Economy

EU holds the purse strings on AIB share sale windfall

Cantillon: Commission recommendations won’t please Opposition – or squeezed middle

Minister for Finance Michael Noonan is expected to press the button on an initial public offering of AIB next week. The share sale could net the State up to €3 billion, sparking a debate as to how the funds might be used. Photograph: Paul McErlane/Reuters

Tue May 23 2017 - 05:54

Opposition hopes that the Government might be able to use the proceeds from the likely AIB share sale in the coming weeks were dealt a blow on Monday by the European Commission.

“In view of Ireland’s current cyclical conditions and the heightened external risks, the use of any windfall gains to further reduce the general government debt ratio would be prudent,” the commission said in its latest round of country-specific recommendations on Ireland.

Minister for Finance Michael Noonan is expected to press the button on an initial public offering of AIB next week. The share sale could net the State up to €3 billion, sparking a debate as to how the funds might be used.

National debt

The Government has previously signalled that the money would be used to repay our national debt. This is not an unreasonable position given that the bailout of the financial sector cost €64 billion and was a key reason why our national debt ballooned over the past decade to stand at a gross €200.6 billion at the end of 2016.

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Fianna Fáil, Sinn Féin and the Labour Party have all called for the Government to renegotiate the ceiling on public spending with the EU, to allow for the AIB funds to be used for infrastructure projects, including new house building.

Tax take

The commission helpfully suggested some measures that could broaden the annual tax take for the exchequer. It called for more efficiencies to be derived from the health sector and said differences in the taxation of diesel and petrol for road users was “environmentally unjustified”.

The commission also described the property tax as a “growth-friendly” revenue source and suggested a gradual indexation of the tax when the current pricing mechanism expires in 2019.

This wouldn’t sit well with the so-called squeezed middle. Not that this will worry Noonan for too much longer, given that he will return to the backbenches when a new taoiseach is elected.

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