Mary Butler (Waterford, Fianna Fail)
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118. To ask the Minister for Public Expenditure and Reform the reason his Department has not given effect to the borrowing framework contained in the Institutes of Technology Act 2006. [37919/16]

Paschal Donohoe (Dublin Central, Fine Gael)
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The Institutes of Technology Act 2006 contains a provision for Institutes of Technology to borrow within a framework agreed with the Higher Education Authority, following consultation with the Minister for Education and Skills and the Minister for Public Expenditure and Reform.

A key consideration in relation to the scope for independent borrowing by institutions in the higher education sector is whether the subsequent expenditure funded by the borrowings is classified as falling within the General Government sector or not, and therefore whether it impacts on the General Government Balance.  There is a detailed framework in place under EU law, implemented at national level by the CSO, for classifying what entities in the economy are part of or outside of the General Government sector and how their expenditure impacts on the General Government Balance.  Eurostat are the ultimate arbiters of decision-making in this area.  

Universities have traditionally enjoyed autonomous borrowing powers on account of their classification as outside General Government.  As such, borrowings by universities are 'off-balance sheet' and do not impact on the level of General Government Debt, nor does their expenditure impact on the General Government Balance.  This outside General Government status reflects a combination of the historical autonomy that such institutions have benefitted from and their capacity to generate own income, which has contributed to the universities meeting the 'market test' for their borrowing and expenditure to be 'off-balance sheet' under Eurostat rules.

These considerations do not apply in the case of the Institutes of Technology (IOTS).  IOTs, unlike universities, are classified as inside General Government. Consequently, expenditure by the IOTs impacts on the General Government Balance and borrowing by the IOTs contribute to the General Government Debt.  Essentially, as borrowings are spent, they impact on the General Government Balance in the same way as applies with direct Exchequer funding of the IOTs.

The Department of Education raised the issue of a borrowing framework for IOTs in the context of the provision of student accommodation. Officials in my Department and in the Department of Education and Skills are currently exploring options for a borrowing framework or equivalent arrangement that would facilitate investment in student accommodation for IOTs but would not impact on the General Government balance.