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A HEFTY €1.5 billion is to go into a rainy day fund, Finance Minister Paschal Donohoe announced today.
In the Budget 2019 announcement in the Dáil this afternoon, Donohoe said that the fund:
will be capitalised with €1.5 billion from the Ireland Strategic Investment Fund and supplemented with an annual contribution of €500 million from the Exchequer starting from 2019.
He also said that “historically high levels of corporation tax will be set aside for the purpose of capitalising the fund”.
The minister said that this fund is being added to because the “ability to withstand economic shocks [in Ireland] needs to be stronger”.
Not new
But this isn’t the first time we’ve heard of this rainy day fund. Essentially, it’s a fund that’s meant to act as a buffer against any future potential economic shocks. It’s something that is supposed to help Ireland should we run into problems down the road.
Back in December 2015, the Fianna Fáil Finance spokesperson Michael McGrath put forward the idea of a rainy day fund in a press release, saying it would “cushion the effects of any future shock in the economy”.
The party described the concept as “similar to the National Pension Reserve Fund”, which was set up in 2001. (Money from this fund was used in the bank bailout – this fund has been rolled into the Ireland Strategic Investment Fund).
On 7 June 2016, the Irish Fiscal Advisory Council released its tenth Fiscal Assessment Report - in which it mentioned the fund.
On 21 June 2017, the then-Finance Minister Michael Noonan mentioned the establishment of a rainy day fund in the Summer Economic Statement, saying that it would be put in place once a balanced budget is achieved. The aim was for public expenditure not to increase at a pace that the economy couldn’t absorb.
While the Public Accounts Committee was questioning officials from the Department of Finance in July 2017, PAC chairman Seán Fleming asked Chief Economist John McCarthy if there was anything in the fund.
McCarthy said that the fund was empty because the country’s books were not balanced.
“[There's] nothing in it yet, but there is a provision at the moment for €1 billion to be provided in 2019, 2020 and 2021,” he continued.
“It doesn’t come in until we balance the books. We balance the books in 2018 so it doesn’t come until the year after, 2019.”
So the fund was due to be put in place once the Budget was balanced – and today, Donohoe confirmed that next year it will indeed be.
Hence the filling up, at last, of the long-mooted rainy day fund.
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Rainy day fund ??? For the ministers paddys day weekend in new york???
I don’t get it, the pension reserve fund was taken from surpluses. I never heard of borrowing money to stick it in the bank. (well, except for anglo)
@Watchful Axe:
here is the bit you missed:
will be capitalised with €1.5 billion from the Ireland Strategic Investment Fund and supplemented with an annual contribution of €500 million from the Exchequer starting from 2019.
@Tim Pot: Oh right, fair play. At least something is working.
@Watchful Axe: the pension reserve fund was setup by Charlie McCreevy. It was originally planned to assist in generational pension requirements. The levels before the bank bailout were 15 billion. Read this and weep. It was used as part of the bank bailout programed as directed by the troika. It’s gone. Not a red cent left.
Pascal, it’s lashing rain in the housing market and health service
That is a lot of money, some should be spent in the above two areas.
@Hellenize Dublin:
but money is being spent in these two areas.
@Tim Pot: you’re missing the key word “enough”…
The Govt could be giving a crumpled fiver to the situation and you could deem that as money being spent
@Tim Pot: and just for the record, as you seem to be pro-Fine Gael, I’m a free martlet enthusiast and don’t believe that govt money should be spent on the situation in order to alleviate it
Alas, public opinion seems to insist that govt spending will triage the issue
1.5 billion is a lot to stow away considering the next rainy day the taxpayer will be asked for more money anyway (once again, not what I agree with)
@Hellenize Dublin: don’t forget the water shortages
@Hellenize Dublin: don’t forget the water shortages lol
Last time pensions fund was raided, and those affect are still and probably always will be. You Paschal and FFG wish for us the people to believe you wouldn’t raid our money again for status quo.. Whilst paying back debts not ours, you wish to take more to screw all again.. I hope the electorate sees you out for a long time..
he means for the banks when they screw up again.
No problem with this been setup, however, I imagine, when the time comes I guess everyone will have a problem with what it will be used for. Bailing out the nearest person that makes a balls of something, but it has it be into the billions.
Usual whingfest on the journal,Im no fan of the government but this is a good idea and needs to continue going forward We need to be prepared for the next downturn and people also would be complaining if the government didn’t do this as well they just cant win
@Robert Woodward: its a fund set up to bail out future banking crises. How is that a good idea?
@Leo Massey: The next crisis will come along and may not necessarily be caused by the banks.In fact it looks like the seeds of our next crisis are an over relience on corporation tax.Are you saying we should just keep spending and make no plan b
@Leo Massey: Because, if it happens again, a generation may not be plunged into debt. To be fair, there are lots of reasons outside Ireland that could cause huge banking issues down the tracks.
@Robert Woodward: I’ll think you’ll find that we are already €209 BILLION in debt
this fund will do little to help when the next crisis comes. just the same as back in 2009.
we would be much better off hedging by buying yuan or gold with budget surpluses
@Robert Woodward: I think a nations financial planning should involve extremely heavy regulation on those inclined to gamble with that nations stability. This hasn’t been done yet as far as I can see.
And the banks don’t have to pay any tax for 20 years!
If you put a juicy cherry anywhere near these grasping insane institutions, they will find a way to pick it, this Will happen.
Your implicit trust in this is an example of why they get away with it.
****Insert standard Irish begrudging comment here****
@Charlie B:
bonus points for using the following:
corrupt
self-serving
cronies
elite
FFG
@Tim Pot: well played
@Charlie B: wow the edginess of that comment would equal a paper cut…..but do tell us have you got any other great phrases, waiting for something to finish off like snowflake or a real belter
Any ideas how much is in the Strategic Investment Fund ? – just asking.
It’s still fairly wet lads!
“bank bailout fund”…to go with our bailout tax *coughs* I mean universal social charge…
Another pay day for bondholders on the way
Call it what it is a second crash slush fund to bail out the banks and developers, along with keeping the wages and expenses of the 166 clowns in the dail clown college sweet
What about the €14 Billion from Apples taxes ..
are they going to use it or sneakily give it back to them in the hopes we forget ?
They can use €10 Billion of that to reduce the IMF loans and reduce the interest we pay on that .. before the next recession !!
have your say