Gerry Adams (Louth, Sinn Fein)
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Question 40: To ask the Minister for Finance his views that the State will have to borrow the €3.1 billion promissory note payment to Anglo Irish Bank due on March 31 2012; and if so the amount he believes the interest rate on this borrowing will be; and if he will make a statement on the matter. [34432/11]

Michael Noonan (Limerick City, Fine Gael)
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The Deputy should be aware that the funds that become available to the State from Revenue or as a result of borrowing undertaken by the Exchequer are not generally assigned to one particular area of expenditure. Rather funds available from borrowings, along with the funds sourced from revenues such as tax revenue, non-tax revenue and capital receipts, are used to fund overall expenditure. Accordingly, there was no one tranche of funding that was undertaken or assigned solely for the purpose of funding the Promissory Note payments to IBRC (Anglo Irish Bank and Irish Nationwide Building Society). Further, the draw downs of funds so far under the Joint EU/IMF Programme of Financial Support have been used for a range of different purposes including of course the general running of the day-to-day operations of the State. However, in so far as the €3.060 million Promissory Note payment constitutes part of the Exchequer deficit in 2012 it does appear that the Government will have to borrow to meet its commitments in this regard.

It is difficult to isolate precisely the exact cost of the interest payments on the borrowing undertaken to fund the Promissory Note payments. However, for illustrative purposes, on the basis of the original 5.8% blended average interest rate which applied to borrowing under the Programme, the interest costs on borrowing of €3,060 million would be just under €180 million per annum. In light of the recently agreed reduction in interest rates on funding available under the Joint EU/IMF Programme of Financial Support however, the estimated interest cost on such borrowing reduces to approximately €115 million per annum as the average Programme interest rate is currently estimated at around 3.7%.

I would caution, however, against attributing particular costs of funding to specific expenditure in Government accounting terms to assess an overall cost of providing capital to Anglo. There is a distinct difference between a commercial approach to funding projects and the approach applied in governmental terms to projects which generally have a social or "public good" focus. If, for example, the Government borrows to build a school, which costs €100 million – the cost of the school is shown as €100 m, not the cost of the school plus interest calculated in perpetuity (based on commercial criteria that the school does not directly provide any financial return to the State). If we are to compare like with like, in terms of Government expenditure, we should assess costs on that basis. The table below sets out the Department of Finance's calculation of the cost of the Promissory Note provided to IBRC for the Deputy's information.