Dáil Éireann Debate, Tuesday - 27 May 2014
9. Deputy Thomas P. Broughan asked the Minister for Finance if savings can be made on servicing the national debt next year; the expected interest payments required for the national debt for 2015; his views on the growing burden of interest payments on the national Exchequer; and the measures he will take at a European Union level to have these payments greatly reduced. [22321/14]
Amharc ar fhreagraMy question is premised on concerns held by people in my constituency and elsewhere, which we heard so vociferously in the past six or eight weeks, regarding the desperate impact that the national debt and interest repayments are having on the national budget and how that will constrict whatever efforts the Minister might try to make in October to have a more expansionary budget.
The stability programme update, SPU, published last month, provided an estimate for general Government interest expenditure of €8.45 billion in 2015. This is a reduction of €300 million on the corresponding budget 2014 estimate, primarily reflecting an improvement in the interest rate environment generally.
The interest expenditure projection for 2015 will be further reviewed in the context of budget 2015 in the autumn and will reflect developments in the interim as well as the outlook at that time, including for interest rates and funding requirements.
As regards 2016 onwards, the SPU shows that interest expenditure is projected to increase in nominal terms over the forecast horizon. This is primarily a reflection of further, albeit decreasing, deficits in the public finances in the coming years, which are driving an increase in general Government debt in nominal terms over the forecast horizon. When measured as a percentage of GDP, however, general Government debt is projected to trend downwards from this year onwards. These reducing deficits are part of the phased correction of the public finances. This policy of phased correction, implemented in as fair and equitable a manner as possible, has allowed growth in the economy to return.
While the continuing Exchequer deficits add to the national debt and the associated interest costs, the size of the deficit is continually decreasing each year. My Department's most recent forecasts show a primary surplus is projected next year, both in Exchequer and general Government terms. This means that, excluding interest costs, revenue will be more than sufficient to meet expenditure commitments. Furthermore, the medium-term budgetary objective of a balanced budget in structural terms is set to be achieved in 2018. This should help to lower interest costs.
Importantly, general Government interest expenditure when expressed as a percentage of total general Government revenue is projected to remain at more or less the same level over the medium term and well below levels seen in the 1980s. It is important to recognise what has already been achieved in reducing the interest burden. In 2011 the interest margins originally charged on the EFSF and EFSM facilities were removed, with significant benefits in terms of reducing interest expenditure. The restructuring of the IBRC promissory notes, delivered last year, also has significant benefits in reducing general Government interest expenditure.
I will deal with the Minister's final point first. The reductions to which he refers to some extent relate to debts that no one ever even attempted to pay down. The reality is that the €8.5 billion in income tax to which he refers equates roughly to the entire education budget. In the past three years the Government of which he is a member has imposed savage cuts in the health budget, which is a little bigger than that for education. The Fianna Fáil-led Administration which preceded the Government also imposed savage cuts in the health sector in the three years prior to 2011. The total figure for the cuts to which I refer is currently running at €32 billion, a phenomenal sum in the context of the national budget. Should the Government not be more robust in its efforts to have some of the overhang relating to the disastrous blanket bank guarantee reduced to a significant degree? The burden with which the people have been saddled is huge. Many economists are of the view that GNP is a better indicator of the level of the burden. When one uses GNP as the method of comparison, it becomes obvious that the country is operating in the shadow of an enormous monolith of debt. I am sure the Minister has read Plan B: How Leaving the Euro Can Save Ireland by Cormac Lucey. I am not suggesting the Government is going to adopt a plan B, but some of the figures put forward by Mr. Lucey and others are truly frightening. There may come a point when the Government - not just individual Ministers within it - is long out of office and the nation, as a result of its incompetency, is still burdened with a savage amount of debt.
Most countries have national debts; I do not know of any country which does not have such a debt. If one is running a national debt, one pays interest on outstanding loans. That is the way countries behave if they wish to remain solvent. Ireland's national debt is just in excess of €200 billion, of which some €64 billion arises from the situation with the banks, while €138 billion relates to the fact that we and our predecessors in government have run deficits. That is why we are obliged to reduce our deficit. On each occasion on which we run a deficit, the national debt increases and the interest burden which the Deputy deplores also rises. If we were to implement what all those who advocate additional expenditure and no cuts in expenditure are seeking, the debt would rise again and we would be obliged to pay more interest on it. It is not possible to have it both ways.
The Deputy has stated the final point I made in my initial reply is not real. Of course it is real. There is no longer a margin on the official debt relating to Europe, which is down to the rate which applies to borrowing. That is of huge advantage to Ireland because it reduces our interest rate.
The Deputy has also referred to the deal on the promissory notes and stated it has had no benefit. Some €30 billion was involved in that regard. The Deputy will recall that up to two years ago a bill of €3 billion in respect of the promissory notes had to be paid each March.
It was not paid.
It was paid in the first year in which we were in government, when the Deputy was still a member of the Labour Party.
It was not paid.
It was not paid after that and we then negotiated our way out of it. The effective rate of interest on all of that money now stands at approximately 1%. The money to which I refer is not of the pretend variety; it is real.
I am not sure the European Central Bank would agree.
The Deputy should not be concerned with that old guff.
At this time last year, other Members and I on the left in this House presented alternative budgets and alternative ways of raising money. However, the Minister informed us that we were crazy. That is the reality. We were prepared to balance budgets and know how to do so. We also indicated that we were prepared to facilitate effective budgets and address the problems relating to the national finances left behind by the disastrous Fianna Fáil-Green Party Government. Unfortunately, for the past three years the Government has implemented remedial policies similar to those put in place by the previous Administration. Earlier today the Minister referred to history judging people. Many future historians will say the Government of which he is a member carried on the policies implemented by the Administration which preceded it and that those in the Labour Party were insane to take power with Fine Gael.
The point is, whatever way we look at it, an education budget and a health budget are being spent on interest repayments, ultimately, to refund gamblers in the Irish banking system. This continues to be an outrage.
More than two thirds of the Irish national debt is due to previous Governments running deficits. That is a fact. Less than one third is due to what Deputy Broughan deplores, that is, bust banks that had to be recapitalised and bailed out.
Deputy Broughan should not pretend that foreign bankers imposed this on us. Much of the burden of the debt was done domestically, over two thirds of it in fact. As we continue to run deficits - we will run one this year and next year - it increases the debt. As we increase the debt, it increases the amount of interest we have to pay. It is simple economics.
Finally, history will be a good deal kinder to the Tánaiste, Deputy Eamon Gilmore, than to Deputy Tommy Broughan when an assessment of this is made in future.
We will see what the historians say.
The next question is in the name of Deputy Lucinda Creighton. Since Deputy Creighton is not here we will call Deputy Seán Kyne, who has tabled Question No. 11.
