The purpose of the joint EU-IMF programme of financial support is to provide the necessary funding while Government continues the process of repairing the banking system, restoring the public finances to a sustainable position and assisting the economy to return to a path of sustained growth and job creation. The programme provides access to a secure source of funding which the State can avail of in the coming years. It is important to bear in mind that a large element of the borrowing that will take place under the programme replaces borrowing that would have been undertaken in any event to fund the day to day activities of the State.
The State's debt burden has increased substantially over recent years as a result of the significant deterioration in our public finances, owing to the economic downturn, and the significant level of State support provided to the banking sector. Clearly, a gross general Government debt level of €148 billion, or approximately 94% of GDP, as it is estimated to have been at the end of 2010, is very high and one that needs our ongoing and close attention. Both the nominal level of the debt and the debt to GDP ratio are forecast to increase further in the coming years, albeit at reducing levels, as we will have to continue to borrow to fill the gap between revenues and spending, and economic growth remains relatively subdued.
The stress tests being conducted at present to determine the extent of additional support required by the banking sector have the potential to increase the level of debt over and above the most recent Department of Finance forecasts, with resulting increases in the level of resources that must be diverted to servicing the interest on that debt. It is my view that an amount above the previously identified €10 billion sum will be required but I cannot give a definitive figure until the outcome of the current stress tests is known.
There is no one rule that states that if one's debt is above a particular level, it is unmanageable. Clearly, however, a debt level on the scale the State is currently at is one that warrants our attention and requires that action be taken. Stabilising and then reducing the debt ratio to lower levels is a key priority of the Government's policy objectives. The narrowing of the gap that currently exists between revenues and expenditure through additional fiscal consolidation, coupled with the implementation of policy measures that will assist in boosting economic growth, will assist in this regard, as will the achievement of a primary surplus — that is, an excess of revenues over expenditure excluding interest expenditure — by 2014.
The budget 2011 forecasts projected debt interest costs at €4.8 billion, €6 billion, €7 billion and €7.8 billion in the years 2011-14 respectively. The budget 2011 forecasts for tax revenue for the years 2011-14 were €34.9 billion, €38.3 billion, €41.3 billion and €44.4 billion respectively. The budget 2011 public finance forecasts are based on a capital injection of €10 billion for the banking sector, which, as I have said, is likely to be higher.
One measure which may be referenced in forming a judgment of whether a particular level of debt is sustainable is the proportion of tax revenues that must go towards servicing the interest on that debt. Based on the forecasts I have just outlined, it is estimated that approximately 14% of tax revenues will be required to service the interest on the State's national debt this year. By 2014, approximately 18% of our total tax revenues will be required simply to service the debt. While this is undoubtedly significant and high, the level of tax revenue devoted to servicing the debt in the 1980s was higher. In regard to the forecasts of debt interest costs and tax revenues for 2015, the current forecasts do not extend that far. However, the projections for both are currently being worked on by the Department of Finance in the context of the upcoming stability programme update which is due to be submitted to the European Commission and subsequently published.
Additional information not given on the floor of the House.
I turn specifically to Deputy Boyd Barrett's query on the names of bondholders of the Irish banks. Credit institutions do not have access to comprehensive information on the holders of their senior and subordinated debt, because such debt is publicly traded and dealt with through clearing house systems. Issuers do not have access to the records of those systems and the issuer has no means of establishing the underlying ownership of its bonds at any given time. Unlike the position of shares, the holders of credit institutions' senior and subordinated debt instruments are not subject to a disclosure regime. Therefore, such information as a credit institution may have on the holders of its debt would be indicative only and based on an institution's client-specific and general market information. Any such information would be commercially sensitive and subject to the normal provisions on client confidentiality, where applicable.
Government consideration of the approach to burden sharing will be further informed by the outcome of the important capital assessment exercise currently being undertaken by the Central Bank as well as international developments on burden sharing.
