Whoever becomes the next finance minister will have three big items on their in-tray.

The first item on the agenda will be the flotation of AIB, second is the budget, and the third is the enormous challenge of Brexit.

The sale of one quarter of the Government’s stake in the bank is rapidly becoming a hot political topic.

It is likely to be the biggest flotation in Europe this year.

It is possible Minister Noonan will trigger the process by issuing an "intention to float" letter before he leaves office.

That document will set out the timetable for the flotation.

The bank is almost 100% State-owned and the policy of the Government is to extricate itself from the business of owning banks.

It currently holds 75% of Permanent TSB and 14% of Bank of Ireland.

Many economists and central bankers have deep reservations about banks being in state ownership.

They highlight political interference in banks that has occurred in other countries.

There is always the danger that public representatives could try to pressurise state-owned financial institutions to offer soft loans for a client or go easy on some customers.

The policy of getting the taxpayer’s money back from the banks is laudable.

Selling 25% of AIB will generate in the region of €3 billion in comparison to the original €20.8 billion the taxpayer paid to save the bank from going bust.

Although the State has received substantial money back from the bank, it will be a long time before it recoups the full amount.

Arguably it should take its time selling the remaining shares over the coming years to ensure it gets the best value for the taxpayer.

There has been criticism about the price the State received for assets sold by the National Asset Management Agency (NAMA).

In that case the Troika set a tight timetable for the agency to reduce its borrowings.

In hindsight, given the recovery there is no doubt that if NAMA waited longer it would have raised more funds.

In the case of AIB there is less pressure to sell the Government’s shareholding now.

Last Thursday the Labour Party succeed in getting a motion passed in the Dáil, which called on the Government to use the proceeds of the sale for spending on infrastructure instead of paying off the national debt.

There is undoubtedly a good point here.

In the midst of a homelessness crisis €3 billion could build a lot of houses.

On the other hand the national debt is very high at €200 billion.

Last year the Government spent €6.7 billion paying the interest bill on that debt.

Paying off some of the borrowings does lower the amount paid on interest.  

The Department of Finance argues it is prohibited from using the funds from the AIB flotation on one-off gains under EU spending rules.

The Irish electorate agreed to those rules in the referendum on the Fiscal Compact Treaty in 2012.

The Department points out it can, however, borrow money from the European Investment Bank for infrastructure.

It argues this debt could be kept off the State’s balance sheet if money is spent on a project that has an income stream, for example, a toll road.

There may be merit in that argument.

But the Government is likely to win little sympathy by using the money from AIB to pay off debt when there is a housing crisis.

Regardless of Government promises to rapidly fix the homelessness problem, it is clear the issue will be a long-term one.

It is safe to assume families in emergency accommodation are not too concerned about budgetary arithmetic.

The bottom line is that it will be difficult for Michael Noonan or his successor to convince people that the AIB proceeds should be used to pay off borrowings, even if it is an EU requirement.


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