Pearse Doherty (Donegal, Sinn Fein) | Oireachtas source

This Bill, as the Minister outlined, provides for the establishment of two funds, namely the future Ireland fund and the infrastructure, climate and nature fund. It is fair to say these funds were first proposed in the context of two trends: future costs likely to incurred by the State and the growth of corporation tax receipts in recent years. The Minister reflected on this fact on budget day making explicit his intention for a portion of windfall tax receipts to be transferred to these funds and we have seen a significant increase in corporation tax revenue in recent years. The exceptional growth in revenue presents risks but it also presents opportunities for us. Corporation tax has overtaken VAT as the second-largest tax head in the State. It is also highly concentrated, as we know, with only ten companies accounting for more than 50% of all corporation tax revenue and we now know foreign multinationals are paying 87% of all corporation tax receipts in 2022. As I said, this poses opportunities but also risks as a result. The use of this revenue must be treated very carefully. It is for this reason that Sinn Féin has made clear for some time that corporation tax revenue, which is volatile and potentially windfall in nature, should not be committed to day-to-day current expenditure. We support the establishment of a sovereign wealth fund. What matters is how that fund is designed.

In a recent research paper, the Parliamentary Budget Office put the growth of corporation tax receipts in context. Among the issues the office considered were the risks to corporation tax as a revenue stream in the coming years. While many of these risks are well known, such as the concentration and volatility, another was what the office referred to as the infrastructural risk involved. It noted that infrastructural capacity is essential for maintaining a stable and attractive environment for business, employment and investment. I could not agree more with that statement. This State is suffering from an infrastructural deficit and house prices that are not only reducing the living standards and harming the life chances of our people, they are also undermining our ability to attract investment, employment and growth. It is this risk which reveals the weakness of this legislation.

The Bill proposes the establishment of what is called the future Ireland fund. The stated intention of this fund is to deal with future expenditure pressures the State will face, including demographic change. Under the legislation, 0.8% of GDP will be invested in the fund from the years 2024 out to 2035, with additional contributions possible by way of Dáil resolution. These are significant sums. For example, it would see €4.6 billion transferred into the fund in 2026 based on the Department's most recent estimate of GDP growth in last year's budget.

To put this in context, in 2019, the year before the pandemic, the Government recorded a surplus of 0.5% of GDP or €1.7 billion. Had this legislation been in place and this fund in operation in that year, the Government would have been obliged to transfer €2.3 billion into the fund, swinging the public finances into deficit and depriving the State of the funding required to invest in critical areas such as housing and hospital capacity. I say this just as an illustration of what could happen in the future under this legislation. As a result of these provisions we could face a situation where the public finances record a surplus, which could be a modest one, while our people continue at the same time to face acute housing need and chronic housing shortage, yet the Government would be obliged by this legislation to transfer billions of euro into this fund without regard to the housing and social needs of our people. That is the fundamental problem with the way this legislation has been designed and drafted. Payments into this fund and the expenditure policy by extension will be tethered to a metric that is universally acknowledged to be an inappropriate measure of the Irish economy, that is, GDP, yet GDP will determine the amount of money, the billions of euro, the Government must transfer into the fund, possibly at the expense of much-needed investment in housing, health and other infrastructure. What was the basis on which GDP was decided as being an appropriate metric for transfers into the fund rather than GNI*, for example, which is the most commonly used metric by Government, which is approximately half what GDP is? Another metric which could have been used would have been the general Government balance.

Under this Government the rate of home ownership is falling. Homelessness is rising and an entire generation is locked out of affordable accommodation. It is common knowledge that this Government's housing targets are far too low and even those abysmally low targets are doomed to fail as we see how the Government has missed its social housing targets for four years in a row. I will give the Government one thing at least in that it is consistent. We know that more than 50,000 homes are required each year just to meet the social need. Significant public investment is needed to increase capacity in our health services and hospitals. Today, as we speak, there are nearly 500 people on hospital trolleys throughout the State. In many of our hospitals there are dozens of people on hospital trolleys. There are more than 30 people languishing on trolleys in my local hospital because we do not have the capacity, wards and wings that are needed on our hospitals. This is capital investment that should have been delivered many years ago. All of this will demand a substantial boost in capital investment in the coming years if we genuinely want to deal with this issue, or maybe it is the Government's intention to not deal with the issue, just as it has not dealt with it for many years.

It is inevitable the economic climate and the position of the public finances will change. Under this legislation, we could face the scenario whereby, despite the need to increase public investment in housing infrastructure and the economy, the Government is required by law to transfer an amount equivalent to the entire Government surplus into this fund. Hamstrung by this legislation and restricted by its rigid requirements, the State would risk underinvestment and a further undermining of our economy and prospects. That is a great flaw inherent in the legislation because it is too rigid. It lacks flexibility and risks unintended consequences for the State's fiscal and economic policy.

In this regard the Minister may draw attention to or reference section 9, which allows the Minister of the day to reduce or pause payments into the fund between 2024 and 2034 where he or she is satisfied, the word that is used in the legislation, that there has been or is likely to be a deterioration in the economic or fiscal position of the State. Where the Minister forms that view, the payment can either be reduced to 0.4% of GDP or paused altogether. Any such decision would be made after considering the recommendation from the Fiscal Advisory Council, which will consider indicators such as corporation tax receipts, GDP and unemployment levels. This provision is remarkably vague, and that is one of the problems. For example, if the Government was to record a surplus of 0.8% of GDP, would it be considered to be a deterioration or would the Government be required by law to transfer this amount into the fund, blocking the ability of the State to increase much-needed public investment without borrowing or increasing our public debt? Given the crude basis on which payments would be transferred to the fund, it risks greatly inhibiting the ability of the State to address significant and grave challenges facing our economy and society, such as housing, at great economic and social cost. In this regard, the legislation suffers from serious deficiencies, and for these reasons Sinn Féin will not support this Bill.

The Bill also proposes the establishment of what is called the infrastructure, climate and nature fund. The stated purpose of the fund is to make resources available in a future downtown to support expenditure throughout the fiscal cycle. Under the legislation, money in the fund would be released to support countercyclical expenditure where the Minister of the day is satisfied there is or is likely to be a significant deterioration in the fiscal or economic position of the State. Again, like the future Ireland fund, how this will be determined is remarkably vague and lacks sufficient detail. What are the criteria for the release of money from the fund? An additional provision of the legislation under section 21 will allow only for the drawdown of funds not greater than €3.15 billion between the years 2026 and 2030 for designated environmental projects. It is abundantly clear, however, this Government will fail to meet its greenhouse gas emissions targets. It has failed to date to meet every climate target that matters. That this legislation will only allow €3.15 billion to be withdrawn, which is on average €630 million each year, to invest in environmental projects lacks ambition. What is of grave concern is that this legislation makes no provision for the drawdown of money from this fund for housing projects during this period. I do not know whether the Minister is aware but we are in the middle of a housing crisis. Whether the position of the public finances deteriorates or not, housing need will not be met without sustained and substantial investment in affordable housing. That the Government has not provided for explicit drawdown from this fund for the delivery of social and affordable housing reveals how out of touch it is with the struggles our people are facing.

Sinn Féin recognises the significant growth of corporation tax receipts in recent years and that a substantial portion of these receipts are potentially volatile and windfall in nature. As we have said repeatedly, these tax receipts must be regarded and utilised with caution. We have also made clear that the establishment of a sovereign wealth fund providing funding for future challenges and current crises should make good use of the significant growth of corporation tax receipts in recent times. However, the final design of such a fund is of utmost importance: how it is invested, how it is funded, how it is drawn down and how it is put to use. For these reasons, the flaws in this legislation and the deficiencies in the Bill's provisions I have already referenced, Sinn Féin will not support this legislation. Facing a substantial infrastructure deficit and housing crisis, the funding requirements over the coming years to address both will be significant, yet the ability of the State to adequately respond to both could be made impossible were a Government projected to run a modest budget surplus, while this legislation provides insufficient flexibility and ambition for either fund to be utilised to boost investment in housing or other critical infrastructure this decade. While Sinn Féin is supportive of the establishment of a sovereign wealth fund to protect the public finances and boost the capacity of this State to address challenges now and in the future, this is not the fund. This is not the right design. It is far too rigid.

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