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'Rainy Day Fund is finished before it even started' say TDs as minister drops €500m top-up

Donohoe has rowed back on his commitment to top up the fund this year.

Image: Shutterstock/Atomazul

OPPOSITION PARTIES HAVE hit out against the government for not lodging the long-promised funds to the Rainy Day Fund. 

Yesterday, Finance and Public Expenditure Minister Paschal Donohoe said he would be moving €1.5 billion from the State’s Strategic Investment Fund into the Rainy Day Fund, but said he would not be topping it up with the promised €500 million. 

His comments came ahead of the publication of the government’s White Paper, which sets out in more detail the State’s finances ahead of Budget day next week. 

It outlines that the there will be surplus this year of €609 million and also an overrun in corporate tax receipts of about €800 million. 

Yesterday, Donohoe said he would be dipping into the extra tax take from multinationals to pay for some supplementary estimates that are needed for the likes of the health service. 

EU Budget

The White Paper also states that we are to increase our contribution to the EU Budget this year by a billion euro to €3.475 billion.

Labour Party, Brendan Howlin has said the Rainy Day fund is “clearly not working”. 

Labour has been critical of the so-called Rainy Day Fund, which was the first thought up by Fianna Fáil, from the outset.

Sinn Féin has also criticised the fund as a “badly designed policy”. Sinn Féin’s TD Pearse Doherty said the policy of a Rainy Day Fund “has finished before it even started. No money will be going into the Fund from this year’s revenue”.

What is the fund meant to be used for?

Essentially, it is 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. 

Rainy Day Fund

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).

In 2016, the Irish Fiscal Advisory Council released its tenth Fiscal Assessment Report - in which it mentioned the fund. And in 2017, the then-Finance Minister Michael Noonan, seemed to adopt the idea, mentioning the establishment of a rainy day fund in the Summer Economic Statement. 

The plan was to put away a provisional amount of €1 billion per year from 2019 onwards into a rainy day fund. But, it hasn’t worked out that way, with Donohoe rowing back on the lodgement amount yesterday.  

Howlin said the if Rainy Day Fund idea really worked, the government would have funded it this year just in advance of a potential ‘no deal’ Brexit.

“The fact that they didn’t tells us that this is another failure by Fine Gael in managing the public finances,” he said. 

There have been questions raised about what exactly the fund can be used for, with the Oireachtas Budgetry Oversight calling for more clarity around the issue in its recent report. 

In February, TheJournal.ie reported that a Department of Finance briefing note for Finance Minister Paschal Donohoe on the fund, which was released under Freedom of Information, notes that the fund should not be used for Brexit or climate change, stating that it “is vital that the Rainy Day Fund is not earmarked to meet challenges of which we are already fully aware”

Doherty said the legislation that underpinned the fund allows it to be used only in exceptional circumstances and to bail out the banks.

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