Mick Wallace (Wexford, Independent)
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9. To ask the Minister for Public Expenditure and Reform if he had discussions with the Minister for Finance with regard to using a proportion of the capital from the sale of a bank's (details supplied) shares for public investment here, as recommended by TASC in its report A Time for Ambition with regard to the promised new capital investment plan; and if he will make a statement on the matter. [10624/17]

Mick Wallace (Wexford, Independent)
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The Minister will probably have heard of the TASC report, A Time for Ambition, which addresses the promised new capital investment plan. Has the Minister discussed with the Minister for Finance the possibility of using the proceeds from a potential sale of State shares in Allied Irish Banks to invest in infrastructure, rather than paying down loans?

Paschal Donohoe (Dublin Central, Fine Gael)
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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.

Mick Wallace (Wexford, Independent)
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I would prefer if the Government did not sell its share in Allied Irish Banks. It would be great if AIB became a State bank. We heard a great deal in 2011 about establishing a State investment bank when the private banks let us down and we ended up bailing them out because they were useless.

The Minister referred to European Union rules. The European Commission recently stated that Ireland is not spending enough on infrastructure and noted that our investment rate was one of the lowest in Europe. In 2008, we spent 5.2% of gross domestic product, GDP, on investment in infrastructure. By 2016, the investment rate in infrastructure had declined to 1.7% and it is set to reach 2% by 2021, which is far below the European average. Other countries break EU rules when it suits them and the EU has shown flexibility towards France, Italy and Austria in the past 18 months. Given that we need money to invest in infrastructure, especially housing, is there not a case for seeking a special dispensation from the EU to use money such as the proceeds from the sale of State shares in the banks to invest in infrastructure?

Paschal Donohoe (Dublin Central, Fine Gael)
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The Minister for Finance is making a case with regard to how we can maximise capital expenditure. Under the capital plan, which we discussed earlier, the Government plans to increase capital investment in the years ahead. Capital investment increased this year by more than €300 million or 14% compared to 2016. It is planned to increase it further every year until 2021-2022 when it is expected to exceed 3.5% of national income. My experience of increasing capital investment indicates that it is important to have planning permission and agreement to allow moneys to be spent and this takes time. On the issue of using the proceeds from a potential share disposal to fund additional expenditure, this is not possible under the current rules.

Mick Wallace (Wexford, Independent)
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While I realise Rome was not built in a day, it was started and we should start the process here. The Minister argues that it takes time to secure planning permission and get all our ducks in a row but there does not appear to be much in the way of planning in place. Is there a genuine plan to spend serious money?

Paschal Donohoe (Dublin Central, Fine Gael)
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The building of Rome has started. The national capital framework is being reviewed and public consultation on the framework will commence next week. I aim to conclude the review by the end of the year and we will use it to clarify the position regarding any projects whose planning status is uncertain.