Thursday 27 July 2017

Government warned of debt error a year ago

about the error by the NTMA, the agency which manages our national debt.

The NTMA informed the department last year that it was now borrowing money on behalf of another agency -- the Housing Finance Agency -- and, as a result, the loans should be only counted once, on the NTMA's books.

However, the repeated warnings were not heeded. The department also counted these loans on the Housing Finance Agency's books, creating a classic double-counting mistake.

It has also emerged that the department and the Central Statistics Office (CSO) only decided to rectify the error in recent days after fresh contact was made by the NTMA.

Ireland's government debt now falls from €148bn to €144.4bn. While the overall debt is falling, this does not change the arithmetic for Budget 2012, which is about tackling the annual budget deficit.

The NTMA and the Housing Finance Agency were quick yesterday to deflect any blame for the error and, by implication, blame by the department.

But the department was unable to say why earlier warnings about the issue from the NTMA were not acted upon.

It did point out, however, that last year saw a change in the relationship between the NTMA and the Housing Finance Agency.

"The Department of Finance is responsible for the calculation of general government debt. The NTMA raised the issue (of potential double counting) with the Department of Finance on a number of occasions from as far back as autumn 2010,'' the NTMA said in a statement provided to the Irish Independent.

Shock

For its part, the chief executive of the Housing Finance Agency, Ian D'Alton, said his organisation sent its annual accounts to the Department of Finance in the normal way and the error seemed to occur at the point where government debt was "collated''.

This is done by the Department of Finance.

The error emerged last Friday in the department and it is understood there was huge shock among officials.

Correct and fresh figures will be issued this Friday when the department publishes the medium-term fiscal statement.

"All this does is reduce your debt, not your deficit, which is the key thing," a spokesman for the department said.

The spokesman said there would still be a requirement to reduce the deficit in the public finances to 8.6pc of Gross Domestic Product (GDP)-- which is expected to require at least €3.6bn of cutbacks and taxation increases. The medium-term fiscal statement will be highly anticipated because it will contain a new estimate for what GDP will be in 2012 and onwards.

The spokesman denied that the accounting error had led to the Government borrowing more money and incurring more interest rate costs.

"All this is doing is reflecting what was borrowed to fund the Housing Finance Agency. It doesn't mean there was extra borrowed -- it's how you account for it," he said.

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Irish Independent

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