Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I welcome the opportunity to contribute to the Private Members' motion put forward by the Labour Party this evening. While my colleagues in Fianna Fáil and I have sympathy with the spirit of the motion and the objective of increasing capital investment in our country, we do not believe a prerequisite of that should be to secure a change to the fiscal rules and that in the absence of changing those rules, the sale of the stake in AIB is blocked. This is essentially the thrust of the motion. It proposes that the sale would be stopped until the fiscal rules can be changed. Changing the fiscal rules at a European level and, indeed, at a domestic level is not an insignificant challenge and would be likely to take quite some time. In reality, it would entirely derail the proposal to sell a stake in AIB. Of course, that then requires an assessment as to whether or not one believes selling a stake in AIB is the right thing to do.

Our party's position is that provided the conditions are right, and the Government has access to a lot of expert advice to which we have no access, the sale of a stake of up to 25% would be a positive development. It would be a positive development for the bank and the country, represent an injection of private capital and be a statement of at least a degree of confidence in our banking system. What it would also serve to do is help to put a real value on the remainder of the State's share holding in AIB which, presumably, would be in or around the 75% mark. At the moment, we are working to a notional value of AIB because of the State's almost 100% ownership of the shares in that bank. In our view, having a sale successfully conducted would be a very important exercise in rebuilding confidence in the banking system and getting a proper handle on the valuation of our bank assets. Selling a majority share holding would be a different decision and would not be one we would be prepared to support - certainly not now or for the foreseeable future. It would be an entirely different decision if the State was to lose the majority share holding in AIB. I do not believe the bank is ready for that but I believe that private investment of up to 25% would be a positive development.

I will address increasing capital investment, the options we have and what we believe the Government should be doing. It is our position that the Government should seek support at European Commission level to use some or all the proceeds from the sale of AIB for once-off capital expenditure. It is my understanding that the Government has not even made that case. In fact, when one reads the Government amendment, it is very clear that Government policy is that the proceeds be used entirely to pay down debt. There is nothing wrong with paying down debt in normal circumstances. Irish citizens and businesses have gone out of their way to de-leverage and pay down debt where they could, particularly in the past seven or eight years. In normal circumstances, debt reduction is a fine objective and is laudable. The issue for this country is what the best use of the proceeds from the sale of AIB would be. It is our judgment at this time that the greater need facing our country is to address the infrastructure bottlenecks Deputy Howlin rightly identified and which are undoubtedly there. It is our view that the Government needs to make the case. We have made the case. We have written to Jean-Claude Juncker as president of the European Commission and have set out our assessment of the situation which relates to these being once-off receipts and how spending these receipts on capital investment if it does not displace other expenditure would result in Ireland exceeding the expenditure limit and breaching the fiscal rules. We support the fiscal rules. We believe that the Irish people made the right decision in voting in favour of those fiscal rules. That is not to say they are perfect or they should not be reviewed. It is our position as a party that the manner in which capital investment is accounted for in those fiscal rules needs to be reviewed. I do not think the balance is quite right in terms of the smoothing effect - that 25% of capital expenditure in any given year is accounted for in that year and the remaining 75% is accounted for over the following three years. There is a strong case to be made to extend that smoothing effect over a longer period of time. That should be examined by the European Commission and, in our view, it should be supported by the Government.

In respect of capital investment, one item we highlight in our amendment is the 10% domestic rule in place in respect of expenditure on public private partnerships, PPPs. In essence, it means that no more than 10% of the annual expenditure on capital investment can be accounted for by PPPs. We heard evidence at the Joint Committee on Finance, Public Expenditure and Reform, and Taoiseach last Thursday from Mr. Andrew McDowell, the Irish vice president of the European Investment Bank, EIB, that the EIB is more than prepared to provide additional financing to Ireland to do more under the heading of PPPs. The real constraint now lies in that 10% domestic rule. In our view, it is time that this rule is reviewed. If I look at our current level of PPP activity, I can see that at the end of 2016, the value of all Irish PPPs on the Government balance sheet was €500 million and €4.3 billion off balance sheet amounting to a total of €4.8 billion. That is a very modest contribution from the private sector to our capital needs given the size of our economy and the potential role PPPs can play so that should be reviewed. We are asking for an independent assessment of the appropriateness of what is a domestic rule. It is not a fiscal rule at EU level. It does not come under the Stability and Growth Pact. It is a domestic rule that should be reviewed.

The national capital investment plan will be reviewed over the course of this year. It needs to be more ambitious. If we look at the projection of expenditure on capital over the next number of years, we can see that it is projected that there will be significant increases in 2019, 2020 and 2021 if the anticipated fiscal space actually materialises during those years so we need to look at new ways, and at maximising the existing ways, of spending more on capital, which I agree is a key priority for the country at this time. Anyone who has heard the evidence from Transport Infrastructure Ireland cannot but be struck by how down-beat it is about the lack of activity in the investment pipeline in respect of projects that are going through the various stages to get to the end point. I will identify a few that are on my desk. They include the M20 Cork to Limerick motorway of which the Minister will be well aware and the Dunkettle interchange next to the Jack Lynch Tunnel in Cork - 2019 is the earliest that will happen because of lack of investment. Others include the Macroom-Ballyvourney bypass, which, at a minimum, has a similar timeline, and the M28 Cork to Ringaskiddy road scheme. These projects and many others are critical to the regions. We hear much from Government about balanced regional development, proper spatial planning, the national planning framework and so on. If the Government is sincere about that, it should back it up with proper investment in projects that would make a real difference to the economy in the regions in that respect.

It is clear that the proceeds will be treated as a financial transaction and so, as Deputy Howlin has said, will not enhance the general Government balance. The Government will accept the money under the NTMA Act. It will reduce the Exchequer borrowing requirement and will, in effect, reduce the national debt of the country.

Do the Minister of State and the Minister for Finance, Deputy Noonan, intend to make the case to Europe for Ireland to be given a dispensation to allow that additional expenditure on capital investment because of the circumstances and, as a result, not contravene the fiscal rules? It is not often said, but investment was one of the real victims of the economic crisis, along with capital expenditure. Perhaps it was at an unsustainable level in 2007 and 2008. Gross voted capital expenditure peaked in 2008 at €9 billion, which was 4.8% of GDP. At the trough in 2013 it was €3.4 billion and 1.9% of GDP. This year, as Deputy Howlin has said, it will be in the region of 1.6 % of GDP or approximately €4.5 billion. In many respects, we are hardly even maintaining the existing infrastructure stock.

The Fianna Fáil position is clear. Provided the professional assessment is that the conditions are right for the IPO to proceed, it should proceed and we will support it for all of the reasons I have outlined. The Government is not doing enough on capital investment. The proceeds from the sale of the stake in AIB offer the potential to do more. That the Government has not raised that issue or had the ambition to seek support at EU level for additional leeway in respect of the one-off receipt from the sale of this stake is deeply disappointing from Fianna Fáil’s perspective. That sums up the overall Fianna Fáil position. I look forward to Deputy Kelleher’s comments and the rest of the debate.

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