Joe Higgins (Dublin West, Socialist Party)
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To ask the Minister for Finance if he will report on the sustainability of the national debt in view of slower growth projections in the economy; and if he will provide the amount of the national debt and interest payments including projections for 2010 to 2014. [50701/12]

Michael Noonan (Limerick City, Fine Gael)
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Officials in my Department have clarified with the Deputy that he is seeking information on general Government debt.

The State's debt burden has increased substantially over the last number of years as a result of the collapse in revenues and the significant increase in cyclical unemployment and debt servicing related expenditure arising from the sharp contraction in economic activity, the structurally high level of expenditure and the substantial level of State support to the banking sector.

One of the primary objectives of the Government is to stabilise the debt-to-GDP ratio and reduce it to a lower, safer level over time. This will be done through the implementation of further budgetary consolidation as well as policies which foster employment and economic growth. The updated Medium-Term Fiscal Statement, published yesterday, forecasts that the debt-to-GDP ratio will peak next year at 121% and will begin to decline in the following years. This is a result of a combination of factors, including the strengthening of nominal GDP as a result of the implementation of further growth-enhancing policy measures; the achievement of a general Government primary surplus, that is, an excess of revenue over expenditure excluding interest expenditure, by 2014; and a run-down of cash balances in future years, meaning part of the annual Exchequer borrowing requirement is funded without need for additional borrowing but is instead funded through resources to hand.

It is also worth taking into account the State’s net debt position when looking at debt sustainability. General Government debt is a gross measure that does not allow for the offsetting of cash balances and other related assets. Netting off the estimated €18.5 billion in cash and deposits held by the Exchequer at the end of 2012 would result in a net Government debt of the order of 106% of GDP at the end of 2012. This is still an elevated level but one which is significantly below the gross debt ratio.

Additional information not given on the floor of the House.

One indicator of debt sustainability that is worth noting is the proportion of revenues that are directed to servicing the interest on the debt. Based on the MTFS projections, it is estimated that 11.4% of general Government revenue will be required to service the debt this year. This ratio is forecast to increase further next year before stabilising at around 16%. While this is clearly a significant level, it is worth bearing in mind that this is well below the ratio experienced during the mid-1980s, where interest expenditure accounted for over 20% of revenues.

My view is that our debt, though elevated, is sustainable. The Government is strongly committed to stabilising and reducing the debt ratio over time. An important part of that strategy is of course the banking related debt and technical work is ongoing in that regard. There is a widespread recognition of the impact banking debt has had on the sovereign, which has been acknowledged in the commitment that the"situation of the Irish financial sector would be examined with the view of further improving the sustainability of the well performing adjustment Programme. I can assure the Deputy, as I have said many times, that the Government will continue to be ambitious in the negotiations and seek to agree the best possible outcome for the Irish taxpayer.

General Government debt was €144 billion in 2010 and €169 billion in 2011. In respect of the period 2012-14, my Department projects that the debt will be €192 billion, €204 billion and €210 billion, respectively. Interest expenditure in respect of this debt was €5 billion and €5.3 billion in 2010 and 2011, respectively. It is projected to be €6.4 billion this year before rising to €9.4 billion in 2013 and to €9.7 billion in 2014. The large increase next year reflects the expiry of the interest holiday on the promissory note.

Joe Higgins (Dublin West, Socialist Party)
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I thank the officials of the Department of Finance for being very helpful. As the question was whether the general Government debt is sustainable, one definition of sustainable is that it would be capable of being continued with minimal long-term effect. Would the Minister agree that by this measure the debt certainly is not sustainable?

The Medium-Term Fiscal Statement the Minister mentioned identifies as being primarily responsible for the debt the collapse in revenues and significant increase in cyclical unemployment and debt servicing related expenditure arising from the sharp contraction in economic activities and the substantial level of State support provided to the banking sector. With growth in the economy next year revised downwards by the Department, with recession unfortunately beckoning in Europe and with unemployment continuing at inordinately high levels, is it the case that the devastating austerity that has been imposed on the Irish people with a gun to their head by the troika and the European Union establishment institutions militates against recovery and points to a scenario where the State simply cannot afford this debt?

What are the interest payments this year and next year? I have seen an estimate for next year ranging between €7 billion and €9 billion per annum, and perhaps the Minister could clarify that.

Michael Noonan (Limerick City, Fine Gael)
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On debt sustainability, the word "sustainability" is often used in a colloquial way but in what we are talking about, it has a precise meaning. Debt sustainability means can we meet the repayments or do we have to default. The debt is entirely sustainable on that definition. If one means it will be tough going, it will be hard on people and it is not sustainable because of the pressure, or it is not politically sustainable, that is colloquial use of the language, but if one is talking the language of the market and of investors, our debt is entirely sustainable. A good example to prove it is sustainable is that in the 1980s, in the last debt crisis we had, 20% of our tax revenue was being spent on servicing the debt and at the peak now projected, that will be down to 16%. If we could sustain it in the 1980s and into the early 1990s when the serving costs were 20%, now that it is projected at a maximum of 16% we can see where that is going.

On the Deputy's question on the interest rate, the general Government debt was €144 billion in 2010 and €169 billion in 2011. In respect of the period 2012-14, we project that the debt will be €192 billion, €204 billion and €210 billion, respectively. Interest expenditure in respect of this debt was €5 billion and €5.3 billion in 2010 and 2011, respectively. It is projected to be €6.4 billion this year before rising to €9.4 billion in 2013 and to €9.7 billion in 2014. The large increase next year reflects the expiry of the interest holiday on the promissory note, which was negotiated by our predecessors in Government.

Joe Higgins (Dublin West, Socialist Party)
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My point is that these are shocking interest figures that the Minister has just given us. He states we can make the repayments and that determines sustainability, but at what cost? Is the cost a massive diversion of funds that could, for example, be going into major investment programmes such as public infrastructure that could take tens of thousands of workers off the dole and have them creating wealth and regenerating, rebooting and remaking the economy? From that point of view, is this debt unsustainable and a considerable drain on the Irish people?

According to the Minister's report, part of the debt is €35.7 billion of EU-IMF programme borrowings and €28.3 billion in the promissory notes outstanding, all of which are related to the bank bailout. In view of this considerable waste of resources and drain on the Irish people, next year would the country be justified in saying we cannot afford to make any repayments on this debt, we should forgo it and the interest involved as well, and put it into investment?

Michael Noonan (Limerick City, Fine Gael)
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Deputy Higgins has moved into a better position now where I can agree with him. It is not that the debt is not sustainable; it is that the debt puts a considerable burden on us and inhibits the growth in the economy.

As I have said previously, it is like trying to drive a car with the handbrake on. That is the effect of the debt. It is a drag factor and our growth rates would be higher if it were not for the servicing charges. Of course, if we had the freedom to use the servicing charges elsewhere, then spending in the economy would be a desirable thing to do.

The Deputy is short on solutions. The solution that comes from the opponents of the Government, generally speaking, is to pile deficit on deficit and debt on debt. That has been tried before and has failed. It will not work. The Deputy's other suggestion, if we cannot do that, is to default. I draw the Deputy's attention to the fact that this week the ESB was able to raise money on the markets, as was Bank of Ireland. Fitch upgraded us from negative to stable and other very positive things have been happening. If we default, I can guarantee the ESB would not get a penny on the market for the next 20 years.

Michael Kitt (Galway East, Fianna Fail)
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We will now return to Question No. 2, in the name of Deputy Pearse Doherty.