State/State-sponsored body to finance the purchase of the asset or receivable would not impact on the EBR.

Given that receipts accruing to the Exchequer from the sale of an asset or receivable would be reflected in the EBR, they would impact to the same extent on the PSBR. However, as the PSBR measure also includes the borrowing of local authorities and commercial semi-State or State-sponsored bodies, borrowing by such a body to fund the purchase of a State asset or receivable would also feature in the PSBR, offsetting the sum received from the sale.

The primary measures of "public indebtedness" are the national debt and general Government debt (the "private sector" debt of central Government, local authorities and the non-commercial semi-State or State-sponsored bodies), which is the measure used in the Maastricht Treaty. I will deal with the Deputy's question in relation to both.

As I have already explained above, the receipts arising under the scenario outlined by the Deputy will be reflected in the Exchequer borrowing requirement and, thus, will also affect the stock of national debt as defined for domestic budget purposes to the same extent. However, as the borrowings of semi-State or State-sponsored bodies do not form part of the national debt measurement, the consequential borrowing by such bodies to finance the purchase of a State asset would not be included under this heading.

The impact on general Government debt would vary depending on the status of the purchasing body, i.e. whether it is part of the general Government sector as defined in the relevant EU regulations.

Non-commercial semi-State or State-sponsored bodies are regarded as part of general Government and, thus, a transaction involving a sale of assets from central Government to a body of this nature would, in effect, be netted off and not affect the overall level of general Government debt. The debt of central Government would be reduced by the amount of the receipt (assuming that the receipt is used to retire debt), while the debt of the purchasing body would be increased by a corresponding amount.

If the purchasing body was a commercial semi-State or State-sponsored body, which is not regarded as part of general Government, the receipt could still be used to reduce the debt of central Government, but the consequential borrowings funding the purchase would not add to the stock of general Government debt. Thus, such a transaction would usually lead to an overall reduction in general Government debt. In the case of certain receivables, the status of the body paying the money can also be an important factor in the determination of the overall impact of these types of transactions.