Breeda Moynihan-Cronin (Kerry South, Labour)
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Question 62: To ask the Minister for Finance his views of recent reports showing a significant increase in the level of personal debt, with some reports suggesting that households here are likely to become the most indebted in Europe by 2007; if he has satisfied himself that this level of debt and borrowing can be sustained; and if he will make a statement on the matter. [38998/05]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The role of Government regarding credit growth and associated indebtedness has a number of distinct dimensions. First, it is important to note that, as far as overall economic and financial stability is concerned, the relevant measure of credit encompasses both public and private sector credit and debt levels. The Minister for Finance has a key role in this regard in ensuring prudent management of the budget and overall sustainability in the public finances. In this context, Ireland's fiscal performance is among the best in the developed world, with Government indebtedness the second lowest in the euro area. Responsible budgetary policy has made a significant contribution to economic performance overall, to the maintenance of low unemployment and to the achievement of record employment levels.

Similarly, the growth of private sector credit and indebtedness needs to be assessed in an appropriate context. In evaluating the financial position of the private sector, it is too narrow an approach to consider the level of indebtedness in isolation from the asset side of the private sector's balance sheet. A high proportion of household indebtedness in Ireland relates to borrowing for house purchase which, in turn, creates an asset for the households. In the same way, borrowing by the business sector underpins high investment levels and the creation of business assets yielding future income.

Account must also be taken of private sector savings levels. The Government has been actively promoting saving by individuals in the recent past, notably through the SSIA scheme. In Ireland, comparatively high household savings rates by international standards support the sustainability of household debt overall.

As far as looking after the interests of the individual borrower and investor is concerned, the function of Government is to provide an appropriate legislative framework for regulation of the financial services sector — one that is both comprehensive and robust. I am satisfied that, on foot of the progress made over recent years, especially in establishing the financial regulator with a particular focus on the interests of the consumer, we have such a framework in place.

Within the implementation of the overall legislative framework, private sector credit growth and debt levels are, in the first instance, a matter for the Central Bank and Financial Services Authority of Ireland. This follows from its role as part of the European system of central banks and its functions, as the financial regulator, in the prudential supervision of financial institutions and the protection of the consumers of those firms.

The financial regulator has already drawn attention to the need for consumers to choose the right type of loan for their needs. The financial regulator, with its statutory consumer mandate, has developed a number of specific initiatives to help consumers make informed choices in terms of the financial products they choose, the amount of risk they take on and the cost of financial products. These initiatives have been developed through the framework of the financial regulator's "It's Your Money" campaign and have involved publishing consumer guides on credit products, fact sheets and cost surveys on personal loans, all of which are intended to assist borrowers in making the most appropriate credit decisions given their circumstances.

Finally, the Central Bank's recently published financial stability report concludes that a range of fundamental factors such as growing employment and incomes, falling inflation and low interest rates have supported the pattern of mortgage growth and associated debt levels in the economy. The report, however, emphasises the importance of responsible behaviour by both borrowers and lenders to factor into their financial decision making the prospective impact of potential changes in the future economic environment. I share the Central Bank's assessment of the importance of maintaining financial and economic stability. In that regard, for my part, I intend to maintain a responsible approach to maintaining stability in our public finances, which will ensure that the strategic direction of our economy will focus on sustainable real improvements in public services, social provision and infrastructure.