Former minister for finance Paschal Donohoe vetoed proposals by the Department of Defence that Ireland should look at borrowing up to €100 million for military equipment under an EU initiative to provide long-term loans.
Official Government documents show the department – then run by Tánaiste Simon Harris – believed in late August there was agreement at ministerial adviser level for Ireland to formally express an interest in taking out such loans under an EU programme known as Security Action for Europe (Safe).
However, the Department of Finance said its minister, Mr Donohoe, had decided Ireland should not apply for loans under the Safe initiative.
The Department of Defence in its business case to Government had suggested that any such loans, which would be repaid over a period of up to 45 years, could be used to replace the fleet of turbo prop trainer aircraft operated by the Air Corps or to provide new light tactical armoured vehicles for the Army.
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The Department of Public Expenditure maintained it had been told by the Department of Defence several months earlier that Ireland would use only provisions in the EU Safe scheme to buy equipment in co-operation with other member States rather than avail of loans under the scheme.
The Department of Defence’s Safe loan business case stated that although it may be true Ireland could achieve “marginally more advantageous interest rates on the open market, the significant ancillary benefits that Safe loans can provide more than outweigh this benefit”.
“In the context of defence, much of the expenditure on capability is reflected in one very significant upfront payment.”
“One of the significant advantages of the Safe loan facility is that it would allow for the delivery into service of the required capability via the utilisation of long-term financing for the duration of its life cycle, while also not diverting funds from other key priority policy areas for Government.”
The issue over whether to access the EU Safe loans came a number of months after a dispute between the Department of Defence and the Department of Public Expenditure over military spending under the revised National Development Plan.
The new Minister for Defence, Helen McEntee, this week formally launched the €1.7 billion capital plan for defence, which is to run between 2026 and 2030. However, The Irish Times reported in August Mr Harris had sought funding of €3.4 billion for capital defence projects.
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He proposed more than doubling the defence capital budget next year to €450 million and suggested this should rise to €850 million for 2029 and 2030. However, the Department of Public Expenditure did not want capital expenditure on defence to go beyond about €230 million each year.
Official Government files show on May 29th the secretary general of the Department of the Taoiseach wrote to his counterpart in the Department of Public Expenditure, highlighting that a step change in funding for national security was urgently required.
The defence sector will receive about €300 million in capital funding next year under the Minister’s new plan. This will rise to €360 million by 2029.
The Minister told the Cabinet last week the new plan would be subject to an annual review and potentially could change depending on the security environment.
