Pearse Doherty (Donegal South West, Sinn Fein)
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Question 2: To ask the Minister for Finance the cost to the State of the Promissory Notes to Anglo Irish Bank and Irish Nationwide Building Society including the capital repayments, the interest payments to Anglo and Irish Nationwide and the cost of servicing the State's debt in borrowing these sums; if he will provide an annual breakdown of the cost to the State of servicing these payments; the steps he is taking to reduce this debt burden on the taxpayer; and if he will make a statement on the matter. [27956/11]

Michael Noonan (Limerick City, Fine Gael)
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The promissory notes were issued in various tranches with different interest rates. There were four tranches for Anglo Irish Bank and two for the Irish Nationwide Building Society. The total interest cost to the State for all tranches of the Anglo Irish Bank and Irish Nationwide Building Society promissory notes is approximately €17 billion, with annual repayments of €3.1 billion per annum. These annual repayments reduce over time as the various tranches of the promissory notes are repaid. The final payment on the promissory notes of approximately €100 million will be made on 31 March 2031. The total cost of the promissory notes, including the principal amount and interest, will be in the region of €47 billion over the life of the notes. The following is a detailed aggregated schedule of capital repayments and interest on the promissory notes.

The Deputy should be aware that the funds which become available to the State as a result of borrowing undertaken by the Exchequer are not generally assigned to one particular area of expenditure, rather they are available, with the funds sourced from revenues such as tax revenue, non-tax revenue and capital receipts, to fund overall expenditure. Accordingly, there was no one tranche of borrowing undertaken solely for the purpose of funding the promissory note payments to Anglo Irish Bank and the Irish Nationwide Building Society. The drawdowns of funds so far under the joint EU-IMF programme of financial support have been used for a range of purposes, including, of course, the general running of the day-to-day operations of the State. It is difficult, therefore, to isolate precisely the exact cost of the interest payments on the borrowing undertaken to fund the promissory note payments. However, for illustrative purposes, on the basis of the original 5.8% blended average interest rate which applied to borrowing under the programme, the interest costs on borrowing of €3.06 billion would be just under €180 million per annum. In the light of the recently agreed reduction in interest rates on funding available under the joint EU-IMF programme of financial support, however, the estimated interest cost on such borrowing reduces to approximately €115 million per annum.

Additional Information not given on the floor of the House.

While the State has budgeted to meet both the interest and cash requirements, I am eager to have the promissory notes examined to see if they can be re-engineered in a better way for the State such as, for example, by lengthening their maturity and reducing the interest rate on them. This re-engineering would have to be completed in a manner which did not impact on the capital position of Anglo Irish Bank and may or may not be feasible.

I had the opportunity to meet President Trichet on the margins of the ECOFIN meeting in Poland on Saturday, 17 September. He was very complimentary of the progress being made by Ireland and noted the narrowing of bond spreads that had taken place, which he would not wish to see put at risk. I mentioned to him and in a separate meeting to Commissioner Rehn the situation in relation to the promissory notes. I proposed that our technical experts get together to examine the technical aspects and the implications of any potential changes. They were agreeable to this on the basis that there was clearly no commitment on their part up front. We are proceeding on that basis.

Pearse Doherty (Donegal South West, Sinn Fein)
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When the first note was issued by the Department of Finance on the promissory note, it included the cost of capital payments and interest on these capital payments. It also included the cost of borrowing. In the response given by the Minister he has not included such a column. I do not dispute the €47.9 billion figure which takes in the capital and interest payments, but there is an issue with the cost of borrowing. If we are to assume we could borrow at the rates at which we borrowed in 2009 and 2010 - 4.7% - the overall cost of the promissory note, until the last payment on 31 March 2013, will be in the region of €74.63 billion. It is proper that this figure be noted in order that people will understand the full cost of the promissory note to Anglo Irish Bank. It is not conceivable that we will not have to pay anything to borrow this money and we could argue about the 4.7% rate which is probably conservative and could go down but it could also increase. We are, therefore, left with a ballpark figure of €75 billion to pay the promissory note. My question is the same as the one tabled to the Minister. What is he doing to reduce the cost of this debt on the taxpayer? Does he believe we should continue to pay €75 billion to Anglo Irish Bank? Why has the promissory note repayment schedule been extended to 31 March 2031 from 2025 in the original note? Why has the cost increased to that extent?

Michael Noonan (Limerick City, Fine Gael)
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The cost is not €74 billion but €47.4 billion. One can think of it as a mortgage. A person making monthly mortgage repayments has a capital as well as an interest payment element. The interest represents the cost of borrowing, while the capital payment diminishes the debt. The Deputy is adding the interest rate cost of €16.8 billion to the €47.4 billion, but it is contained within it as the interest element. The table provided gives the capital reductions in the last column and if these figures are added to the interest rate payments in the first column, one is left with the figures in the middle column, the repayments on an annual basis. This is another issue we inherited when we went into government. This was the way arrangements had been made to fund Anglo Irish Bank. It is like an extremely expensive IOU. Nobody doubts how expensive it is.

Pearse Doherty (Donegal South West, Sinn Fein)
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I seek clarity on the issue and ask the Minister to refer to the original note produced in November 2010 which included the cost of borrowing on the markets, assuming an interest rate of 4.7% at the time. It also included the capital repayments and the interest rate charged to Anglo Irish Bank. As with a mortgage, it is not just a case of repaying €30.6 billion; as the period spans 20 years, the total cost is €47.9 billion. Is the Minister indicating that the total cost of the promissory note is €47.9 billion, including the cost when the State will have to go to the markets to borrow the money to give to Anglo Irish Bank each year up to 31 March 2031? For example, if there was a way by which the Minister's negotiating skills could result in the €30.6 billion Anglo Irish Bank promissory note being wiped away, my assumption is the State would save €74.6 billion.

Michael Noonan (Limerick City, Fine Gael)
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That is incorrect; €47 billion would be saved.