Wednesday, 17 February 1988
Dáil Eireann Debate
Mr. Howlin: asked the Minister for Finance the interest rate attaching to the loan of money from the Central Bank to finance the Government's redundancy scheme; and if he will make a statement on the matter.
Mr. MacSharry: The money which the Central Bank has agreed to provide in respect of the funding of the voluntary redundancy-early retirement scheme is by way of an advance payment of surplus income to the Exchequer and not by way of a loan. Thus the question of an interest rate attaching to the money does not arise.
As I explained to the House in answer to a question by Deputy Desmond on 9 December last, in the normal course the Exchequer receives from the Central Bank each year the surplus income earned by the bank in the previous year, less certain appropriations to the reserves of the bank. Under the arrangements now agreed with the bank the Exchequer will receive in 1988, in addition to the normal payment of the surplus income from 1987, an advance payment out of the surplus the Central Bank will earn in 1988. The additional surplus income from the Central Bank will come into the Exchequer as non-tax revenue in the normal way and has been included as such in the budgetary figures.
 The advance by the Central Bank will be repaid. Repayments will be financed out of the annual savings to the Exchequer from the redundancy programme. Therefore, the exceptional lump-sum payments financed by the Central Bank will not increase the national debt or the cost of servicing it. The repayments will take the form of four equal annual deductions by the Central Bank from the normal payments of surplus income for the years 1990 to 1993 inclusive. This repayment period was agreed by the bank so as to allow the full impact of the savings to come through to the Exchequer and to ensure that realised savings are adequate to meet repayments to the bank.
The bank also provided £8.4 million in 1987 to finance the lump-sum payments which arose last year under the scheme. Similar financing and repayment arrangements to those that I have already outlined, in respect of the 1988 Central Bank advances, will apply. This amount has also been included as non-tax revenue in the outturn for the 1987 budgetary figures.
Mr. Howlin: Will the Minister confirm whether this is a unique procedure or whether there are precedents in any previous administration? In relation to the revenue from the Central Bank which would normally go to the Exchequer on the non-tax revenue side, is the Minister referring to a three year period and will  that leave a shortfall then in the non-tax revenue available to the Exchequer, and will there be tax implications in making up that shortfall?
Mr. Noonan: (Limerick East): Do I understand the Minister to say that the payroll savings which he thinks this redundancy scheme will throw up are going to be put in a special fund out of which the advances from the Central Bank will be repaid from 1990 to 1994? I did not think there was any suggestion of this. The Minister is presenting this as if there was going to be a special fund. The Deputy is quite correct to say that the Minister is borrowing from the next administration, and whoever is in Government from 1990 to 1994 will have to find a significant amount of tax revenue to replace the profits which would normally come from the Central Bank to the Exchequer.
Mr. MacSharry: I was specific in my reply. I said that the repayment period was agreed by the bank so as to allow the full impact of the savings to come through to the Exchequer and to ensure that realised savings are adequate to meet repayments to the bank.
Mr. Howlin: Will the Minister say whether in the normal course of events this revenue would be available to the Exchequer from the non-tax side and  would be spent in the normal way? If that is the case it will not be available between those years indicated. There will be a shortfall in those years and there must be a tax implication to the Exchequer in that event. How can the Minister argue otherwise?
Mr. MacSharry: I am arguing on the basis of the savings that will accrue. I will give an example. A person on £20,000 a year last year will be on £10,000 this year because he is on pension, so that is £10,000 of a saving and so on.
Mr. McDowell: What was the Central Bank surplus for last year and what is the anticipated surplus for this year and if it is the Minister's contention that this is merely an advance payment of a surplus which would otherwise arise, to what extent was it understood that the Central Bank would in the course of 1988 have a surplus of £80 million? Is this in fact a loan by the Central Bank to the Government because the bank did not have a surplus  of that amount to pay to the Government in this financial year?
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