Joan Burton (Dublin West, Labour)
Link to this: Individually | In context | Oireachtas source

63. To ask the Minister for Finance when he expects the partial sale of a bank (details supplied) to be realised; if he will use the funds generated from the sale towards essential capital investment in the event of a shortage of capital investment here; and if he will make a statement on the matter. [23595/17]

Michael Noonan (Limerick City, Fine Gael)
Link to this: Individually | In context | Oireachtas source

The Program for a Partnership Government allows for the sale of not more than 25% of any bank before the end of 2018 (plus any over-allotment option). I have not yet made any decision to proceed with a sale of shares in AIB. In order to proceed with an IPO I would need to be satisfied that the market is prepared to put a fair and reasonable value on the banks equity, bearing in mind the bank's current performance, its future prospects and the outlook for the Irish economy. I would do so on the advice of my officials in my department and our financial advisors.

As I have outlined previously, the sale of financial assets, such as bank shares are transactions which do not result in a beneficial impact to the General Government Balance (GGB) under EUROSTAT rules. This is due to the fact that this type of disposal is classified as a financial transaction whereby it is essentially the exchange of one form of asset (such as shares, equities, loans) for another kind (cash). Consequently, the sale of any shareholding in AIB would not count as general government revenue. Therefore, there would not be increased capacity to spend on capital projects as a result of the sale of shares in AIB without affecting the general government balance.

While not improving the deficit, cash proceeds arising from any sale of shares would result in a reduced requirement for Exchequer borrowing which ultimately results in lower debt. A lower debt level is not only beneficial in terms of the fiscal sustainability of the State but would also lead to reduced interest payments in future years.

As public indebtedness rose partly due to the recapitalisation of the Banks, the appropriate way of treating one-off revenue from divesting the State of its banking assets is to use these proceeds towards debt reduction. These disposals would also help contain contingent liabilities for the State.

As a further comment, though unrelated to banking policy, I have previously acknowledged the need for increased public investment.  The current Capital Plan sets a baseline from which this Government intends to increase investment in critical infrastructure, and in areas such as housing and health, as the Deputy has identified, into the future. As outlined in the 2017 Estimates, gross voted capital expenditure will increase to €4.5 billion in 2017. This represents an increase of almost €400 million in comparison to the 2016 outturn. By 2021 it is envisaged that Gross Voted Capital Expenditure will reach €7.3 billion, an increase of over 100 per cent in comparison to its level in 2014. Based on my Department’s GNP forecasts, Ireland's Exchequer public investment will reach 2.7% of GNP by 2021. These increases in investment over the coming years will be allocated to identified priorities on the basis of the outcome of the review of the Capital Plan currently underway.