Brian Hayes (Dublin South West, Fine Gael)
Link to this: Individually | In context

Question 392: To ask the Minister for Finance the amount that will be paid per annum in national debt payments in 2009 and every year up to 2013 if the State delivers a goal of debt as a percentage of national income of 3%; the way this splits into actual debt repayments and interest payments on the debt itself; the amount of interest rate payments would increase if the adjustment period was to be lengthened to 2017; and if he will make a statement on the option of increasing the repayment period. [39218/09]

Brian Lenihan Jnr (Dublin West, Fianna Fail)
Link to this: Individually | In context

The Supplementary Budget in April set out a multi-annual consolidation plan to restore stability to the public finances. The table below sets out the 2008 outturn for debt servicing costs and the projections for 2009-2013 as contained in the Supplementary Budget. On the basis of the Supplementary Budget estimates, it is forecast that about one-fifth of our tax revenue would be required to service the national debt by 2013. It is important to note that servicing of the debt has a first call on the State's resources and as it rises the amount available for other aspects of public services is reduced.

Supplementary Budget forecast Debt Servicing Costs 2009-2013 & Outturn 2008:

Rounding may affect totals *The sinking fund provision is a transfer from the current account of the Exchequer to the capital account of the Exchequer – it has no impact on the overall Exchequer balance - and represents an element of paying off the principal.

The National Treasury Management Agency (NTMA) have advised that, as is usual, the above estimates for debt servicing costs were prepared on the basis of the prevailing market conditions for Irish Government bonds at the time of the Supplementary Budget. As with other budgetary estimates, these forecasts will be reviewed as part of the preparatory process in respect of Budget 2010, taking account of budgetary decisions.

The overall national debt level will be increasing over the forecast period. At end-2008 the national debt was some €50 billion and, by end-2009 the national debt is projected to rise to approximately €76 billion. If no action was taken to stabilise the public finances it is forecast that this would result in Exchequer deficits of approximately €25 billion a year. On this basis it is forecast that the national debt level would rise to about €175 billion in 2013. Delaying correction beyond 2013 means that the annual deficit would continue to rise, and could result in a national debt level of €275 billion by end-2017.

In considering the implications of rising national debt levels we must also take account of the costs that are associated with servicing this debt. Debt servicing costs have a first call on resources; therefore an increase in these costs would have a significant impact on the level of resources that would be available to meet other needs. Delaying adjustment would also impact on medium and long-term growth and much harder decisions would be required in the future to stabilise the public finances. In this regard, it is estimated that in the absence of corrective adjustments, and based on technical estimates taking into account current debt dynamics it is considered likely that debt servicing costs could be in the region of between a third and two-fifths of tax revenue by 2017.

What is clear is that allowing the deficit to rise and adding further to our growing debt levels is not a sensible option. Therefore we must take action now to stabilise the deficit and Budget 2010 will be framed in this context.