Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

The Minister for Finance is taking the lead role in respect of the State's shareholding in the banking system. I am aware of the report to which the Deputy refers, which I have read and considered. Notwithstanding the proposal contained in the report, under EU fiscal rules, the proceeds of any such sale may not be used to fund increased expenditure, irrespective of whether such expenditure is classified as current or capital.

The Department of Finance's shareholder management unit has the responsibility to protect the State's investment in the bank in question following its return to profitability, consistent with an approach that supports the sustainable recovery in the economy. While the unit's ultimate role is to return the bank to private ownership, the State will exit its investment in the bank in a measured fashion and in a manner than maximises the return to the taxpayer.

Regarding the accounting treatment of any proceeds from such a transaction, the position is that the sale of such financial assets does not result in a beneficial impact to the general Government balance under EUROSTAT rules. This is because it is classified as a financial transaction, whereby it is essentially the exchange of one form of asset, such as shares, for another kind, such as cash. Consequently, the sale of any shareholding in a bank would not count as general Government revenue and would not create any scope for increased spending on the basis of the proceeds realised. Therefore, there will no increased capacity for spending following any sale of bank shares.

However, while not improving the deficit, cash proceeds arising from the sale of bank shares would result in a reduced requirement for Exchequer borrowing, which ultimately results in lower debt. A lower debt level is not only beneficial in terms of the fiscal sustainability of the State, but would also lead to reduced interest payments in future years.

It is crucial that increases in funding for public investment are based on sustainable economic growth. The Government is well aware of the challenges that arose in the past when one-off amounts of money were used to fund ongoing commitments to the State.

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