Jimmy Deenihan (Kerry North, Fine Gael)
Link to this: Individually | In context

Question 89: To ask the Minister for Finance his views on the increase in 2005 in mortgage credit and in non-mortgage credit. [7957/06]

Michael D Higgins (Galway West, Labour)
Link to this: Individually | In context

Question 114: To ask the Minister for Finance his views on reports (details supplied) that Ireland is set to become the most indebted country in the eurozone, with private sector debt anticipated to amount to 200% of GNP before the end of 2006, and credit rising by 29% per year. [7893/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
Link to this: Individually | In context

I propose to take Questions Nos. 89 and 114 together.

The Deputy's question refers to a projection relating to overall private sector debt. 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, which accounts for approximately 45% of private sector indebtedness overall, 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. It therefore reflects the strong performance of the economy and confidence in Ireland's economic prospects.

The report referred to by the Deputy makes the important point that in assessing household debt, account should be taken of Ireland's demographics, savings ratio and interest rate regime. A comparative household debt index published in the report which takes account of these factors, places Ireland's household indebtedness level at 11th out of 19 developed countries. As the Deputies will be aware, the Government has been actively promoting saving by individuals in the recent past, notably through the SSIA scheme.

As far as looking after the interests of the individual borrower and the individual 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 the 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 relation to 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, cost surveys on personal loans, all of which are intended to assist borrowers in making the most appropriate credit decisions given their circumstances.

While the level of indebtedness of Irish households has been increasing, the Central Bank's most 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 does, however, emphasise 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 maintaining 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.

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.