BUDGET 2016: Sell-off of ‘valuable’ banks will go to pay debt

The Government’s ownership of Allied Irish Banks (AIB) and Permanent TSB and its 14% stake in Bank of Ireland are all “valuable” assets which will repay taxpayers the huge sums they pumped into the lenders during the crisis, Finance Minister Michael Noonan has pledged.

In recent months, Mr Noonan has indicated that the Government is preparing to sell an initial stake in AIB, the lender that the State effectively owns outright and which received over €20bn during the crisis.

Mr Noonan said yesterday that the proceeds from bank sales will go to pay the national debt.

Gross debt, which will fell to 97% of GDP at the end of this year, will fall further to match the eurozone average of around 93% of GDP in 2016, Mr Noonan projected. Debt will fall below 80% of GDP by 2021, he said.

“The proceeds from the sale of the shareholdings in these banks will be used to reduce the debt levels further and there will be a major impact on the debt level when these assets are sold and the proceeds are used for this purpose,” he told the Dáil.

“These shares are now valuable assets belonging to the taxpayer and I remain confident, based on the best advice available to me at this time, that we will recoup the investment made in these institutions.”

Between them, the banks soaked up €64bn in cash, but the banking chiefs have also said they have already repaid or will soon pay back all of the money invested in them to keep them from collapse.

Mr Noonan said that the country had put the financial crisis behind it.

He also confirmed that the €150m annual level of the levy on financial institutions would not be increased, but would be extended to 2021 to bring in “a very significant” amount of €750m to the exchequer over the period.

He described that sum as being equivalent to the cost of building the new National Children’s Hospital.

“The levy, which brings in €150m per annum, is currently calculated on the basis of Dirt payments made in 2011,” he said.

“I propose to extend the bank levy to 2021, subject to a review taking place of the methodology used to calculate the levy,” he said.