Thursday, 25 October 2018
Ceisteanna - Questions - Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions
5. To ask the Minister for Finance the commencement date for the establishment of the rainy day fund announced in budget 2019; the initial amount to be transferred to the fund on that commencement date; the five year expected projection for the fund; and if he will make a statement on the matter. [44393/18]
Deputy Catherine Murphy is not in the Chamber. I am using my discretion; it is customary in such cases to make a request to the Ceann Comhairle's office but in view of the number of questions today, I am allowing Deputy Shortall to introduce the question.
The rainy day fund seems to make sense on the surface of it or on a theoretical basis. It seems sensible to engage in counter-cyclical planning and when there are boom-time corporation taxes, it sounds like it would make sense to put them away for a rainy day. However, there has been very little discussion or debate about this and it is very hard to find out the grounds on which that money might be spent in the future. It is not the same as what a family would do in terms of putting money aside. Can the Minister tell us some more about how this fund would work and specifically about the timings involved?
I want to inform the Deputy that this week I brought the National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018 to Government and this Bill has now been published. It will be circulated to Deputies in the coming days. It provides the legislative underpinning for the rainy day fund, which will formally be known as the National Surplus (Exceptional Contingencies) Reserve Fund. The timing of commencement of the fund will be contingent on the Bill's passage through the Oireachtas.
The fund is part of a number of measures to help increase the State's resilience to external economic shocks. My intention, as outlined again in budget 2019, is to seed the fund with an initial transfer of €1.5 billion from the Ireland Strategic Investment Fund. I have then provided for Exchequer transfers of €500 million per annum from 2019 to 2023. This will see the fund grow to approximately €4 billion by the end of 2023. In addition, the Bill will provide the possibility of placing windfall tax or other receipts in the fund, where the Dáil by resolution so authorises. The projection of €4 billion by the end of 2023 is contingent on a number of assumptions, namely, that there is a near-zero net carry-cost or return over the period; that there is no event requiring a draw-down; that there are no windfall receipts placed in the fund over the period; and that there is no significant event during the period requiring use of the in-year contingency reserve.
I should explain that the in-year contingency reserve is intended to operate as a potential carve-out from the annual €500 million allocation to the fund. Where, as a result of a natural or other disaster, the Government incurs unforeseeable additional expenditure to mitigate the effects of that event, the payment into the rainy day fund in that year may be reduced by an amount of up to that additional expenditure. I look forward to debating my detailed proposals on Second Stage in the Dáil in the next few weeks.
I thank the Minister. As I said, on the surface it sounds like it is the prudent thing to do. However, when we actually look at the detail it is clear that this is not money that is going to be drawn down when tax receipts are reduced. The Minister said that it is to be a fund that can be drawn down in a force majeure situation where there are external shocks due to natural disaster or some major thing like that. It is not actually in keeping with the common understanding that this is money put aside that can be used in difficult times. It is very specific to natural disaster type occasions.
We have a crisis now in respect of housing. The Government is spending €700 million in rent which is going into landlords' pockets. Surely this is the time to invest those available funds into an area that is of such systemic importance to our economy that it is putting huge pressure on wages, for example. Even employers are looking for that money to be invested in housing now rather than putting it away for some potential future use.
I will make two points in respect of what the Deputy said. First, the rent supplement and housing assistance payments are not being used to supplement landlord profits. They are being used to provide accommodation to citizens who, in the absence of these payments, would be unable to access the accommodation they need and deserve while our social output is increasing. I have a question from Deputy Boyd Barrett on the matter as well and we had a debate on the matter yesterday during parliamentary questions to the Minister for Public Expenditure and Reform.
The Deputy made a second point on the fund. The purpose of this fund, as I have communicated today publicly, is to have money available in exceptional circumstances that are recognised by the Minister for Finance of the day. These must then be agreed by Cabinet and then, in turn, a resolution must be brought to the Dáil on the matter.
My view is that we will only know the value of this fund when we need it. If we face an exceptional shock we will lament not having set it up. As things stand, the level of public debt in the country is a little under €203 billion, which is a fraction of where we were when we faced the last economic shock, a shock we are still trying to put behind us. For that reason I believe this is an appropriate thing to do to help with the long-term challenges our country may face.
Surely the Minister will accept there is a vast capital investment deficit in the country at the moment, and that this is having a major negative impact on the operation of our economy and the quality of life of people. Why would the Government not use available resources now to save in the future? We are over-spending in respect of the cost of the housing assistance payment. Would it not make far more sense to invest in the provision of housing now rather than continuing with the dependence on HAP? Would it not make far more sense to ensure that we did not have long waiting lists for health services? It makes more sense for the Government to invest in the kind of facilities that are badly needed. It makes more sense for the Government to use the money as a catch-up fund to catch up with the under-investment in the capital area that we have saw during the austerity years. The principle centres on spending now to save in the future. Surely the Minister for Finance will accept that it is far more prudent to provide that kind of investment now rather than putting money away for something that may never happen in future.
At what point do we being the cycle of trying to save for the challenges we could have in future? I absolutely understand the position, as does the Deputy, because I represent constituents who are dealing with anxiety and trauma in respect of their homes, lack of homes and difficulties in accessing the healthcare services that we all want them to have. That is why, for this year, we have increased investment in capital. "Capital" is a technical word for our hospitals, schools and public transport. We have increased it in this year by €800 million. The key feature of budget 2019 is that for next year we will increase investment in our homes, universities and schools by an additional €1.4 billion.
The Deputy has, on other occasions, pointed to the dangers of how high our debt is and to the dangers of being over-reliant on any particular tax stream. All I am trying to do is get the balance right between getting ourselves ready for the future and dealing with the level of social need that I know to be present today.