Tuesday, 29 January 2019
National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018: Second Stage (Resumed)
I will continue from where the Minister of State, Deputy McEntee, concluded. She was taking the House through the different sections of the Bill.
Section 1 is a straightforward definitions section.
Section 2 sets out that the "National Surplus (Exceptional Contingencies) Reserve Fund" will be established on its commencement and that the fund's purpose is to hold assets for purposes specified in section 9(2).
Section 3 places an €8 billion cap on the value of assets and money that may be held in the fund but allows any return on the fund to be held in the fund.
In our current interest rate environment, we can expect a near zero return or a small carry cost for holding the fund as near cash. However, the fund is unlikely to reach the €8 billion cap for some years. It is to be expected that the interest rate environment will normalise over that period.
Section 4 provides that the fund is to be managed and controlled by the Minister for Finance, and includes standard provisions on the keeping of accounts, audit formalities and laying of audited accounts before the Oireachtas. In this regard, I want to clarify that my intention is to delegate my investment responsibilities in respect of the fund under this Bill to the National Treasury Management Agency, NTMA, under section 28 of the National Treasury Management Agency (Amendment) Act 2000. This is an appropriate use of the operational expertise of the NTMA.
Sections 5 and 6 relate to the transfer of assets to the fund. I want to explain these provisions in a little bit more detail. Section 5(1) requires the Minister, within 30 days of commencing the section, to transfer assets not exceeding €2 billion in value to the fund from the assets of the Ireland Strategic Investment Fund. I want to clarify that my intention remains, as set out in budget 2018 and budget 2019, that the transfer will be €1.5 billion. I have specified a higher maximum for two reasons: first, to allow for some headroom in case some of the transferred assets are non-cash and transpire to have a slightly higher realised value; and, second, to allow me to consider transferring a larger amount if there is a high degree of consensus that this should be done. Section 5(2) sets out that in each year from 2019 to 2023, the Minister is to transfer €500 million from the Central Fund to the national surplus (exceptional contingencies) fund. This is subject to subsections (5) to (7), to which I will come shortly.
This House has a function under subsection (4). The Dáil can pass a resolution authorising transfers to the fund. This facility could be used to transfer additional money to the fund in a range of circumstances - for example, if there are windfall tax receipts, or similar one-off income to the Exchequer, or if we have a substantial budget surplus. It might also be used to further augment the fund in the years after 2023.
Subsections (5) to (7) create a form of in-year contingency reserve for then period from 2019 to 2023 when a payment of €500 million will normally be due under subsection (2). Those payments will generally be made towards the end of the year. However, if there is a serious event during the year requiring substantial unanticipated expenditure, it will be possible to reduce the amount of the payment into the fund. The type of event is deliberately not described in greater detail than “a natural or other disaster”. I anticipate this contingency being activated if, for example, there is an exceptionally severe weather event. It is not intended to substitute for prudent contingency budgeting by public authorities. It is only for events that are inherently exceptional, or exceptionally repeated, in a given year. That might arise if there are repeated storms, for example. If this facility is used, any payment made will be directly from the Exchequer under the normal public financial procedures. In addition, the Minister for Finance will make a report to the House, in accordance with subsection (7), as to the reasons for reducing the payment being made into the fund.
Section 6 operates as an escape clause in the years from 2019 to 2023. If, during that period, we move into substantial deficit, it clearly will not make sense to borrow money to put into the national surplus (exceptional contingencies) fund. Section 6 is designed to deal with this. It allows the Minister at the time to propose a type of negative financial resolution - specifically, a resolution authorising the Minister not to make the normal €500 million payment. If the Dáil passes the resolution, then the payment will not be made in that year.
Section 7 is a technical amendment to the National Treasury Management Agency (Amendment) Act of 2014 to allow the Minister to direct the NTMA, as the custodian of the Ireland Strategic Investment Fund, to transfer assets out of it to another specified fund.
Section 8 sets out the high-level investment strategy for the fund. It is designed to be conservative and highly liquid. The fund will most likely be held in cash deposits or in short-term investments that can readily be cashed in at no or minimal loss. This is to ensure that if a crisis gives rise to an immediate funding requirement, the money will be available straight away. There is a specific provision which is intended to address the sustained low-interest environment in which we currently find ourselves and in which deposits are actually attracting negative interest - that is, we are being charged to keep money on deposit. Subsection (3) gives specific authority to consider the net Exchequer position in deciding where and how to invest the fund. This is to take into account that if we are placing the fund on deposit in the Central Bank and are charged an interest rate for that which will, in due course, be remitted to the Exchequer. This provision allows us to take a broad overview of the State’s net position when determining how to invest the fund. When I delegate my investment functions under this legislation to the NTMA, I will also be giving them investment guidelines based on the mandate set out in this section.
Section 9 sets out the criteria for drawdown of the national surplus (exceptional contingencies) reserve fund. It has a triple provision in place. The Minister must be satisfied there are reasonable grounds for drawdown. My Department is working on what those indicators might best be but I am reluctant to be strongly prescriptive within the Bill. An economic crisis can be quite unpredictable in its effects and there is simply no point having the money available to mitigate a serious event but being unable to access it because a specific threshold or condition is not met. However, a Minister must have reasonable grounds to believe that the proposal is necessary. Those grounds could include a sharp and significant increase in unemployment or a dramatic fall-off in tax receipts. The second element is that the Minister brings a memorandum to Government in the normal way in order to obtains its approval. If Government gives its approval, the third and final element is that Dáil Éireann decides whether or not to approve that decision. These kinds of decisions will take place under the full light of democratic scrutiny.
There is a modification to this procedure set out in subsection (4). If the Minister believes - again, based on reasonable grounds - that a payment to the Exchequer is urgently necessary before the next sitting of the Dáil and the Government approves it, he or she may make the payment. The Minister must then report to the Dáil on the payment and the reasons for it at its next sitting. I stress that this could arise only in situations such as a full-blown liquidity crisis in which normal State payments could not be made unless the money was transferred to the Exchequer. Even in the darkest days of 2008 and 2009, it is likely that this threshold would not have been met. I very much hope we never will need to use this provision, but I believe that it is useful to include it in the Bill.
Section 10 requires the Minister to comply with a resolution of Dáil Éireann or the emergency Government decision and transfer the amount specified to the Exchequer. I want to be clear: drawdown is only to the Exchequer. A resolution cannot direct that the money go to any other place. It will, of course, be possible to transfer money on from the Exchequer, depending on what is required. Any such onward transfer will be subject to the full rigour of the public financial procedures and can be made only where this House consents to it by a further resolution.
Section 11 is a fairly standard expenses provision. However, I should explain that any expenses incurred in investing the fund will be chargeable on the fund. Given the conservative nature of the investment mandate, I do not expect this to be a significant cost.
Section 12 sets out the Short Title and includes a standard commencement provision. I intend to commence this legislation later in the year if and when it has received Oireachtas approval and when the delegation order and investment guidelines are ready and the NTMA confirms to me that they are ready to make the transfer of money or assets from the Ireland Strategic Investment Fund.
This is a robust Bill. The fund that will be established as a result of its enactment can help in the future. The Bill delivers on a commitment in A Programme for a Partnership Government. It also delivers on my ongoing commitment to creating resilience in the future to deal with risks that are as yet unknown.
I commend this Bill to the House.
I will share my time with Deputy Fleming. I welcome the opportunity to contribute to the Second Stage debate on the National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018 - it is quite a mouthful - or, what has become known as a rainy day fund.
The events of recent months underline and reinforce the need for a fiscal buffer to be put in place. It makes for very sound financial management for our country to plan for darker days that might lie ahead. One can argue about the drawdown criteria, the methodology and how much is put into the fund but what is not arguable is the need for a country, in managing its public finances, to have a buffer in place so that when there is an economic shock and when exceptional circumstances arise in the future, we have a reserve at our disposal which can be used in that in such a circumstance. The risks we face as a country at this time are very significant. Many of the economic variables have been favourable for Ireland in recent years. We have had tailwinds, in effect. When one examines the interest rate environment our country has benefitted from, one sees there have been very low sovereign borrowing costs, which mean we have saved billions of euro compared with where we thought we would be now in terms of the costs of servicing the national debt. The ECB's quantitative easing programme, or bond-buying programme as it has become known, is very favourable for Ireland in terms of the market conditions it helped to create. As we look into the future there is great uncertainty about potential trade wars. We have the rise of protectionism. We have a very volatile situation in the United States. There is a potential trade war there. It already exists but could deteriorate even further in terms of its relationship with China. The area of corporation tax and the boom in receipts which we are benefitting from at this time is very favourable for Ireland. Receipts are now in excess of €10 billion per annum, which is far ahead of where we could possibly have imagined a number of years ago.
That is all before one even mentions Brexit, which the Minister outlined today. The Minister published an initial assessment of what the impact of a disorderly Brexit with a hard deal or no deal would be on the Irish economy. None of us in the House wants to see that but we have to accept that with just two months to go to 29 March, it is a very live possibility. If it happens, it will have major ramifications for our country, economic performance, jobs, tax receipts and so on. I welcome the fact the Minister today published an initial assessment. There will be further details in February and further work will be unveiled as part of the stability programme update which we are required to submit to the European Commission by the end of April.
I welcome the debate on the Bill. We first proposed a rainy day fund towards the end of 2015 because we saw at that time, and we continue to see, the need for a developed economy working in a cyclical economic environment to put away money for difficult days that may come in the future.
It is important to acknowledge that while there will be a difference of emphasis in how such a fund is set up and how it is operated, a very wide range of international organisations support the establishment of a fiscal buffer, including the European Commission and the OECD. The ECB has also spoken about it. All the main international organisations we engage with, have a partnership with and work with on an ongoing basis, such as the IMF, have urged the Government to put a fiscal buffer in place. It is important we make the start in doing it at this time.
There will be a debate about the criteria for triggering a drawdown. Section 7 of the Bill deals with that issue. It sets out that it would be in order to remedy or mitigate against an event of exceptional circumstances - that is, an unusual event outside the control of the State - that impacts on the financial position of the Government or a severe economic downturn, to prevent potential serious damage to the financial system and its continued stability or to support major structural reforms that have direct, long-term positive budgetary effects within the meaning of Article 5 of the Council regulation of 1997. We will have an opportunity to go into the drawdown criteria in some more detail on Committee Stage.
It is important to say in the event of it being suggested that Ireland could be in breach of fiscal rules if we draw down this fund, ultimately any sanction or decision to take proceedings against Ireland will be made by the European Commission on the advice of the European Council. All those bodies recommend and endorse the strategy of setting up a fiscal buffer of this nature. It will only be in exceptional circumstances that this money will have to be drawn down. I do not envisage a circumstance in which our colleagues in Europe, who are advocating the establishment of such a fund, would punish us for drawing it down or for invoking the good example they have asked Ireland and other countries to set. I do not envisage such a scenario. However, the detail of it is something we can and will work through in the weeks ahead when we get into the section-by-section analysis of the Bill.
With regard to some of the specifics, there is a need for a debate on the cap of €8 billion the Minister has provided for in the Bill. The Minister has reiterated his intention is to transfer €1.5 billion. The legislation provides for up to €2 billion but the Minister has clarified in his remarks this evening that his intention is to transfer €1.5 billion followed by annual transfers of €500 million. A couple of years ago the intention was that it would be €1 billion per annum and it is anticipated it will be €500 million. The Minister might elaborate further if he gets his chance in his closing remarks. We will certainly revisit the issue on Committee Stage of why there is a need for a statutory cap of €8 billion in terms of the quantum of the limit the Minister believes is appropriate for this fund.
The requirement for the fund to be highly liquid and to be retained in the form of cash or near cash will have consequences by way of the return or the cost of administering such a fund. We need to work through the detail of whether there is a need for all the fund to be held in cash or near cash. I do not think it does necessarily. The likelihood of billions of euro having to be drawn down overnight is very unlikely. It may well be more prudent in the form of managing the fund. I am sure the Minister will take the advice of the NTMA, which will have delegated authority in this matter, that at least some of the fund could be put on longer term notice so there may be some return available for the fund to be delivered. I urge the Minister to have a look at the report and the opinion of the Parliamentary Budget Office and the conclusions from December 2017. I acknowledge there is further work to be done in the development of this framework but it is very important for our country at this time. We do not know what we are facing in the next couple of months. It may well be that in the most adverse of scenarios the need to establish this fund or our capacity to establish it could be severely impacted in the very short term. I acknowledge that. All this discussion is on the basis of the central scenario for Brexit, which Government has used as the basis of budget 2019. We have to use it as the basis for this debate while acknowledging the direction may change and that it may need to change out of necessity depending on what happens in Westminster in the next couple of months. On the basis of the central scenario, we need to proceed in a very careful and managed way in setting up a fiscal buffer which, I have no doubt, will prove to be exceptionally useful in time to come when exceptional circumstances visit our country again, as is inevitable at some point in time.
I will leave my remarks at that. I look forward to Deputy Fleming's contribution and that of the other Members of the House.
I welcome the opportunity to speak on the Second Stage of what I would call the rainy day fund Bill. I thank my colleague, Deputy Michael McGrath, who proposed this in 2015. It was included as part negotiations of the confidence and supply agreement with Fine Gael in early 2016. I am quite sure that had he not proposed that with the support of the Fianna Fáil Parliamentary Party at that stage, it would not have been in the confidence and supply agreement and we would not be here today.
The technical name for this legislation is the National Surplus Reserve Fund for Exceptional Contingency Bill 2018. It will in time be known in layman's English as the rainy day fund. It is very good that we are getting to this point. Considerable pressure had to be put on the Government to get to this point. It had to be dragged on different occasions.
There was a commitment to put €1 billion per annum into the fund; the Government has rowed back on that substantially and the proposal now is for only half of that amount. The Taoiseach proposed raiding the fund even before it was set up. Given all the talk about this since the last general election, it has come as a surprise to many people that there is not a single bob in the fund yet. The intention is I presume at least to put something into the fund by 31 December this year. I know the legislation had to be set up, but we really took our time. We would be in a better place if this fund had been operational at an earlier date.
That said, it is good it is happening now. Items like this, which are not overly contentious, should be able to move through the House quickly. I know that on Committee Stage, my colleague, Deputy Michael McGrath, will have positive and constructive amendments. I ask the Minister to consider each to them carefully because they come from a genuine interest in the need for such a fund for whenever the rainy day might come. Let us hope it does not come for many a long year. However, if it comes, as sure as night follows day we need to have something in that fund.
This year things are somewhat clearer in that the ECB plan for quantitative easing is coming to an end. That will put pressure on interest on the national debt which has been reducing dramatically in recent years. We might see a slight increase in that as a result of the change in the ECB policy. With so many unknown factors relating to Brexit, none of us can speculate tonight how that will work. There are definitely risks attached to that, which is all the more reason for having a fund such as this.
Why is there an €8 billion limit on the fund? It should be open ended. In some years with a surplus, there should be a case for putting in an additional amount. Some time ago when we started the debate on this and corporation tax was yielding €4.5 billion to €5 billion per annum and it was then heading to €6 billion, our side of the House proposed that a significant portion of anything more than €6 billion in corporation tax, which was beyond our wildest dreams just a few years ago, should go into this fund. However, the Government has not done that. Because it suits up to ten major multinationals to pay a bit of tax in Ireland rather than a bigger amount somewhere else, the Government has got a this windfall tax. It does not know precisely why we are getting it or why the companies are paying so much. The Government is not able to anticipate it, but it is using that windfall tax to fund day-to-day expenditure in many Departments and especially in the health services.
The Government is running a severe risk in its prudential management of our receipts. We are enjoying these windfall receipts from corporation tax now but next year or the following year it could as easily go some other way. If some other country decides to have a more attractive regime for corporation tax than Ireland, those multinationals will just up sticks and move their corporate headquarters. All of a sudden there would be a big hole in our finances and then we would be in almighty trouble with day-to-day funding. Health services, educational services and social protection funding would be seriously compromised because the Government has not been prudent in its management up to now.
Years ago we had the old National Pension Reserve Fund which was great. It provided a big buffer when it was called on. We still have quite an investment in that fund. Even though in some of those years the country was not as well off as we are now, the investment per annum was 1% of GNP, which probably would be closer to €2 billion per annum now. People might think that is unthinkable, but that is an example of a really ambitions plan. The Government's proposal to put in €500 million is a modest start and let us hope the figures increase.
Some Opposition parties have taken what I would call the lazy approach of getting all the money, spending it all and not investing anything into the future. We need it now and I accept there is a crisis now. However, the crisis is not due to lack of money; it is due to attitudes of Government to spending decisions, prioritisation, getting efficiency for the money we are actually spending and how it is spent. We are not short of spending money at the moment. There is an issue with where the Government is directing that spending and in particular ensuring that we get value for money for what we are spending. While that is the job of the Government, it should not throw the additional corporation tax receipts that are coming in now into day-to-day funding of public services, albeit they are very important.
I know the Irish Strategic Investment Fund can invest up to €2 billion. The Minister has indicated he is putting in only €1.5 billion. He is being prudent; I would say excessively prudent. He should try to invest the maximum amount in this fund. I know it is being managed by the National Treasury Management Agency and it is good that it will be audited by the Comptroller and Auditor General. As Chairman of the Committee of Public Accounts for the moment anyway during this Dáil for as long as it lasts, I believe that is a welcome development. It is important to have public scrutiny of such a fund and a proper Dáil debate on the use and investment of those funds every year.
I share the concerns of my colleague, Deputy Michael McGrath, over holding most of the fund in cash or near cash. As the Acting Chairman, Deputy Connolly, will verify, the Committee of Public Accounts has seen many Departments coming in with a charge in their accounts for negative interest. There was a time when a State organisation was able to earn interest on amounts that could be €5 million, €10 million or €50 million. Now they are being charged interest for putting it on deposit with the Central Bank or through the National Treasury Management Agency. Leaving money as cash in a bank is a way of losing money. We would probably pay many people millions of euro to advise us to do that and lose money. We should not spend money on consultants to do a job that the NTMA is well capable of doing.
The Dáil must give consent to extract money from this fund, which is very important. The reasons have been set out there, but they are rather loose. I would hope there will be strong Dáil control on a Minister doing that or making a proposal. It is proposed that he might be able to act to some extent even when the Dáil is not sitting. I do not think a Minister over a couple of weeks of a Dáil recess could find himself in an emergency that he did not know about on the day the Dáil broke up such that it would be necessary to give that extra power. I am concerned when Ministers get extra power over payments through the Central Fund because it never comes back for discussion here in the Dáil Chamber.
Regarding the Central Fund, all the payments for interest on the national debt are paid through the Central Fund. They never come through the Committee on Finance, Public Expenditure and Reform and Taoiseach or any line committee as part of the Estimates. They never come to the floor of the Dáil for a debate. I am not suggesting we should not pay the interest and pay back our national debt - there should be a debate here in the House every year - but when the Minister has discretion to do something without having to report to the Dáil, that is the way things happen. Also our payments of about €2 billion to the European Union every year are never discussed in totoin this House or at any line committee. Again it is paid through the Central Fund where a Minister has total discretion. When a Minister has total discretion eventually over a period of time the Dáil never gets to debate the matter. That is why I do not believe a Minister should have that discretion. Government is answerable to the Dáil and any withdrawal from the fund should be approved by the Dáil in advance and not noting it after the fact.
We support the Bill, which is long overdue. We look forward to a detailed report coming back after Committee Stage. Any suggestions coming from our side of the House will be positive and constructive and I hope the Minister will take them into account.
Tá Sinn Féin i gcoinne an Bhille seo. Sinn Féin opposes this Bill. The concept of a rainy day fund is one with which most people instinctively agree and if there was a proposal before us to establish a real rainy day fund, I would give it serious consideration but the truth is that we do not have such a proposal before us this evening. A rainy day fund would be truly counter-cyclical in that it would remove money from the economy during times of growth, as this fund would do, but it would also allow that money to be re-injected as a recession hit or growth slowed. That is where the crucial flaw in this legislation lies. It lets us put away money but does not allow us to take it back out.
We must also consider where our economy stands at this point in time. The Government is asking us to support putting money away that could be used to build homes, open hospital wards, support new crèche facilities where they are desperately needed as well as for many other areas. The European Commission, the IMF and others have all pointed to the lack of infrastructure, especially housing, as representing a major threat to our economy. In that context, we must ask if moving €8 billion into a fund that cannot be reopened is the best use of money at this time or indeed, at any time. This is a fund that cannot be spent tomorrow when times are bad and which reduces our capacity to catch up on infrastructure that is needed today.
There is also a very real question as to why this legislation explicitly opens the door to this fund becoming another bank bailout fund. That is in black and white in the legislation before us. It states very clearly that one of the criteria under which this fund can be accessed is for exactly that purpose, thus preventing potential serious damage to the financial system in the State and ensuring the continued stability of that system. That is in black and white in the Bill in terms of one of the three criteria for using the fund. This is about bailing out the banks once again. In fact, this is really the only concrete area where the money can be spent. The other two possibilities in the legislation are likely never to be used, short of a major crisis such as a migrant crisis or major reform of our pension system, for example. These "exceptional" circumstances will be deemed to be thus not by Members of this House but by the European Commission. The Minister for Finance is relying on people failing to differentiate between a nice-sounding scheme like a rainy day fund and this fund, which, when one reads it closely, can only be described as a bank bailout fund in the making. I am sure that a Bill called the bank bailout fund Bill would be very difficult to get through the Houses of the Oireachtas and rightly so.
One of the claims made in relation to the establishment of this fund is that it will tackle the issue of overheating in the economy. Let us examine that claim more closely. First, we must note that the latest CSO figures show a very modest level of inflation in the economy which is not exactly evidence of imminent overheating. The idea that moving money into this fund will prevent overheating simply does not stack up. The greatest sectoral source of overheating within the Irish economy is in the property market with ever increasing housing and property prices and an ever growing demand in Dublin city and its environ, as well as in other cities. Overheating in the Irish housing market is best addressed through increasing the supply of housing, a policy which is inhibited by a supply and skills problem within the labour market. The biggest threat from construction, however, is not from residential but from commercial property, as consistently pointed out by the Irish Fiscal Advisory Council and nothing in this Bill will reduce that threat. The skills gap is a threat too, as has been pointed out time and again, yet today we are being asked to siphon away €0.5 billion each year, which should be used to build crèche and educational facilities so that our population can be trained to fill the gaps and parents, especially mothers, can be empowered to return to the labour market if they so wish. We know about the threat of climate change to our economy and our world but there is no possibility that this fund could be utilised to bring about the green industrial revolution that is badly needed. The risks a rainy day fund seek to address are best combatted by transitioning the Irish economy from one which is dangerously exposed to global markets to one which possesses a stable economic base. Such a transition would require sustainable investment in infrastructure, in skills and in the renewable energy and industry strategy.
Let us not forget that we already have a Strategic Investment Fund, SIF, that can be directed to make interventions and investments on a commercial basis. It has €8.9 billion of resources at its disposal. It is a sovereign fund, investing and accumulating for the people. How does the proposal before us this evening in any way improve on that? In reality, the fund contained in the Bill before us actually raids the SIF to lock away money that is needed at this point in time. If the aim is tackle overheating, this is a very bad policy choice and the excuses for it do not stack up. This Bill is about championing austerity, normalising homelessness and third rate infrastructure. It tells rural Ireland that it can wait for quality broadband. It tells communities seeking their health rights that they can wait. It says to the 10,000 people who are homeless, including 3,000 children, that they are second level priorities to be dealt with only after an arbitrary fund is filled.
We also have fiscal rules, championed by some parties in this House, which are supposed to keep us on the straight and narrow. Sinn Féin has always said that those rules are too restrictive and conservative. They copper fasten low spending but now it seems that for Fine Gael and Fianna Fáil, they are not tight enough. When times were tougher we were told by the aforementioned two parties that they would like to provide services but the fiscal rules would not allow it. Now we are in a situation where we are making up our own tighter fiscal rules. Fianna Fáil wants to be associated with this plan. Its members are clapping themselves on the back, claiming that they were the first to introduce the concept which they have now delivered through their negotiations with Fine Gael. Let us look at what Fianna Fáil originally promised. Had we gone with Deputy Michael McGrath's plan and the promise in the Fianna Fáil election manifesto, we would have to put €3.785 billion into the so-called rainy day fund this year. That is what the Fianna Fáil manifesto stated. Surely that party would have delivered on its promises, or would it? Fianna Fáil said that once a balanced budget was achieved in 2017, any increase in corporation tax revenue above a base line of €6.6 billion would be put aside to lessen the impact of any future slow down in the economy. Perhaps Deputies Michael McGrath or Fleming, who are so eager to claim credit for coming up with this policy, can tell us where the nearly €4 billion will come from this year, next year and every year thereafter. How many nurses would they sack? How many public servants would face the chopping block again, just as they did under the Fianna Fáil led Government of ten years ago? How many social welfare payments would be cut under this policy? This is policy on the hoof and its original aim was to rehabilitate Fianna Fáil which was the party of Government that drove the economy off the cliff and drove tens of thousands of our brightest and best to the four corners of the world. Fianna Fáil cannot be trusted. Sinn Féin will not be the party to make Fianna Fáil look fiscally responsible when its policies would be disastrous. The root of the Fine Gael proposal is the Fianna Fáil proposal. I urge the Minister to rethink. I urge him to get his priorities right and to put tackling the housing crisis, the cost of child care and the high cost of living above some half-baked, recycled Fianna Fáil idea.
A hard Brexit is now a real possibility. Today the Minister for Finance released a statement on the possible impact of a hard Brexit and it makes for sobering reading. The idea that hours later he would come into this Chamber and talk about reducing our ability to invest is simply mind boggling. Deputy Michael McGrath said the European Commission might let us use the money we have put into the fund to deal with Brexit but if there is a hard Brexit, it will happen before a penny goes into this fund. The idea that we would lock money away in this fund and hope that the Commission would allow us to use it in the face of Brexit is absolutely daft.
It is daft. The Minister had advice prepared for him by officials last year for a question and answer session. When he was asked if the fund would meet the uncertain cost challenges of Brexit, the answer given was that it is vital that the rainy day fund is not earmarked to meet the challenges of which we are already full aware. Sinn Féin knows, as does Fianna Fáil and Fine Gael, that Brexit is not an exceptional circumstance because it has been flagged for more than two years. Indeed, the answer that the officials gave the Minister was that the Government and the Oireachtas must take responsibility for addressing these issues and that using the fund to meet the challenge of Brexit would create moral hazard and so on. Brexit is just another idea being used to try to pass this Bill.
The National Pension Reserve Fund was a rainy day fund which was raided by Fianna Fáil to save the banks. It is written here in black and white that one of the potential uses for this fund is a bank crash in the future.
The idea that the Minister can come into this Chamber and talk about reducing our ability to invest is mind-boggling. Does he not see the connection between A and B? A hard Brexit is all the more reason to keep our options open and to be ready to step in with genuine, countercyclical investment policy if and when it is needed.
At 3 p.m., the Minister told us that the level of economic activity will be approximately 4.5% lower than our existing trajectory over the medium term. This aggregate figure hides an even larger hit to our economic activity in labour intensive sectors such as agrifood and indigenous SMEs. At 6 p.m., he came into the House and asked us to support this Bill which will drastically reduce our capacity to respond in sectors such as agrifood and to protect our SMEs. There is no joined-up thinking in this policy.
We know from the Minister's briefing that the rainy day fund cannot be used to meet the challenges of Brexit. It is stated in the information we obtained through freedom of information. If the Minister wishes to produce a genuine rainy day fund, Sinn Féin will be all ears but we reject this sham rainy day fund, which in reality is a bank bailout fund because it ties our hands precisely at a time we need maximum flexibility. The Minister should go back to the drawing board with Fianna Fáil, his partners in government.
My colleague, Deputy Pearse Doherty, has outlined Sinn Féin's position on the Bill. I want to pick up on some issues he did not address owing to time constraints, one of which is the contradictions in the briefing notes obtained by Sinn Féin via freedom of information requests to the Department of Finance. These are notes provided to the Minister in the lead-up to the publication of this Bill in respect of press briefings and appearances before Oireachtas committees. They detail various provisions within the legislation as published, including the withdrawal mechanism. The Minister touched on this earlier when he said that one of the withdrawal mechanisms would have to be Dáil approval. In fairness, he stated that there would be an exception under section 9(4) in regard to seeking Dáil approval but, up to that point, his stated view was that matters of national economic and financial importance should have the support and endorsement of not just the Government but also the Dáil. It is now provided in the legislation as published that Dáil approval can be side-stepped if the Minister decides it is in the national interest and it is a crisis. How do we reach that point? The legislation states that the Minister responsible for the introduction of the Bill, which is the Minister for Finance, shall consult the Minister for Public Expenditure and Reform before bringing a proposal to Government to withdraw moneys from the fund. In essence, the Minister, Deputy Donohoe, will have to stand in front of a mirror and ask himself whether he should withdraw money from the fund. If the Minister thinks it is a good idea, he will then bring the proposal to Cabinet but if the Dáil is in recess the money is simply withdrawn. That is one of the clear contradictions between what the Minister was saying in the lead-up to the legislation being debated in the House tonight and what is contained in the Bill as published. This highlights the Government's approach to this legislation over the past 12 to 18 months.
The Government is making it up as it goes along. This is a public relations exercise. Fine Gael is trying to portray itself as a party of fiscal prudence while, at the same time, portraying other parties that are asking the Government to invest in housing, health services and public services at a time people are sleeping on the streets, lying on hospital trolleys in overcrowded conditions, living in direct provision and in family hubs, where children are at risk, as irresponsible. The Government has opted to establish a rainy day fund for future crises, ignoring the crises we are currently trying to navigate our way through. It is fiscally irresponsible to do what it is proposing to do and the Government, and the Minister of State, Deputy Canney, know that. They are setting out the dark scenario of a major economic downturn at some point in the future when we will be glad we have this €8 billion fund while ignoring the fact that many people in this State tonight will sleep without a roof over their heads. That is not only fiscally irresponsible; it is morally irresponsible.
One of the other issues I want to touch on is the Minister's commentary on the fund being used as a potential bank bailout. In this regard, the briefing notes provided by the Department to the Minister reference caution against closing off future uses of the rainy day fund at this time, particularly given we do not know what crisis could be faced into the future. This includes a stopgap measure for the banking sector. It is provided for in the legislation as well that the fund can be used to finance banks as a stopgap measure. The public will not agree to this. We all know what Fianna Fáil did to this economy through the bank bailouts. My grandchildren and my great grandchildren will still pay for it. It is disingenuous of Deputy Michael McGrath to talk about other parties, such as Sinn Féin, trying to use this as a baton to beat the Government, trying to portray us as people who are not responsible. As the finance spokesperson for the party that drove this economy off the cliff, he sought to lecture Sinn Féin on our public finances. Brass necks does not cover it when it comes to Fianna Fáil. I am not surprised that Fianna Fáil is trying to portray itself as having learned the lessons of the past. The Fianna Fáil I know will never learn the lessons of the past. They are only in it for themselves. Let there be no doubt about it - Fianna Fáil is looking to a couple of general elections down the line when they will be in government and in control of this €8 billion fund. Their past history explains what they will use it for.
The quicker we get this Bill to Committee Stage such that we can deal with the detail of it and get away from the PR and spin, the better for all of us. I have no doubt that the public, when they understand what this money could be used for into the future when it could be used now to build houses and alleviate hospital waiting lists, will not support it. I would be surprised if some of the Independent members of Government were supportive of it. People need to take a long, hard look in the mirror, just as the Minister, Deputy Donohoe, will have to do if he wants to bring a proposal before Government to withdraw money from this fund. The quicker we move to Committee Stage and deal with the details of the Bill, the better. I hope that the Government will listen to the reasonable voices within this Chamber and not to Fianna Fáil. I ask it to be open to listening to an alternative argument. We are where we are today because previous Governments refused to listen to the Opposition when it put forward reasonable and rational proposals.
They refused to listen to it. They thought they knew best but look where it got us. I implore the Minister to ensure this Government does not repeat the mistakes of the past. However, I am very sceptical as to whether that will happen. Time will tell.
This Bill is what one might describe as virtue-signalling. In other words the Minister for Finance and the Department of Finance want to send out a message that times have changed and that we hope not to go back the time of the bank guarantee when all the parties in the House, with the exception of the Labour Party, voted for this guarantee. It was probably one of the biggest mistakes ever made in the country's history. The Government is saying that with a fund of €2 billion up front, and €500,000 a year, our economy is more structurally sound than it might otherwise appear to be. As a strategic tactic, I can understand why the Minister for Finance might want to send out virtue signals. However, I find it very difficult to understand how a Minister for Finance, who presided over a budget on budget day, which bore almost no comparison to what he brought to this House as his forecast and outline of his budgetary position at the time of the summer economic statement and other statements, can attempt to lecture anyone and how he suddenly found, miraculously, another half €500,00 down the back of the sofa to give to the Department of Health in the actual budget.
The Minister also discovered in recent times that the overrun in the cost of the children's hospital, which is a much-needed project, is of a scale the country has never experienced before. Can the Minister for Finance and the economic managers in this Government give us an explanation or account of their management as to how so much money has gone astray in just one area? They have been completely silent. They are now saying to us that this particular Bill is part of the fix of the economic difficulties we may face in the future. I do not believe that and I know some of the people in government and in the Department of Finance are probably far too intelligent to believe that either.
Strategically, virtue-signalling, by saying that a country is potentially more robust than it might otherwise be, may have its values. Bear in mind, however, that as a country we now have, when one takes into account our gross debt minus the other holdings we have, somewhere below 60%. That is the real situation and is the EU target. It may not be recognised or presented in this way, but that is what the figures show. It would be far better if we had a real conversation on where we really stand because we are now entering the scariest, riskiest point in our country's financial history as we approach the UK's decisions on Brexit.
I see this evening that an amendment on a customs union proposed by the British Labour Party has been defeated in the House of Commons by 327 votes to 296. At this point, I do not know what the fate will be of the other votes which are taking place later tonight.
The Minister's own commentary today confirms that we are at a very dangerous point. The Minister and the Taoiseach indicated that two significant stand-out risks are that overall a difficult Brexit will lower growth by in the region of four points and we can anticipate an increase in unemployment of two points over a period of time. These are not minor but are serious indicators. A proportion of those people who are now back at work face a serious risk of unemployment and families, individuals, towns and the whole country may again experience distress and hardship.
We have the largest cloud hanging over the economy since the bank guarantee, NAMA, the collapse of the banks and the working out of that. I was part of the Government that had to take up the reins of a mess when Fianna Fáil walked off the pitch and left Government Buildings practically in darkness. We had to pick up the pieces. In particular after 2013, year after year, as Minister for Social Protection, I had to see money from the savings made in social protection by getting people back to work go to the Department of Health to try to stabilise its position. Instead of Department of Health now being managed by the Government, which is challenging, the figures coming out of that Department are now worse than they have ever been. For many people, unfortunately, the experience of the health service is nothing like it should be in a country as rich as this one. Not only that but we are now facing a really difficult and dangerous strike by nurses who are looking to have their legitimate pay issues addressed in a competent manner by this Government which should be responsible for managing economic events.
Instead, we are going to have a buffer in place of €2 billion from the Strategic Investment Fund, followed by €500,000 a year. As has been said by many other speakers, we have absolutely no idea at what point it may be used, except that all the indications are that it is there as a kind of backstop to limit the impact of another financial, banking or fiscal crisis which is part of a European framework.
There are certain issues that are giving rise to populism and are a danger to European democracies. In this country, we have an acute housing crisis that is up-ending all the previous assumptions among young people, who have are in employment and are educated, that they should be able to afford to rent accommodation at a reasonable cost - for example, less than 25% of their income, although many countries would say 15% of their income. They should be able to aspire to eventually purchase or build their own home as their parents and grandparents were. We have allowed that particular expectation and assumption to be up-ended.
I recall the Minister quoting Yeats in his last budget speech, saying the centre must hold as opposed to saying the centre cannot hold. On housing, the Minister should know should know the centre is not holding. There is distress among so many citizens that there are so many homeless people. Instead of that problem being tackled, it is actually getting worse.
How does one undermine an economy and a democracy? One does that with catastrophic events like the bank guarantee and what happened afterwards. One does that also by consistently undermining people's reasonable expectation that with education, hard work, diligence and application, they should be able to rent at a reasonable price and, at an appropriate time, be able to access a very secure long-term tenancy or to purchase or build a house.
The Minister may be seeking to shore up the Irish economy and to build people's confidence in this country that we can come through what may be a very difficult time with Brexit. It is an event nobody in any part of this House favours, other than perhaps those from Solidarity-People Before Profit, who have said they are Lexiteers and are in favour of a left-wing exit of some kind from the EU. However, I am not aware that others support Ireland quitting the EU.
What we have is a situation where we are debating this very modest Bill to virtue signal in respect of €8 billion over a number of years. We would be far better in economic strategy terms to utilise the funds we have available in a careful way, given we have to be careful with money, to address the key crises that could undermine democracy in this country. We have not really had a discussion on how exactly we are going to respond to Brexit, and we cannot have that discussion given we do not yet know the outcome. What we were told by the Taoiseach today is that we are not going to see the actual details of the Brexit legislation until some time towards the end of February, and the assumption is that it probably has to be passed before 25 March.
If ever there was a time when a Government has managed to put a whole load of carts before the horse, this Bill is one example. If we have a very difficult Brexit, we will need to be able to have command of our financial resources and manage our debt situation in such a way that we can best maintain all the features of Irish Government expenditure that we wish to see maintained. That includes current expenditure in terms of all necessary areas, such as education, health, social welfare. We know what happened when the economy went into crisis. I can remember the report called An Bord Snip and all the things that were to be cut or eliminated. Let us remember that once countries have signed up to these events, it is not possible to call them back. At this point, I find the idea that the Government would spend time on this legislation genuinely extraordinary. The Government should be putting its best and brightest brains to addressing the significant issues we have, particularly in the area of capital investment in housing and the investment we require in education.
We also need to take into account that there are expectations, to put it mildly, in terms of what is going to happen broadly on tax policy and tax structure in Europe. We know already that quite a number of European countries are moving to digital taxation, particularly in regard to the very big IT and social media companies, because they are generating no tax revenue from all the spending their citizens are doing in these areas. It is perfectly understandable that this is happening yet the Minister, even in the clean, cool air of Davos, could not acknowledge that Ireland has a problem in regard to how it deals with corporation tax and how it is not sustainable in the long term that social media companies and other companies would not contribute a fair share of corporate taxation to the different countries they operate in.
This flies in the face of what is happening tonight in the UK Parliament in that we are potentially moving to a very difficult Brexit, if not a disastrous Brexit. In the context of the Belfast Agreement, there is pretty much unanimity that we do not want a hard border in Ireland but I do not think this Bill is going to do anything to help any of that. The Government is probably doing this on foot of Fianna Fáil's original plans around this legislation, which were basically to get Fianna Fáil in a position where it could begin to restore its reputation for fiscal rectitude, having wrecked the economy through the bank guarantee. The Government's decision to go with this Bill is not appropriate at this time and it will not lead to a good use of funds on behalf of the people of Ireland. The need to invest in housing is pretty much the elemental crisis this Government is facing yet is failing to manage. As I said, despite the overruns on the children's hospital, which amount at this point to several multiples of the potential annual transfers to this fund, the Government seems incapable of being able to manage that.
One of the first decisions the Government made was to abolish the Department of Public Expenditure and Reform. I do not believe it was loved by very many people but it was an oversight body which was meant to look at and query the spending of funds by different Government agencies and Departments. We are now back to the good old days in that it is rolled into the Department of Finance, so it is very difficult now to even ask the Minister for Finance and Minister for Public Expenditure and Reform for a specific answer on a question around what has been happening to the children's hospital and the massive budget overrun. He just passes that off, as the Minister for Finance, to the Department of Health and it, months later, sends a blah-de-blah reply with no actual detail on the information that, if there was proper accountability, it should be able to identify and answer for.
It is regrettable that the Government should decide to roll along with this at this point in time. We would be far better served by having a detailed discussion on the likely impact on businesses of a difficult Brexit. Let us consider the position of people running a small business which is importing and exporting to and from the UK. They will have to meet the costs of, for example, customs clearance if there is a hard Brexit. We know that in regard to our imports of food from the UK there is likely to be what has not been seen in the Irish economy for ten years, which is a significant increase in inflation. We are doing this against a backdrop where, in the context of the nurses strike, the Government is unprepared to discuss and establish a pay discussion forum for public service employees. Public servants took a lot of cuts and experienced a lot of difficulties, and while there has been a process of restoration, many people have not got much, if anything, in the way of an increase.
We are facing some very difficult times. This Bill is a distraction and, as I said, it is virtue signalling in the hope that somebody in Bloomberg or some place like that will pick it up and say, "This is very good, Ireland is putting away a few bob for the rainy day." We know what they say about bankers and a rainy day.
They say when it is a rainy day, the bankers will take the umbrellas away, but when the sun is shining, the bankers will be out with the umbrellas. To be honest, this is a kind of rather strange economic interlude but it is a distraction from the real issues that face us, namely, the difficulties around Brexit that we should be here tonight discussing.
The simple-mindedness, paucity of thinking, ideological bankruptcy that lies behind this concept of a rainy day fund the Government is presenting in the Bill, which it has been arguing for some time, is staggering. It makes clear that the Government has not the faintest clue or simply does not want to acknowledge why we had an economic crisis previously and why we will have another economic crisis fairly soon. The Government had a rainy day fund prior to the previous crisis. Did it stop the crisis? No. Did it stop vicious austerity being imposed on the people of this country? No. Did it stop a virtual economic collapse in the country? No. Did it prevent us having to go begging to borrow money and impose vicious austerity in order to get money from the European Central Bank, ECB, and the International Monetary Fund, IMF? No. Did it achieve anything? The answer is "No", except – I am sorry but I forgot - that it bailed out the banks. That was the one thing it achieved. The same banks that are now selling off people's mortgages to vulture funds, repossessing their homes, and paying no tax because there is a tax loophole that incredibly allows them to write off previous losses for 20 years, even when they have restored themselves to extraordinary levels of profitability, and where the people running those banks are back earning shocking, obscene, staggering salaries of between €700,000 and €800,000. That is what it achieved. It did nothing to act as a buffer, and now the Government just wants to do it again.
Has the Government learnt anything at all? It is just mind-boggling. The Government wants to draw us into an argument about how we fight over these little crumbs rather than look at the storm that hit us the last time and the storm that will hit us again when the markets to whom the Government bows down wrecks economies overnight. Its take on the economic crash which is used to justify this is Orwellian. It peddles the myth that we were spending beyond our means. The Taoiseach goes on about it and says the nurses cannot get paid because the reason we had an economic crisis the last time was public servants were paid too much. That is not the reason we had an economic crisis; we had an economic crisis because the rich in this country, in America, across Europe and just about everywhere in the western world, had spent the previous 15 to 20 years turning housing, the most basic human need, into an object of speculation.
That is what happened. Even a child knows that. Everybody knows it but the Government pretends it is not the truth. It was something to do with the fact that public servants, apparently, were living beyond their means. That is just preposterous. I think it is happening again. All the developers who helped bankrupt the country, those greedy people who speculated on Irish housing then went into NAMA and were paid €200,000 a year to get back into business were nurtured back to profitability and then the State gave them back all the assets and property which we had at least off got them and should have kept. Now one of them, Seán Mulryan of the Ballymore Group, is selling back a property to the Central Bank. The ironies just pile up. The Central Bank moved from Dame Street a few years ago to the docklands and it is now going to buy another property beside its new headquarters from Mr. Mulryan. The total bill is €200 million. It is unbelievable. One could not make it up but it is happening. It was in the business pages of the Sunday Independent last weekend.
I do not know if anyone has even mentioned that. I find it beyond belief. All the boys are back in town and now they are backed by an even greedier bunch. The previous Irish property crash was financed by the banks and the greedy Irish property speculators. Now, having nursed them back into business, in order to hoover up everything, they have gone to America to get the big vulture funds to come in and back them financially so that they can get everything back and get even more. They will have even greater control over the Irish property sector, which is running riot, and, against that background, the Government is saying we should put €500 million a year into a rainy day fund. It is an absolute joke. Even if I thought it was a good idea, by the time the next economic crash comes, there will be bugger all in it anyway compared to the likely hit. It is just nonsense. I would not mind if the Government said we need a safety net or a buffer after we do the things that would begin to create some insulation for the economy and society against the inevitable economic crash that will be caused by those people again.
When the next economic crash comes, which it will, will the Government say it is down to the public servants or to the nurses? The Taoiseach was implying that today. He said if we concede to the nurses, we are one step closer to an economic crash. Whether the nurses get paid, an economic crash will come and it will have nothing to do with them. However, what it will have to do with is the greedy people in the financial markets and the people who have taken control of the property sector, many of whom are the same, deciding at a certain point that they are shifting their money somewhere else because it is not profitable enough for them anymore. That is when the crash will come. We have no control over what they do because we have given them more control over wealth, assets, the financial system and property than they even had before the previous crash, which they caused.
That is what the Government has done and, against that background, this Bill is pathetic. What the Government could do if it wanted some insufflation for the economy is to start to get back some of that surplus wealth those individuals control, the movement of which can destabilise this economy or the wider European or American economies. It is due to the fact that such wealth is even more concentrated than it was before the last crash that they can destabilise our economy and the global economy. Unless we address that fact we do not have a prayer of dealing with the next crash that is coming. I am amazed that nobody even asked those questions. I doubt that any economics or financial correspondents are even listening to this debate. They think they have heard it before and there is no point in discussing it. They will discuss tomorrow's crisis, whatever that is, but not provide a deeper analysis of why crashes happen and what we might do to the system that generates the crashes again and again, where they tend to get worse and where the concentration of wealth, the ingredients that generate the crises in the first place, are accumulated on a bigger scale each time there is a crisis. We will have part two tomorrow.