AIB sale proceeds to go to debt reduction, says Kenny

Taoiseach Enda Kenny has confirmed that the proceeds of the sale of 25 per cent of AIB will go towards paying down the State's debt and would not be used for infrastructural development.

“The paper asset shares are being swapped for a cash injection. That will go towards debt reduction, as the Minister for Finance has made clear,” Mr Kenny said.

He told Labour leader Brendan Howlin the Government was looking at alternative ways of raising other funding and he cited the European Investment Bank which had potential for long-term low-interest credit for infrastructure facilities.

But Mr Howlin said access to money was not the issue. “Money is cheap and accessible to this country,” he said. The Government should be working to change the growth-and-stability pact, which aims to curb budget deficits.

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Right now the State could not invest the proceeds in building the houses, hospitals and schools so urgently need, he said.

Financial advisers

Mr Howlin believed the majority of the Dáil was against the funds being used for debt reduction. Financial advisers working on the sale of AIB stood to gain €40 million. “No such benefit will accrue to the taxpayer.”

During Leaders’ Questions in the Dáil, Mr Howlin said there would be a small impact on the State’s debt of about 1.5 per cent but “the social good it would yield if we deployed it to meet our infrastructure deficits would be infinitely greater”.

The policy of selling off the State’s holding in AIB was based on the urgent need to reduce debt but the situation had dramatically changed since that decision was made and net debt had already decreased to 66 per cent of GDP.

The Taoiseach said, however, that the State invested had €20.8 billion in AIB and had recovered €6.6 billion through capital repayments, interest income and fees and still owned 99.9 per cent of ordinary share capital.

He said the sale of AIB would not benefit the general Government balance as it would not be counted as revenue. “There is therefore no increased capacity to spend. The proceeds from any IPO would be used to pay down debt.”