Liability for claims against State doubles to €4bn in four years

Debt interest costs are expected to remain stable until 2025, NTMA says

The NTMA said the average interest on the Government’s debt pile will fall to a record low of 1.5 per cent this year. Photograph: Alan Betson

The NTMA said the average interest on the Government’s debt pile will fall to a record low of 1.5 per cent this year. Photograph: Alan Betson

 

The State’s outstanding liability for personal injury to clinical negligence cases has almost doubled to €4 billion since 2016, fuelled by rising number of cases and the cost of catastrophic injury claims, according to the National Treasury Management Agency (NTMA).

The figure has been partly driven by a number of mass claims relating to the CervicalCheck scandal and lack of in-cell sanitation in prisons.

The NTMA’s State Claims Agency (SCA) unit manages personal injury, property damage and clinical negligence compensation claims on behalf of the State and certain State authorities.

The number of active claims being managed by the SCA has risen 37 per cent over the past four years to 12,175, while the outstanding liability has jumped from €2.2 billion to just over €4 billion over the same period, the NTMA said in its latest annual report, published on Monday.

Clinical claims have driven the value of claims, fuelled by a landmark Court of Appeals decision in 2015 that set a precedent for higher catastrophic injury awards in an era of low investment returns, and increased life expectancy of victims.

Last year, the SCA received 3,628 new claims and resolved 3,221 cases, more than half of which were sorted without court proceedings being served.

Interest

Meanwhile, the NTMA said that the average interest on the Government’s debt pile will fall to a record low of 1.5 per cent this year, from 2 per cent in 2020.

This will result in an interest bill of €3.5 billion, less than half the €7.5 billion of interest the State was paying on borrowings at the post-crisis peak in 2014.

“Debt interest costs are expected to remain stable in the period to 2025, at below €4 billion per annum,” the NTMA said.

NTMA chief executive Conor O’Kelly told reporters on a virtual conference that while borrowing costs may rise as Government debt is refinanced in the future, the risks “might be overstated”. That’s because European Central Bank monetary policy is set to remain benign for the foreseeable future as countries recover from the Covid-19 shock, while the agency has also pushed out its debt maturities by issuing longer-term bonds in recent years, he said.

The Government estimates that public debt will rise by €35 billion – or 17 per cent – over the space of two years, to end 2021 at a level of €239 billion, as it counts the economic cost of the Covid-19 crisis.

The NTMA borrowed €24 billion on the international bond markets last year at a record-low average rate of 0.2 per cent, and is on course to raise up to €20 billion of cheap debt in 2021 to deal with the fallout from the pandemic. It has so far sold €13.3 billion of bonds this year at a weighted average yield of 0.15 per cent and maturity of 14.6 years.

On average, between 5 and 7 per cent of the State’s total debt will fall due for refinancing each year over the next decade, according to the NTMA.