Charlie McConalogue (Donegal, Fianna Fail) | Oireachtas source

I thank the Deputies who contributed to this debate for their constructive engagement on what is important and far-seeing legislation. I am certain my colleague, the Minister, Deputy McGrath, looks forward to engaging with Deputies further on Committee and Report Stages on the issues which have been raised this evening. As the Minister stated during the significant amount of time he was present in the House to deal with this legislation today, the Bill legislates for two new funds, the future Ireland fund and the infrastructure, climate and nature fund, which the Government believes is an important step to ensure the continued resilience of our public finances.

By setting aside part of our tax receipts now, we can deal with foreseen and unforeseen challenges in the future.

Ireland’s public finances are currently in a strong position, underpinned by record corporation tax receipts, which last year reached nearly €24 billion. The strong performance of corporation tax in recent years has increased the risk of relying on these volatile and unpredictable receipts to fund permanent increases in expenditure. We also know that changes to the international tax regime in the coming years could negatively impact on corporation tax receipts. While these revenues are, of course, absolutely welcome, it is therefore essential that they are not used to fund permanent expenditure. Ultimately, the best way to mitigate the risk of an over-reliance on corporation tax is to keep public expenditure growth at sustainable levels, which will be achieved by continuing to follow the appropriate budgetary strategy. These funds will take advantage of the favourable conditions that Ireland is currently facing, while acknowledging the assumption that a large proportion of the increase in corporation tax receipts seen in recent years is windfall in nature.

I will reiterate some of the comments made by the Minister, Deputy Michael McGrath, in respect of the two new funds. The future Ireland fund will help deal with future expenditure pressures including ageing, climate, digitalisation and other fiscal and economic challenges. Other actions are likely to have to be taken to deal with these pressures, yet this fund should be of enormous benefit in resolving these issues. Its purpose is to support, in a consistent and sustainable manner, State expenditure from 2041 onwards. The legislation does not provide for these resources to be directed at any specific expenditure, as the use of the resources from the fund are a matter for the Government of the day. It would be impractical and imprudent for a Government at this point now to determine the priorities of a Government in the 2040s and beyond.

The infrastructure, climate and nature fund will seek to deal with the procyclical nature of public spending and to assist with climate change objectives and nature, water quality and biodiversity issues. The fund will provide for resources for spending in a future downturn to support expenditure through the economic and fiscal cycle. It is important that there are resources are available that can be brought to bear in the event that there is a future downturn in order that we can finalise existing capital projects and commence new ones. It recognises that there are challenges in dealing with the issues of climate change and the need to reverse the degradation of the biosphere and contribute to improving water quality in our lakes, rivers and seas.

In response to Deputies, I want to reaffirm that the management and control of the new funds will be with the National Treasury Management Agency, which has extensive experience managing the Ireland Strategic Investment Fund, ISIF. This legislation provides for the overarching investment policy and strategy for the two new funds, "to invest on a commercial basis so as to seek to secure the optimal total financial return" while having regard to "the level of risk to the assets, including any such risk posed by environmental, social or governance, ESG, matters" and "the likely timings of payments from the Fund".

The inclusion of environmental, social and governance risk in primary legislation is an important point, as it is ensuring that the investment mandate of the new funds and the Ireland Strategic Investment Fund is clear and allows for the investment strategies of each fund to be amended. Under the proposed legislation, there will be an extensive ESG approach for the Ireland Strategic Investment Fund and the two new funds. First, specific provisions in the Bill set out the investment policies for each fund. These are the statutory parameters underlying how the National Treasury Management Agency will hold and invest the assets of each fund. The NTMA will be required to invest on a commercial basis, while having regard to environmental, social and governance risks to the funds. Second, the legislation provides for the investment strategy of each fund to outline the classes of assets in which the funds may be invested, a description of how the NTMA takes into account ESG risks and also a description of the categories of investments which the funds shall not be permitted to be invested in and the exclusions. Third, the NTMA will be required to consult with the Minister for Finance and the Minister for Public Expenditure, National Development Plan Delivery and Reform in preparing the investment strategies. The Minister will also be able to consult with any Minister considered appropriate on the investment strategy. This engagement at political level is an important balance on the evolution of the NTMA’s strategy for all three funds.

I acknowledge the points raised by Deputies in respect of the Private Members’ Bill to prevent the National Treasury Management Agency, through the Ireland Strategic Investment Fund, from investing, directly or indirectly, in companies listed which have activities in the Palestinian occupied territories. As they will have seen, the Minister, Deputy Michael McGrath has been advised by the NTMA that it has decided to divest from certain ISIF global portfolio investments in companies that have certain activities in the occupied Palestinian territory. The divestment decision relates to shareholdings with a total value of €2.95 million in six particular companies. These are mainly banks, with one large supermarket group. ISIF has determined that the risk profile of these investments is no longer within its investment parameters and that the commercial objectives of these investments can be achieved through other investments. The decision will be implemented as soon as possible in the coming weeks. While recognising the independence of ISIF in the management of the investment portfolio, I know that the Minister, Deputy McGrath, believes this is the correct investment decision in respect of the assets it manages on behalf of the State.

A number of Deputies have raised the issue that the resources for these funds should be spent for today's issues. There are significant existing commitments under the national development plan over the coming years. Capital expenditure has increased from €3.7 billion in 2015 to almost €13 billion last year. The overall level of capital funding is now at an all-time high, including expenditure on social housing, roads, bridges, hospitals, schools and public transport projects. On top of that, we must bear in mind that there are capacity constraints in our ability to use significantly more resources for capital expenditure projects. In terms of current expenditure, given that we have a concentration of corporation tax receipts and nearly half of those receipts are estimated as being windfall in nature, it would be unwise to embed permanent expenditure measures on the back of those receipts.

Deputy Nash raised an issue in respect of the process as to how projects may be designated. Deputy Whitmore also raised the important role of nature and biodiversity. They are clearly included in the Bill also. The process outlined in the Bill provides for the designation of projects as environmental projects where a relevant Minister is satisfied that the project contributes directly or indirectly, or is likely to so contribute to a reduction of greenhouse gas emissions in the State; the achievement of environmental objectives derived from a number of EU water regulations; the achievement of conservation objectives or the implementation of conservation measures or administrative and contractual measures established under the birds and habitats directive; or the implementation of a plan, programme or strategy, the national biodiversity action plan or guidelines under the Wildlife Act 2000. Some examples of projects that may be provided for under this fund could be expanding the national barriers mitigation plan; delivery of the nature restoration plan for Ireland; the decarbonisation of industry; or increasing the deployment of renewable energy generation and strengthening our national grid. The allocation of funding for designated environmental projects will be a process overseen by the Minister for Public Expenditure, NDP Delivery and Reform in consultation with relevant Ministers in line with the normal Estimates process.

On behalf of the Minister, Deputy Michael McGrath, I thank Deputies and the Oireachtas committees for their contribution to the development of this legislation to date. It is important legislation, as I think all Deputies would recognise. We fully expect a detailed debate on Committee Stage in the coming weeks. The Minister, Deputy Michael McGrath, is very much looking forward to a detailed consideration of the provisions of the Bill and will engage closely with Deputies as the Bill continues its journey.

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