Mr. Michael Tutty:

The prudence fund was designed to take out excess corporation tax. We have had significant overruns on corporation tax every year and we keep spending it. We we should not be spending that revenue but instead putting it away into the prudence fund during the year. That should then be put into the rainy day fund, or whatever its official name is, at the end of the year. The prudence fund would be on top of the rainy day fund, which we do not see as being adequate to fund significant countercyclical activity. The Minister does not even see it as countercyclical but we argue that it should be countercyclical. The rainy day fund has very little, if anything, in it as yet. I am not sure if €500 million has officially gone into it. Our view is that it is necessary to build up a significant amount of money in the fund if it is going to be useful as a countercyclical measure. We do not know what is coming down the road next year. In anticipation of the possibility of Brexit happening, and a resultant slowdown here, we certainly would not recommend raiding the rainy day fund at this stage.

We have been stating in recent years that the Government should be running surpluses now so that when the bad times come we have something built up. We have nothing built up as yet because the surpluses were not realised. It is a bit difficult, therefore, for us to state that we must have countercyclical measures. We have arrived at the situation that we were warning we should not be arriving at. I refer to when we might need countercyclical measures, but we have not done the right things in the good times to allow that to happen. We spent the money in the good times, we have not run surpluses and now we are faced with a possible downturn. The immediate question then is whether we can spend more money to avoid the downturn. We are now back where we have been in the past. It is to be hoped that, when we get through any slowdown that might occur, people will realise that what IFAC has been saying is right and we should build things up in the good times so that we will have money in the bad times.

We find it difficult at this stage to say we should raid the rainy day fund or use any slack or borrowing we can get because we have not done the right thing before now. We are saying we should let the automatic stabilisers work. We are not saying that if there is a slowdown, we have to start raising taxes and reducing expenditure immediately. We will let the stabilisers work. We certainly do not see scope at this stage to start spending a large amount of money. If, in 12 months' time, we see that the effects of Brexit are more significant than we expect, perhaps we will start looking at that. At the moment, as Mr. Coffey said, our projection is that there will be a slowdown in the economy rather than that the economy will go into reverse.