Robbie Gallagher (Fianna Fail)
Link to this: Individually | In context

The Minister of State is very welcome to the House. I, too, welcome Senator Pat Casey's guests, namely Pat and Barry, and the school pupils. I hope they have a very enjoyable day here.

One of the many difficult aspects of the current housing crisis is the availability of funds for investment in housing and, indeed, many other projects. Government finance has accelerated over recent years but it is simply not enough without the support of considerable finance from other sources. That there is almost €170 billion in savings on deposit in Ireland, which under the right circumstances could be better utilised to fund much-needed infrastructure projects, including those associated with energy, water, transport, sewerage and housing, all of which are vital in supporting the development of housing, surely presents an opportunity worth exploring. Surely a way must be found in order that citizens' funds on deposit, which in many cases are earning little or no interest, can be invested in major infrastructure projects. We are grappling with the housing crisis, which is marked by increasing rents, a shortage of supply and rising homelessness. Irish deposits are an untapped resource that deserves long-term planning.

Figures from the CSO this week show that, before adjusting for seasonality and inflation, Irish households saved a whopping €8.2 billion in the first three months of this year alone. It is a staggering amount of money. Compare this with the record €5 billion allocated for housing in 2024.Irish households are saving billions which could and should be channelled into a State-backed housing and infrastructural investment scheme for the long-term gain of the State. A State-backed housing investment vehicle to allow households to invest their savings in housing developments and infrastructural projects was first put forward by the Society of Chartered Surveyors Ireland some time ago. Such an initiative, similar to schemes already in operation in countries like France, would enable the Government of the day to put long-term, multi-annual plans in place which also facilitate investment in much-needed infrastructural projects and access to finance, especially for small and medium-sized developers for whom finance still remains a major barrier.

The State is by far the largest investor in Ireland’s housing delivery. However, the level of public investment is not sustainable in the long-term, and alternative funding streams need to be examined. My colleague, Barry Andrews MEP, having produced a policy paper back in 2023 on housing which investigated systems across the EU, came up with an option that he and many others recommend called Livret A, which is a French investment saving scheme. This scheme shows that excess household funding can be channelled into something positive. In France, almost all the people have a type of state-backed savings account. It is a tax-free way of saving money up to a maximum amount which is available through any bank and offers savers a more attractive interest rate than their usual account would do. This interest rate is significantly above that offered by the current bank. These savings are managed by a special state-investment vehicle such as a public bank. It helps finance projects that support public goals, including both infrastructural and social projects, but the largest single recipient is the French social housing model. Now, although in France, like in many other European countries, they are grappling with the housing shortage, funding, apparently, is not a problem. A savings fund of this nature could underpin long-term planning by providing the multi-annual funding commitments that housing projects and many other infrastructure projects require. It seems to me to make perfect sense that, where we have an untapped resource of €170 billion that makes no money whatsoever for Irish savers, that money could be channelled into much-needed funding for infrastructural projects we need to get up and running as soon as possible.

John Cummins (Waterford, Fine Gael)
Link to this: Individually | In context

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.

Robbie Gallagher (Fianna Fail)
Link to this: Individually | In context

I thank the Minister of State for his contribution. I know the area is not his own and that it is that of the Minister, Paschal Donohoe, as he alluded to. I find the response rather disappointing. While I take a point about the State savings scheme, if we have a resource of €170 billion sitting on deposit that makes very little interest for those savers, surely it is a resource the State should look at utilising. Other European countries have gone down this road, and I just named France as one, and it has proven very successful. When we have €170 billion that makes little or no return for deposit holders currently, any kind of interest rate to them is better than what they currently get, and surely it is cheap money we could use to utilise and fund much-needed infrastructural investment across the board and State.

John Cummins (Waterford, Fine Gael)
Link to this: Individually | In context

I thank the Senator for raising this matter again. As I said in my opening statement, the State already provides a mechanism to its citizens to support the Exchequer through the State savings scheme, and the Government can use that funding to invest in infrastructural projects which we all agree are much needed in our country. The remarks from the Minister for Finance point to the fact that any savings that might be used by the State in an alternative mechanism to derive a higher return for depositors ultimately would go on the Government debt and would result in the State having to repay those sums. There is a feeling that it would not add anything more than what is already done through the State savings mechanism. Nonetheless, I appreciate the comments the Senator made, which I will take back to the Minister for Finance.