Tommy Broughan (Dublin Bay North, Independent) | Oireachtas source

I am grateful for the opportunity to comment on the Bill and on the rainy-day fund. At the Committee on Budgetary Oversight last year, I strongly opposed the establishment of this fund at this very precarious and dangerous time for our economy and country. I felt then and still believe that all available current and capital resources should be allocated to addressing the serious needs of our people in health, housing, education, public transport and disability services and in the restoration of public sector salaries to pre-crash levels. Like many Deputies, I was out on the picket lines this morning with our nurses. Resources should also be allocated to the ending of all discrimination against younger public servants, particularly in health and education.

We celebrated the 100th anniversary of Dáil Éireann last week. One of the great scandals of our history was the decimation of the National Pensions Reserve Fund established by a former Minister for Finance, Charlie McCreevy, in 2001 following his crass decision to privatise Eircom and the national telecoms network. The growth of that fund from 2001 created a national wealth fund for the Irish people but the appalling decision on the part of Fianna Fáil and the Greens - subsequently and unfortunately reinforced by Fine Gael and the Labour Party - to splurge much of money in the fund on the blanket bank guarantee, which I strongly opposed and voted against, robbed our people of their national wealth. That decision remains one of the most disgraceful in the history of Dáil Éireann.

We know from recently published statistics that the National Treasury Management Agency, NTMA, has cash or near-cash reserves on hand of €14 billion or €15 billion. The Minister of State might provide an update on that figure. The former pensions fund has morphed into two funds, one of which is the Ireland Strategic Investment Fund, with assets of €8.5 million, committed investments of more than €3 billion and €5 billion invested in global equities and other assets for our people. The other fund managed by NTMA holds the State's shareholdings in the major pillar banks and it was recently estimated that its value was about €10.5 billion. The fund holding the State's pillar bank investments was originally earmarked to pay down our huge national debt, which, as the Minister, Deputy Donohoe, reminded us last week at the Committee on Budgetary Oversight, still stands at what he called the "highly elevated" figure of 105% of GNI* versus a comparable 87% level of debt across the euro area.

There are several other possible windfall assets for the national Exchequer, including the Apple escrow corporation tax account, which contains an estimated €13 billion. The Minister of State might also provide an update on that account and any current legal actions at EU level. Given that the national funds administered by the NTMA total €19 billion or €20 billion and that the agency has cash holdings of €15 billion, the question must be strongly put to the Minister of State as to why we need to salt away a vital €500 million a year from current revenues and raid the Ireland Strategic Investment Fund to the tune of €2 billion, which could be better used for much-needed productive capital investment in the economy. Of course, it is also planned that €500 million will be transferred to the fund from the Exchequer in each year to 2022.

When Deputy Varadkar was elected Taoiseach, he told The Sunday Business Postof his intention to scrap the rainy-day fund. The newspaper reported at that time - 18 months ago - that the Taoiseach stated that he "believes it does not make sense to salt away €2.5 billion in a rainy-day fund when the money is urgently required for new infrastructure such as public transport projects, schools, hospitals and roads". That sentence sums up my view and the view of many in the Opposition - the Taoiseach did not think that was an appropriate time to have a rainy-day fund. It is still is not the appropriate time. In fact, it is even less appropriate in these critical days with Brexit approaching.

The current rainy-day fund proposal, of course, originated with the former Minister for Finance, Deputy Noonan, in the 2016 summer economic statement, when he indicated an intention to put away €1 billion a year from 2019 onwards.

Of course, in the previous year, 2015, Deputy Michael McGrath of Fianna Fáil had also put forward the idea of a new fund similar to the National Pensions Reserve Fund to hold windfall gains and other unexpected revenues. It is striking that the two parties which have determined Ireland's economic fate since 2008, as they trooped into the Government lobbies on all the major economic decisions, which blew away the pensions reserve fund and lumbered us with a massive debt are now as always ad idemon this current regressive fiscal proposal.

I would generally favour a sovereign wealth fund if the needs of people in housing, health and education were being addressed in a proactive and timely manner and the national debt was reduced to the 55% debt-to-GDP target. What happened to that target? The Minister for Finance appears to have forgotten that it was one of his targets for the national debt. A sovereign wealth fund could be utilised as a fiscal buffer and fulfil countercyclical and contingency functions. As I mentioned, however, the funds administered by the National Treasury Management Agency, NTMA, fulfil some of those functions already. We are also familiar with the eurozone's €500 billion bailout fund, the stabilization reserve fund, and the efforts to create a European monetary fund.

In the context of global wealth funds, we are all aware of Norway's famous sovereign wealth fund which was established in 1990 and passed the $1 trillion value mark in 2017 from the surplus revenues of the Norwegian petroleum sector. China's sovereign wealth funds are also vast, as are those of the oil producing states such as the United Arab Emirates, UAE, Kuwait and Saudi Arabia. A number of countries also have funds earmarked for future pension, social and infrastructure needs such as New Zealand, South Korea, Australia, Iran, Russian, Turkey and Kazakhstan. A total of 48 of the American states also maintain rainy day funds but all 50 states have major restrictions against running a deficit. There is also usually some level of restriction on those states to access their rainy day fund, whose chief purpose is to act as a budget stabilisation fund. A number of countries maintain contingency funds as part of their annual budgetary process. The UK, for example, maintains a "contingencies fund" of 2% of expenditure to meet temporary cash needs of Departments. Spain and France have similar precautionary reserves.

It is unclear to me in the short Bill before us whether the key purpose of the rainy day fund is to be a contingency fund for unforeseen natural or other events in the State or whether its primary function is to act as a countercyclical economic tool, especially to impress our colleagues in the European institutions. The amendment to the NTMA Act of 2014 in section 7 includes funding for occurrences "in the State of exceptional circumstances", the prevention of the "potential damage to the financial system in the State" and to support "major structural reforms which have direct long-term positive budgetary effects". The rainy day fund seems to be intended to cover both the objectives of acting as a contingency and also as a countercyclical tool. Section 3 caps the fund at €8 billion and the Minister is given total control over the management and accounts of the fund in sections 4 and 5. The investment criteria for the fund, which will be held in cash or near-cash instruments, are set out in section 8. Unlike rainy day funds in some other jurisdictions, drawdowns from the fund in section 9 can be made following a simple majority resolution in the Dáil. In some parliaments there must be a two thirds majority so it must be the bulk of the parliament. As he outlined when introducing the Bill, the Minister has emergency powers for drawdowns under section 9 in cases of extreme urgency.

In its working paper No. 6 of May 2018, Designing a Rainy Day Fund to Work within the EU Fiscal Rules, Eddie Casey of the Irish Fiscal Advisory Council, IFAC, and his colleagues warned that "financing potential fiscal stimulus in future downturns by setting aside savings in good times may not be adequately facilitated in the EU Fiscal Rules Framework". I ask the Minister to address the point. The paper goes on to propose an enhanced policy toolkit available to member states when seeking to strengthen appropriately countercyclical fiscal policy. What steps is the Minister therefore taking to ensure further support for the operation of the rainy day fund at EU level? The same paper argues that contribution and withdrawal conditions should be clearly specified. Does the legislation before us address that criteria in sufficient detail in relation to future drawdowns from the fund?

Briefing paper No. 3 of 2017 was produced by the Parliamentary Budget Office, PBO. We had a brief meeting with the PBO today. I welcome the fact that the office has recently been established on a statutory basis. The paper, Rainy Day Fund, clearly envisaged a rainy day fund being used to address only specific events or shocks rather than as a countercyclical policy tool, although it does consider the fund being used for countercyclical purposes in the event of a severe economic downturn. The PBO is critical of the consultation paper on a rainy day fund produced by the Department of Finance because that paper uses inconsistent terminology including the use of "rainy day fund" and "contingency fund" as interchangeable terms when that is not the case. The PBO also asks that the criteria for drawing down the fund "should be outlined in terms of the events it is to address and that these should be clearly set out in legislation". The criteria for withdrawals outlined in section 9 hardly address that requirement, as laid down by the PBO.

The PBO also warns that if the fund is to be deployed as a countercyclical stabilisation policy tool, it must remain compliant with the Stability and Growth Pact. That is the same point that was made by IFAC. The PBO also advises that any budgetary contingency reserve be made part of Government expenditure ceilings and a Vote in the Estimates process and that expenditure from the contingency reserve would be made by way of Supplementary Estimate. The Minister was not very clear on that point when introducing the Bill.

The PBO makes the important point that with the rainy day fund, the State is forgoing a significant amount of money in the medium term and that there may be a big opportunity cost to the State by saving rather than investing the funds and developing the infrastructure we need in public transport, for example, and in health, by just salting the money away and trying to preserve its value. It is not opportune for us to do it at this time.

The PBO concludes that fiscal policies to pay down debt and mitigate risks to the population from natural disasters may have a better cost-benefit outcome than simply establishing a rainy day fund. In the current uncertain circumstances I believe the PBO's critique of the rainy day fund is very well founded.

I note that the consultation paper on a rainy day fund produced by the Department of Finance in October 2017, to which I referred several times, concludes that a rainy day fund is in line with what it calls "best international practice" and that the creation of a contingency reserve-rainy day fund "should be market-positive for Ireland". However, the paper also warns that "remitting funds to any rainy day fund will result in gross public indebtedness being higher than would otherwise be the case" and that the interaction between the rainy day fund and NTMA cash balances must be considered. I wish to focus on the role of the NTMA in the fund. I was pleased to hear the Minister say the NTMA will manage the fund. I welcome that news based on the track record of the NTMA in recent decades. One can at least hope those funds will be in reasonably safe hands and also accountable to us. I am pleased that point was clarified given that it was not clear in the Bill.

I support the creation of a national wealth fund when the current profound needs of our people in health, housing and other critical sectors have been addressed by the Government and when expenditure on the national debt is further reduced. When talking to nurses this morning it came home to us that we should not have a situation where nursing staff, the 40,000 brilliant workers in hospitals and health centres, had to take the action they did today. The matter should be resolved. I tried to establish the facts about the funding necessary to meet the needs of nurses but it is very difficult to get the information from either the Department of Finance or the Department of Health. There are crucial needs in the health service. Approximately 75 extra hospital beds that were promised in the budget should have been opened by now but they are still not open with all the ancillary staff provided. We must address that and other issues first and foremost. Given the existence of the funds administered and maintained by the NTMA, which is upwards of €30 billion, I believe that the time for this initiative has not come. It is not opportune to establish such a fund. The time has not come and it is not appropriate to do it now. Establishing a rainy day fund in the current circumstances is inappropriate and inopportune. It is a grave disservice to the millions of our citizens for whom the rainy days are here. It is raining right now in all the hotels and hubs where homeless people are waiting tonight, and for all the people who are on waiting lists. The all-party Oireachtas disability group spoke earlier about the significant waiting lists for early assessment for children on the autism spectrum. We have so much to do with the revenue we have. We have enough stashed away. It is the wrong time to set up a rainy day fund.

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