Professor Stephen Kinsella:

I thank the Deputy. What is interesting about the three different funds, which sort of comes back to the point I was making earlier, is that one fund, the Ireland Strategic Investment Fund, ISIF, is essentially designed for investing in Irish business and improving the productive capacity of the country. By law, that has to earn a commercial return, which is great. Since the national reserve fund is invested only in Irish debt, it is an interesting model because one can reverse out of it very quickly. If one is investing in one's own debt, it is almost like treasury bills, T-Bills, in the USA, since one can just move in and out of it. If one needs to access it, it is there. If, God forbid, there was another pandemic, it could be accessed immediately, which would be good. If we started investing the national reserve fund in bonds, public equities, stocks and shares, and such simple stuff, it would simply become another sovereign wealth fund and have a different person. The upper limit on the national reserve fund is €8 billion, which we are nearly at. That is interesting. Why would we, as a growing economy, choose to limit the amount of savings that we have?

We tell most people just to save as much as they can, particularly since they know they are going to get older. It is interesting that we are explicitly saying in this paper that we know we have a problem with ageing. That is absolutely true. It was true when the National Pensions Reserve Fund was set up over 20 years ago. We could see the ageing trend. It was clear then. This is a welcome attempt to manage that. The difficulty that I have is the suggestion that that is the only problem we have to solve. I use the example of climate change because climate change in Ireland, from a fiscal perspective, essentially means paying for floods and flood barriers. It will all be capital expenditure. There could be a housing estate that is completely flooded which has no insurance because it has flooded before and the State simply has to either flatten it and move the people, which in other words means building more houses, or it will have to make those houses whole again. Either way, the State is paying out to make something happen. It makes sense that we might use this for those uncertain expenditures, because that is what it is there for.

We could have a fourth fund. We could just use this sovereign wealth fund, which we could call sovereign wealth fund A, for ageing, and create another one, called sovereign wealth fund B, for climate change. The issue is that this is not necessarily how funds should work. Funds should be pooled because then they can be compounded. Even though €90 billion seems like a lot, it is quite small, relatively speaking. It makes sense to have one big sovereign wealth fund that is fed from multiple sources and has multiple uses. It strikes me that it will be required by life. Life will happen to the Irish economy in the next 20 years. There will be some crisis and we will need to take from it, exactly as we did from the national reserve fund. We took €1.5 billion from it to cope with Covid. Things will happen. We will have to take money from this.

I referred to this in the note but I really want to emphasise that the withdrawal rule is very important. I suggest in the note that a supermajority of the Dáil is required. Pretty much everyone needs to agree that this has to come out. It cannot just be the Government of the day. When the principal is withdrawn, that kills the compounding, as we all know from basic leaving certificate accounting. We just cannot take it away. We need to be very careful not to do that and no Minister for Finance should be empowered individually to do this. In fact, it should be quite the opposite. I mentioned earlier, maybe during the break, that Norway has a rule that any primary surplus is, by law, instantly invested into the reserve. That is in order to give the compounding, which is really wanted.

To come back to the question the Deputy asked, the national reserve fund being invested almost entirely in Irish debt is just a matter of financial engineering. It could be decided to change that at any point. I see it as being a welcome thing. My only question is why it is only €8 billion.