Use proceeds of AIB sale to pay off National Debt and provide Pensions – Hayes
Brian Hayes MEP today said that the proceeds from the sale or partial sale of AIB should be used for Ireland’s long-term financing and pension needs.
He said: “The sale of AIB cannot be a green light for the government to ramp up current expenditure; the temptation to splurge this cash on short-term expenditure needs must be resisted at all costs. The original money that saved the banks costing the Irish taxpayers €64 billion came from ‘piggy bank money’ that was saved through the National Pension Reserve Fund (NPRF).”
Mr Hayes said that “the two main priorities for these funds should be on reducing our national debt, putting cash aside for future pension needs and by extension building up a cash buffer in case of future economic shocks. Anything else would be irresponsible and not good for our international reputation.
“We must not forget that €16 billion or 80% of the €20.7 billion that the State injected into AIB came from the National Pension Reserve Fund. That money should be returned.
“The funds are now owed to Ireland’s Strategic Investment Fund (successor to NPRF) who has a different mandate to the NPRF with more of a focus on investment and employment. But there is a pension time bomb coming down the tracks that we need to face up to. We currently have one pensioner for every four workers; by 2060 there will be one pensioner for every two workers according to CSO projections. We need to start preparing for the huge impact pension provision will have on the State’s long-term financing needs. Putting money aside now makes sense.
“Given the result of the first round of the French presidential elections, market conditions are now looking favourable for the AIB stock market flotation. A partial sale of the government’s stake in the bank before summer would be good news for Irish taxpayers.
“Irish politics isn’t good at long-term thinking. However, it is key that we have a long-term vision for the proceeds of the AIB sale. And what is important is getting our public finances into a strong position.
“We can’t achieve a strong public finance position without getting our national debt down. It’s still too high and its cost remains a worrying and persistent issue.
“If we do not reduce our national debt to manageable levels, it will cripple us for decades to come. While the good news is that we have reduced our debt to GDP ratio from 123% in 2013 to the current level of 75.4%, the size of our debt stockpile is way too large. The general government debt is currently over €200 billion.
“Additionally, we have to repay about €45 billion worth of debt between 2018 and 2020. We need to get our public finances into a better position before these sudden debt repayments hit.
“The Department of Finance recently made it a priority to get our debt to GDP ratio down to 45% by the mid-2020s. This is the correct course of action; we do not want to remain a heavily indebted country. The EU fiscal rules state that debt to GDP ratio should be lower than 60% but we should look to go lower than this.”