Pearse Doherty (Donegal, Sinn Fein)
Link to this: Individually | In context | Oireachtas source

69. To ask the Minister for Finance if the sale of a bank's (details supplied) shares could be used for anything other than the reduction of debt such as an instalment in the rainy day fund; and if he will make a statement on the matter. [31956/17]

Paschal Donohoe (Dublin Central, Fine Gael)
Link to this: Individually | In context | Oireachtas source

Any proceeds from a sale of shares held in a bank by the State would not result in a beneficial impact to the General Government Balance (GGB) under the European System of Accounts 2010 (ESA 2010) framework. This is due to the fact that it such transactions are classified as a 'financial transaction' whereby it is essentially the exchange of one form of asset (shares, equities, loans) for another kind (cash). Consequently, any such sale would not count as general government revenue. Accordingly, if any such proceeds are  used for general government expenditure at any time, the general government balance will worsen. 

In the first instance, the proceeds would go to the Ireland Strategic Investment Fund (ISIF).  Such proceeds can then be transferred on to the Exchequer if the Minister for Finance so directs.  If the money were to remain with the ISIF then it could be used as part of the ISIF's investment portfolio and must adhere to the ISIF’s double bottom line mandate of a commercial return and economic impact. The requirement to achieve a commercial return ensure that the investment does not impact the general government balance. 

If the proceeds are lodged to the Exchequer, then the NTMA will, in the normal course of events, take them into account in their funding plans and, all things being equal, it would result in Ireland’s Exchequer borrowing requirement reducing and, consequently, Ireland’s gross debt and debt to GDP ratio being reduced.

A lower level of debt is not only beneficial in terms of the fiscal sustainability of the State but would also result in reduced interest payments in future years. The strategy of reducing the national debt is consistent with the Government policy of repaying the borrowing previously undertaken to finance the recapitalisation of the banking sector during the financial crisis. It is my view, therefore, that because public indebtedness rose partly due to the recapitalisation of the Banks, it is appropriate to use one-off revenue from divesting the State of its banking assets to reduce debt

The rainy day fund is currently under review and further information will be provided in the Summer Economic Statement (SES) to be published shortly.  The possibility of lodging the proceeds of a sale to a rainy day fund, as suggested by the Deputy, would depend on the legislation establishing the fund.