Peter Fitzpatrick (Louth, Independent) | Oireachtas source

During budget 2024, the future Ireland fund was highlighted as a crucial measure to safeguard living standards and public services for both current and future generations. The fund will act as a new investment vehicle, which aims to accumulate €100 billion by 2035 to address the country's forthcoming expenditure pressures, specifically in relation to an ageing population, climate change, digitalisation, and other fiscal and economic challenges. The Government's strategy involves pre-loading the financial burdens associated with ageing by establishing the future Ireland fund. Under this plan, funds from the National Reserve Fund, NRF, will serve as the initial capital, with annual contributions amounting to 1.5% of gross national income, or 0.8% of GDP, earmarked until 2035.

Critics may argue that allocating billions for future contingencies is a luxury amidst ongoing challenges in sectors like healthcare and housing. I do not want to take away from the fact there these challenges are present and are significantly affecting many in my constituency and, indeed, throughout Ireland. However, the Minister for Finance, Deputy McGrath, asserted that the fund initiative is not a luxury but a fiscal necessity to prepare for anticipated expenditures rather than merely awaiting a hypothetical rainy day fund. Rather, it is designated to cover known future costs, such as healthcare, pensions, home care and other expenses, with age-related spending expected to increase by €7 billion to €8 billion over the current decade.

The Bill’s proposals would empower the Government to allocate 0.8% of GDP annually to the future Ireland fund from 2024 to 2035. Additionally, approximately €4.1 billion will be transferred from the dissolution of the National Reserve Fund in 2024. With these contributions alongside potential returns from investments and GDP growth, the fund could swell to around €100 billion by 2035. This substantial amount would provide significant resources to manage the anticipated rise in expenditure demands in the forthcoming decades.

Two key considerations were underscored within this Bill. First, while legislation will enforce annual contributions, some exemptions may be granted based on economic data. For example, the Bill also grants finance ministers the authority to halt or decrease contributions to the future Ireland fund in case of a significant deterioration in public finances. Second, a future Government reserves the prerogative to reallocate funds if deemed necessary, although withdrawals from the newly established funds might risk tarnishing the country's reputation. Managed by the National Treasury Management Agency, the future Ireland fund is an investment initiative. Supported by the Irish Fiscal Advisory Council, investment funds will be diversified internationally to prevent inflationary pressures within the Irish economy. Notably, it will not invest in domestic assets like Irish sovereign bonds.

While the future Ireland fund presents several potential advantages, it also carries certain disadvantages and risks. Investing the fund abroad exposes it to various risks such as currency fluctuations, geopolitical instability, and economic downturns in other countries. Especially relevant are ethical considerations while investing the fund abroad. This may raise ethical concerns, particularly if investments are made in industries or countries with poor human rights records or environmental practices. Additionally, while it is believed that this counter-cyclical fiscal measure will counteract the effects of the economic cycle and will support major transport and energy projects in the event of an economic downturn. Yet, by prioritising international investments, there is a risk of neglecting essential domestic infrastructure and development projects. This could exacerbate inequalities or infrastructure deficits within Ireland.

Although it is anticipated that the fund could mitigate the necessity for tax increases in the years ahead, additional revenue sources might still be required, which is something to keep to the fore. Additionally, economists are debating that despite the initial high costs, the anticipated benefits of the proposed fund may not be significant. This is attributed to the projected growth of the economy in the coming decades, suggesting that Ireland would essentially be setting aside funds during a period of economic constraint to be utilised during times of enhanced prosperity. For example, if the benefits of this fund are relatively small in the short term, this could lead to dissatisfaction or scepticism among the public, especially if people do not perceive tangible improvements in their quality of life or public services as a result of diverting resources away from pressing needs or investment opportunities. This could result in missed opportunities to address immediate challenges such as healthcare, education, or infrastructure deficits. As an alternative to this fund, economists pose that reintroducing the pension age increases, which were abandoned in 2022, could yield similar effects on addressing ageing-related expenses, albeit without the immediate financial strain.

A further argument is that the Government should utilise windfall corporation tax revenues to establish a fund dedicated to investing in domestic infrastructure instead of opting for a fund that allocates resources overseas. Various stakeholders, including NERI and IBEC have proposed such a fund, underscoring a widespread consensus that windfall taxes should be prudently managed and not immediately spent.

We must also consider the risk of mismanagement, poor investment choices, or even corruption, which could lead to losses and erode public trust. To mitigate these disadvantages, it is essential for the Government to ensure transparent governance, rigorous oversight, and effective communication with the public regarding the objectives, progress, and impact of the future Ireland fund. Additionally, regular evaluations and adjustments to investment strategies may be necessary to maximise returns and address emerging challenges.

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