Gerry Horkan (Fianna Fail) | Oireachtas source

I thank the Minister for his very comprehensive statement. As it is likely though not certain that this may be the last time he addresses Members of this House as Minister for Finance, I wish him the very best in his future endeavours and a long and happy time when his period as Minister for Finance ends. I thank him for all his efforts on behalf of the State.

This debate concerns statements on the proposed sale of AIB shares, not the motion that was originally alluded to by the Labour Party and, therefore, we are discussing the former, not the latter. There are issues in the motion which I would address were it up for discussion. However, I will confine my remarks to the topic of statements on the proposed sale of AIB shares. I welcome the opportunity to speak on this topic.

Fianna Fáil supports the gradual and responsible return of AIB to the private sector and agrees with the proposed sale of 25% of the State's shareholding of AIB. The party's position is that, provided market conditions are sufficient to secure the best return for the taxpayer, the sale would be a positive development. The Government has access to much expert advice in that regard to which we do not. As mentioned by the Minister, the Government has decided that now is an optimal time for the sale following professional advice from Rothschild and others. AIB returned to profitability in 2014 and has returned €6.6 billion of the €20.8 billion that the State put into it during the crisis. At the time that AIB was taken into State ownership, there was no European banking union or Single Resolution Mechanism in place to restructure European banks. It must also be recognised both here and in Europe that the bank bailout in Ireland saved other countries from bailing out their banks.

To give some background detail, AIB was nationalised on 23 December 2010 in order to safeguard the financial system in Ireland and Europe. The State, as I said, has put €20.8 billion into AIB and €64 billion into the banks in general to date in order to stabilise the financial system. As a further measure, AIB and the Educational Building Society, EBS, were merged on 26 May 2011. As part of the merger, EBS was de-mutualised and turned into a regular limited company. EBS continues to operate under that name and the ownership of AIB. AIB officials have acknowledged that the EBS brand is now probably an even more valuable brand in its own right. AIB returned to profitability in 2014. In 2015, it redeemed preference shares in the amount of €1.7 billion and in 2016, AIB redeemed loan notes issued to it in 2011 by the State. This involved paying €1.6 billion together with €160 million in interest, totalling €1.76 billion. AIB's financial position has been steadily improving as it is aiming to simplify its business model and this year it announced a dividend for the first time since 2008, which totalled €250 million.

The Minister for Finance is proceeding with the sale of 25% of AIB based, as he said, on the advice he has been given. It is difficult to ascertain at this point how the 25% share will be valued by the market. It is likely to be worth in the region of €2 billion to €3 billion. That is a guesstimate. A difference of €1 billion is a great deal of money and we will not know the market value until the IPO has commenced and ultimately completed. Fianna Fáil believes that conditions seem correct for proceeding with the IPO. The instability that engulfed European banks last year does not seem to be as evident or pronounced this year. In addition, in the context of Brexit and other uncertainties surrounding the euro, now may be a better time to sell than some time in the future. Again, one never knows what may happen. Many companies undergo IPOs. Some wish they had not at the time they did while some wish they had. It is an uncertain process.

The AIB shares are currently held by the NTMA and the Ireland Strategic Investment Fund. Under European fiscal rules, this will be deemed a financial transaction and the assets converted to cash. As it is deemed to be a financial transaction, the revenue received from the sale is not recognised in the general Government balance. Therefore, if we were to use the proceeds to invest in capital expenditure, we would most likely be breaking the rules. Our expenditure would go up but revenue would not. The Minister has indicated his intention to use the proceeds to pay down the national debt. There will always be competing objectives in terms of debt if we are selling as part of a gradual and timely unwind of AIB shares to return the company from 99.8% State control back to the private sector.We are never actively sure when is the best time to do so but over time I think it is the best course of action.

The EU Stability and Growth Pact and the fiscal rules are vital for ensuring fiscal stability and responsibility across the eurozone. While we would like to see the rules changed, we do not believe the sale should be delayed due to those rules.

In an uncertain world, we do not know what the financial markets will be like in the future. Ireland faces a major capital investment deficit in part due to the money that went into all of the various banks, including AIB. Our capital expenditure has been inadequate, as we alluded to yesterday when we discussed the mid-term capital review. Many of us understand that the inadequacy is due to a lack of resources. We have major challenges, including a rapidly growing population, with very significant projections up to 2040, as well as Brexit.

The Fianna Fáil position is clear: provided that the professional assessment is that the conditions are right for the IPO to proceed then it should proceed. We will support the initiative for all of the reasons I have outlined. We believe the Government has lacked the level of ambition we would like to see when it comes to capital funding. We have called on the Government to seek support from the European Commission to see if it can use some or all of the proceeds from the sale of AIB for capital expenditure.

To conclude, we will only know with the benefit of hindsight how good or otherwise this decision has been. The Minister has taken very significant professional advice and we have to rely on that kind of advice. We just hope, for all of our sakes, for the state of the country and for the future of this island that we get the best return for this money. We would prefer if the money was used for capital funding but I appreciate the rules do not allow us to do so at the moment.