Simon Harris (Wicklow, Fine Gael) | Oireachtas source

As members will be aware, the State has received some €335 million from the sale of its shareholding in Aer Lingus. It is proposed that these funds will be used to establish the connectivity fund which will be a sub-portfolio of the Ireland Strategic Investment Fund, ISIF, as it is commonly known. Given that the proceeds came from the sale of the State's stake in a transport asset, the fund will be dedicated to enhancing connectivity both within and for the State. The decision to use the proceeds from the sale of Aer Lingus for productive investment in connectivity related projects will provide an opportunity to enhance our regional connectivity, improve our attractiveness and competitiveness in the tourism sector and promote investment and enhanced opportunities for growth.

In recent years the Government has created an environment of certainty conducive to growth and investment. It has established certainty around the stability of our financial system. It has established certainty around our public finances and reaffirmed certainty that Ireland is a growth-friendly environment for both foreign direct investment and local business investment. The connectivity fund will operate on a commercial basis, providing support for commercial investment projects with a connectivity theme, such as the development of ports or airports, including access to these transport assets.

It will also be open to providing support for projects that involve a wider definition of connectivity, including data connectivity, such as broadband, fibre-optic cables and interconnectors, and energy connectivity, including energy interconnectors and other energy related projects. These wider connectivity requirements are becoming increasingly important elements of our core infrastructure and will be extremely important to a more balanced regional development.

It has not been a consistent policy of the Government that proceeds from the sale of assets should be used to support and sustain economic recovery and job creation. However, as members of the committee will be aware, under EUROSTAT rules, the proceeds arising from the sale of the State's share in Aer Lingus - representing the sale of a financial asset - will have no beneficial impact on Ireland's general Government balance and, therefore, will not provide any additional capacity for Government expenditure on a general Government balance neutral basis. This is why the Government has decided to bring forward the proposal to allocate the proceeds to a special fund that will operate on a commercial basis and will, therefore, not constitute Government expenditure. However, it will facilitate the reuse of the proceeds for productive purposes in the economy on a general Government balance neutral basis. The Government proposes to transfer the funds to the ISIF for investment given that it already has the appropriate governance arrangements in place to manage them.

The investment criteria used to assess investment opportunities for the connectivity fund will be entirely consistent with the ISIF’s existing mandate, which is to invest on a commercial basis in a manner designed to support economic activity and employment in the State. The success of the connectivity fund will be measured by both investment returns and economic impact achieved. The connectivity fund, like the ISIF, will be a long-term fund. Deployment will be on a phased basis and will be driven by investment opportunities identified. Returns are likely to accrue over the medium and longer term.

Following the commencement of the relevant section of the National Treasury Management Agency (Amendment) Act 2014 on 22 December 2014, the assets of the National Pensions Reserve Fund became the assets of the ISIF. The latter recently published its first baseline economic impact report. Key figures show that as of 30 September 2015, the ISIF has committed €1.8 billion to investments aligned with its mandate. As of the same date, the market value of the capital drawn down is €909 million. Some 79 Irish companies and projects with a combined annual turnover of €472 million are benefiting from ISIF investment. As of 31 December, approximately 8,362 jobs were supported directly and indirectly by ISIF investments. The funds in which the ISIF invested have had significant engagement throughout the Irish market with 3,573 engagements and 99 completed investments since its inception. This clearly demonstrates the impact the ISIF has already had and I look forward to learning about the performance of the fund as it progresses in the medium term. Using the proceeds of the sale of the State’s shareholding for investment in the connectivity fund will result in similar economic benefits.

Under section 46 of the National Treasury Management Agency (Amendment) Act 2014, I am empowered to bring a resolution before the Houses of the Oireachtas on behalf of the Minister for Finance setting out the proposed payment to the ISIF. I commend the motion to the committee.