John Cummins (Waterford, Fine Gael)

I thank Senator Gallagher for raising this issue today, which I am taking on behalf of the Minister for Finance, Paschal Donohoe, who sends his apologies to the House.

As I understand it, the proposal is to utilise individual savings in financial institutions to fund infrastructure provision in the State and that this could result in higher returns for depositors than are currently paid by financial institutions. As regards the proposal, I would say any intention to use existing deposits for the purposes proposed would mean the borrowing of such funds by the State from depositors. Such borrowing would ultimately have to be repaid by the State. There is no obvious financial model whereby borrowings from individual depositors in banks to fund infrastructure such as water or sewerage projects are repaid other than from existing State revenues. Borrowing, therefore, would add to the existing level of debt incurred by the State and increase its financial obligations in repaying such borrowing. Given the economy operates at nearly full capacity, increasing borrowing and expenditure may lead to poor value outcomes in the development of infrastructure, given that it may create upward pressure on costs.

It is also not obvious as to the basis for any premium that could arise from such borrowing. At best, such borrowing could only be appropriate for the State at current rates that apply, for example, to the State savings or indeed the cost of debt funding. Otherwise, the State would fund borrowing at a higher cost than at present, either via normal borrowing mechanisms or State savings. There are also concerns about adding to the overall debt of the State.

I refer the Senator to Ireland’s State savings products, which are managed through the National Treasury Management Agency. Crucially, and directly relevant to the matter raised by the Senator today, all savings invested in this way are available to the Exchequer to fund Government expenditure, including the delivery of major Irish public infrastructure projects. They are borrowings by the State from its citizens to form part of the national debt of Ireland. Repayment of all Ireland’s State savings money is a direct, unconditional obligation of the Irish Government.

Ireland possesses a high savings deposit rate which reflects the success of our economy for our citizens in recent years. As the Senator may be aware, at EU level, the European Commission recently launched the savings and investment union strategy, which includes measures to advance the capital markets union project. The savings and investment union seeks to increase investment in the economy and promote EU companies' competitiveness through various measures, such as supporting the development of national capital markets, revitalising and securitisation of the market, increasing retail investor participation in capital markets and promoting SME investment. Ireland is a strong supporter of the SIU initiative and is actively involved in its development, including measures specifically designed to promote more retail investment across the Union.