Check Against Delivery
Counter Motion to Private Members Motion in relation to the Sale of AIB
9 May 2017
Minister of State Eoghan Murphy T.D. Closing Speech
I wish to thank the Deputies who have brought this motion for discussion this evening and for all of the contributions to this evening’s debate.
The State's shareholding in Allied Irish Banks is a valuable asset and it is the Government's policy that the State will exit this and our other banking investments over time and in a prudent manner. The taking of these important decisions should not be impacted, or influenced by, discussions around future capital expenditure as the issues are not related.
The Programme for Partnership Government provides for a 25% sale of AIB, and indeed any of our other banking investments, during 2017 and 2018. This reflects and reaffirms the Government’s commitment to maximising the recovery from these investments for the taxpayer and reducing the residual risk associated with these shareholdings. Concrete steps towards achieving those objectives have been taken over recent months, as the Minister for Finance has described, and it is the Government’s clear position that the proceeds from the sale of Bank assets will be used to pay down our national debt.
While a reduction in our debt-to-GDP ratio, and debt servicing costs is to be welcomed, I would urge caution in extrapolating from this that our elevated debt levels are no longer of concern. Notwithstanding the recent reduction in our debt-to-GDP ratio, to just over 75 per cent of GDP at the end of 2016, there are still risks. As a small open economy Ireland is sensitive to economic shocks in any region in the world, the new debt to GDP target of 45 per cent, which Minister Noonan announced last October, provides an additional buffer against risk, which would increase the capacity of future Governments to borrow to alleviate the impact of such shocks in the future.
In relation to the current low debt servicing costs, clearly we need to be cautious. These servicing costs are being partially driven from the ongoing non-standard monetary policy measures being undertaken by the ECB, which can’t be expected to continue indefinitely. Furthermore, clearly the all in debt servicing costs are in part a response to the consistently stated Government position that the proceeds from the sale of Bank assets will be used to pay down debt. This policy has been clearly articulated by Government since 2011 and has been consistently endorsed by a number of market analysts and international financial institutions, for example the IMF’s 2015 Article IV report on Ireland (which stated “it is important for the State to be actively seeking to sell down its bank shareholdings, in order to further reduce public debt and contain contingent liabilities”). Therefore a change to this position, as the Labour Party’s Motion proposes, may be detrimental to the markets’ perception of our ability to reduce our overall debt levels in the medium term.
The need for sustainable capital investment is evident to all of us in this House, and the Government intends to further increase such investment over the coming years, with funds to be allocated to key priority areas as identified by the outcome of the on-going review of the Capital Plan.
The Capital Plan "Building on Recovery", sets out a €42 billion framework to address our priority capital projects up to 2021 and is the appropriate forum for addressing these priorities. The Minister for Public Expenditure and Reform will be considering the various submissions received from the recent public consultation, along with proposals received from Government Departments with a view to making recommendations to Government in Q3 2017, to inform final decisions on revised capital allocations, to be announced in the context of Budget 2018.
Finally for those in this House who think we should retain ownership of AIB indefinitely, or indeed any other banks, I would beg to differ. It does not make sense for the State to continue to own a significant portion of the Irish banking sector in perpetuity. Reducing debt and building fiscal shock absorbers gives the State the flexibility to invest in more appropriate areas and allows the State to respond to economic downturns in a way that underpins sustainable medium-term economic growth and future growth potential.
Moreover if we’ve learned anything over the past 10 years it’s that banks are risky entities; as long as the State holds bank shares the taxpayer is exposed to that risk and competition in the Sector is restrained. This Government does not want to see a scenario where vital competition is hampered, or where taxpayers are exposed to the risks arising from the private activities of commercial organisations. Ultimately it is necessary for the State to clearly separate the Sovereign and the banking system by selling the State’s shareholdings in the banks. It would be inadvisable to link or delay the sale of bank shareholdings - as sought by the proposed Motion - until we can affect any changes in the fiscal rules, for which there is no concrete timetable.
In closing, I wish to again thank the Deputies for bringing forward their motion for discussion this evening and for their participation in this debate, which has facilitated discussion of a number of important, discrete policy areas. I would encourage the house to support the counter-motion, as proposed by the Minister for Finance.
Check Against Delivery