Select Committee on Finance, Public Expenditure and Reform, and Taoiseach debate

Future Ireland Fund and Infrastructure, Climate and Nature Fund Bill 2024: Committee Stage

An Leas-Chathaoirleach

Apologies have been received from An Cathaoirleach, Deputy John McGuinness. I welcome members, and also viewers who may be watching our proceedings on Oireachtas TV, to the public session of the Oireachtas Select Committee on Finance, Public Expenditure and Reform, and Taoiseach for the Committee Stage consideration of the Future Ireland Fund and Infrastructure, Climate and Nature Fund Bill 2024. On behalf of the committee, I welcome the Minister for Finance, Deputy Michael McGrath, and his officials to the meeting.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official either by name or in such a way as to make him, her or it identifiable. I remind any members who are attending remotely of the constitutional requirement that members must be physically present within the confines of the place where Parliament has chosen to sit, namely, Leinster House, in order to participate in public meetings. It is important to note that in order to participate in a division in committee, members must be physically present in the committee room.

In order to provide for a smooth running of the meeting of the Committee Stage of the consideration of the Future Fund and Infrastructure, Climate and Nature Fund Bill 2024, any member acting as a substitute for a member of the committee should formally notify the clerk now if he or she has not already done so. Divisions will be taken as they arise. Members must attend in person in the committee meeting room for divisions, although they can attend the meeting remotely. Members attending this meeting in accordance with Standing Order 106(3) should be aware that pursuant to that Standing Order, they may move amendments but cannot participate in voting on those amendments.

Section 1 agreed to.

SECTION 2

An Leas-Chathaoirleach

Amendment No. 1 in the name of Deputy Nash is ruled out of order due to the fact that it poses a potential charge to Revenue.

Amendment No. 1 not moved.

Section 2 agreed to.

Sections 2 to 5, inclusive, agreed to.

SECTION 6

Question proposed: "That section 6 stand part of the Bill."

Deputy Rose Conway-Walsh

On-----

An Leas-Chathaoirleach

We were going well now.

Deputy Rose Conway-Walsh

Sorry. On section 6, obviously it provides for the investment policy of the future investment fund but at present the only specification under the investment strategy is that moneys may be invested inside and outside of the State. The State is suffering from a chronic housing shortage and infrastructure deficits. Our concern relates to the constraining effect that legislated contributions to the future investment fund could have on public investment in the years ahead. Investment of moneys within the future investment fund should have a domestic focus, particularly in areas of infrastructure and housing to boost the productivity capacity of our economy. Will the Minister speak to that?

Minister for Finance (Deputy Michael McGrath)

I thank An Leas-Chathaoirleach and colleagues on the committee for the opportunity to come before them today. I thank Deputy Conway-Walsh for raising this issue. It is probably relevant to the first group of amendments as I read it.

Deputy Rose Conway-Walsh

Yes.

Deputy Michael McGrath

We have amendments Nos. 2 and 3. Deputy Conway-Walsh's colleague, Deputy Doherty, has an amendment, namely, amendment No. 3, which is around the strategy having regard to the promotion and the economic development and stability of the State, across sectors including housing, infrastructure, energy and water. They come under section 7 but we are on section 6 at this point.

An Leas-Chathaoirleach

Yes, that grouping is under section 7.

Deputy Ged Nash

The Minister should be given the opportunity to respond on those amendments rather than repeating what he may say, although I do not want to anticipate what he will say.

An Leas-Chathaoirleach

Okay. I am agreeable to that.

Question put and agreed to.

SECTION 7

An Leas-Chathaoirleach

Amendments Nos. 2 and 3 are related and will be discussed together.

Deputy Ged Nash

I move amendment No. 2:

In page 8, between lines 15 and 16, to insert the following:

“(3) The Agency may, in consultation with a Minister of the Government having functions in relation to a sector of the economy, develop proposals for investment in that sector in order to support economic activity and employment.”.

This relates to the investment strategy that the NTMA would intend to deploy in terms of the use of those funds. What I have in mind in the context of this amendment is to give the NTMA a more explicit remit in the development of our regions. When I speak about the development of our regions, I speak primarily around the requirement to invest in our indigenous SME base. We are only too well aware of our excessive reliance on multinational corporations both for quality jobs and in terms of our revenue stream. The reality is that we are discussing the creation of this future Ireland fund and the infrastructure, climate and nature investment fund because of Ireland's success in terms of the surplus funds we are generating from what might considered to be excess corporation tax receipts.

Enterprise Ireland is one of Europe's most successful indigenous enterprise agencies in indigenous job creation and supports for the indigenous SME base. The majority of those jobs last year, as has been the case in recent years, were created outside of Dublin. It is an important agency in the context of regional development. The Minister is aware - the entire system is aware and the evidence is there - that the Irish SME base is not as productive and has proven not to be as innovative as the countries to which we like to compare ourselves. We have a productivity, competitiveness and innovation challenge. Given the precarity of corporation tax receipts and the implied precarity around FDI, it is important that we use the funds we have and will have in this fund to explicitly target those investments at the SME base, making it more productive, competitive and innovative and ensuring there are decent jobs in high-performing and high-potential Irish companies into the future, notwithstanding state aid rules. We cannot anticipate where EU state aid rules are going to be by the time we can draw down funds from the future Ireland fund to invest in our indigenous enterprise base. There is a logic to explicitly saying this evening that this legislation must explicitly say that we are open and prepared to invest in our SME base into the future. There is also a logic, when talking about excess corporation tax receipts from firms that have done well in and been good for this country in the context of foreign direct investment, that we invest some of that surplus in our indigenous enterprise base into the future.

Deputy Pearse Doherty

Amendment No. 3 in my name is similar to that of Deputy Nash in its purpose. It relates to the future Ireland fund investment strategy. The strategy is important and I have huge faith in the NTMA and how it will operate, although we have had reason to have clashes recently regarding its ongoing investment in companies operating in the illegal territories, which is appalling and continues to be so, despite that fact it has divested from a number of companies - about a quarter of the portfolio - as the bombs rain down on Gaza. Most people are disgusted at the thought that our taxpayers' money is invested in companies involved in the occupied territories. We will come to that later as we deal with the environmental, social and governance section of the Bill. Where this Bill is deficient is it fails to understand - I genuinely think this comes from a political-driven analysis by Fianna Fáil and Fine Gael - the infrastructural deficits across the State. It is quite interesting when you look at the SPU and the surpluses and money that would be put away in the fund, we also look at some of the unknowns and risks in the economy. We still do not have a clear picture of how the OECD process will end up in terms of the impact, particularly of pillar 1, on Ireland. Yet, we have legislation that locks in investment and locks that investment away from certain infrastructural needs we have at this point. That is where I have a fundamental difference with the Government regarding this fund. Funds are required. As the Minister knows, we supported the transfer to what is known as the rainy day fund in the past year. I support the establishment of the fund but the idea that it would be a certain amount of GDP and that it is left to the NTMA to develop the investment strategy without regard to any specific area is a problem. Amendment No. 3 proposes the insertion of the following:

Without prejudice to the generality of subsection (1), the ... fund investment strategy shall have regard to the promotion of the economic development and stability of the State, across sectors ... but not limited to housing, infrastructure, energy and water.

I was struck by a message I got late last night from a young woman who is in Australia and wants to come back home. It is going around social media within the Irish community in Australia. They want to come back home and they talk about the restrictions on coming back home. There is the issue of housing, if you can afford it. If you want to come back to your local community, you are unlikely to get planning because of the planning rules. If you are looking to go into the town, there are challenges. The deposit ratio is also a difficulty because they are not here. How do you get a mortgage if you are not living in the country? The banks say you have to live in the country to get a mortgage. You have to have a job to get a mortgage. If people who have been in Australia for the past couple of years want to return and help and contribute, how do they do all of that? Housing has become a disaster for many people. For a lot of families and people with whom I engage, they are looking at what we are doing in this room. Although I support the idea of funds, they look at the situation and say, "Are you off your heads? We have not only my kids in the back room but my grandchildren in the back room." We have a housing crisis yet the Government is talking about billions of euro being invested somewhere abroad when what we really need is investment here in housing, our communities and so on. Housing is not just an issue for that young woman in Australia or indeed that mother whose box room is now home to her daughter and young family. It is an economic issue. The Minister has heard it and I have heard it. We know it is now becoming an issue for some large employers to continue the investment pipeline in the State due to the unavailability of housing to meet future staff needs for those companies. It was put on the record of the Dáil by the previous Taoiseach that this is the case. There is an acknowledgement yet no action, unless you want to call Housing for All action. I do not even want to get into that.

This is about trying to ensure that the fund would have the promotion of economic development and the stability of the State across sectors including but not limited to housing infrastructure, energy and water at its core. I made the case before that if I were in the Minister's position, I would be ramping up capital investment in housing and would do it significantly. That is the biggest challenge we have in this State. A Government in tune with the needs, aspirations and hopes of the Irish people would respond in that way. Can the Government do both? Can it put money away, making sure it is there for other rainy days? Absolutely, but at the same time, it must make sure there is the necessary investment. Can money in some of these funds contribute to solving the housing crisis? The Government can do that as well through different models. We have a model in mind that would be beneficial is if there was investment from a fund like this with a decent return. That is what this amendment is. We will tease through the other stuff later on with regard to the blunt nature of the legislation. The reality is we are legislating for 0.8% of GDP contributions. We will come to that later on but I would be very surprised to see that 0.8% of GDP had been contributed to this fund in five years' time, if any of us are returned in the next election, and even if the Minister is in government.

We have seen legislation like this before, where certain amounts of money were to be contributed into funds. I think the Minister, Deputy Donohoe, took resolutions on four occasions before the Dáil – at least three but maybe four – not to pay the money into the fund. As I said, we will come to that later. The problem is we could have a nice wee conversation here and then you walk out the door and talk to the ordinary people of Ireland and the only thing they want to talk to you about is housing. I am sure everybody around this table is getting this as we canvass for the local and European elections.

Deputy Michael McGrath

I thank both Deputies for their contributions to the debate on the investment strategy of the future Ireland fund and their proposed amendments to section 7 of the Bill. As I understand, Deputy Nash’s proposal is to provide for the NTMA, in consultation with a member of Government, to develop proposals for investment of the resources of the fund in that sector in order to support economic activity and employment. This would be a discretionary power for the agency but would be part of the strategy. Presumably, the intention is that some of the resources of the future Ireland fund would be invested in such sectors of the domestic economy based on such analysis.

Similarly, Deputy Doherty’s amendment would require the NTMA to "have regard to the promotion of the economic development and stability of the State, across sectors including but not limited to housing, infrastructure, energy and water." Section 22 of the NTMA (Amendment) Act 2014 already provides the NTMA with a power under the part of the Act that deals with State assets and investments. When performing functions under that part of the Act, the agency is described as NewERA - the New Economy and Recovery Authority. Under that existing provision, the agency can develop proposals for investment in relation to the energy, water, telecoms or forestry sectors. This can also include any other sector in which the Minister for Finance considers it is desirable to do so in the interests of supporting economic activity and employment in consultation with the Minister for Public Expenditure, National Development Plan Delivery and Reform and the Minister whose functions relate to that sector.

Section 40(2) of the 2014 Act provides that the agency, in determining and reviewing the ISIF investment strategy, shall have regard to the agency’s functions under section 22 of the 2014 Act. This connects with the support of economic activity and employment in Ireland aspect of ISIF’s double bottom line. As part of the design of the structure of the funds, the Government agreed to keep ISIF in place.

As the Deputies know, ISIF is focused on investment in Ireland. ISIF has had a mandate since 2014 to invest on a commercial basis in Ireland to support economic activity and employment. The agency’s existing statutory powers in its capacity as NewERA with regard to the development of investment proposals in relevant sectors and the agency’s function of investing ISIF’s assets in a matter designed to support economic activity and employment will continue to apply. ISIF comprises the discretionary portfolio, valued at some €8.7 billion, and the directed portfolio, valued at €6.3 billion. In June 2022, the revised ISIF impact strategy was launched with a focus on long-term transformational investments addressing key strategic challenges facing the country across four key investment themes of climate, housing and enabling investment, scaling indigenous businesses, and food and agriculture. Investing to support balanced growth across all regions of Ireland is an important part of its strategy across the investment themes. ISIF has an ambition to invest €500 million in regional investments to further enhance the economic potential of Ireland’s regional cities. Retaining ISIF means that the State has the capacity to invest, or co-invest with others, so as to drive public and private investment in the State.

These amendments also need to be read in conjunction with section 6 of the Bill, the investment policy, which provides that:

The Agency shall hold or invest the assets of the [future Ireland] Fund on a commercial basis for the benefit of the [future Ireland] fund, so as to seek the optimal total financial return, as to both capital and income.

The agency’s mandate is to achieve a commercial return. The intention to use the resources of the future Ireland fund to invest in specific forms of economic activity would undermine the reason for the establishment of the fund. We all recognise there are significant costs arising down the line in terms of the cost of demographic change, digitalisation, decarbonisation and the other costs of the State. The policy aim is to establish a financial asset for the State to deal with such future liabilities that we know will arise. Utilising all the windfall corporation taxes means there is less provision for future liabilities. The expenditure on specific areas of economic activity would also reduce the amount of cash resources available for investment in the fund to deal with the expected costs in the years ahead.

Building a financial asset allows the State to use the proceeds of the fund to have resources available to support the Government of the day in dealing with these issues. We do not pretend that this will solve all the expenditure likely to be incurred in the State in the decades ahead but having financial assets in places will undoubtedly be of enormous assistance.

I know we will talk about housing in more detail later on. I refer to the Government’s commitment to addressing the enormous housing challenge we face and our commitment to the national development plan, which is funded. On the basis of the already very significant planned capital expenditure, the existing and well-established roles of ISIF and NewERA and given the core purpose of the Bill is to develop a financial asset that will give us a return in the years ahead, I do not propose to accept the amendments from the Deputies.

Deputy Ged Nash

I thank the Minister for his response. I would argue that the way in which I drafted my amendment, amendment No. 2, is broad enough not to necessarily tie any future Government’s hands on what it specifically ought to do in terms of functions with regard to a sector of the economy and the development of proposals for investment in a sector in order to support economic activity and employment. We know what the NTMA is required to do. We are all aware of its legislative obligations, we read its annual reports and we meet its representatives regularly in various committees and other contexts. Similarly, we are extremely familiar with the operation of the Irish Strategic Investment Fund, what it is required to do and the good work it does in this country in investing in our economy. There was an example recently where ISIF invested in a very innovative proposition led by Louth County Council and property developers to develop infrastructure to enable 5,000 new homes to be built on the north side of my home town of Drogheda. That is a long-term investment that will have a positive social as well as economic benefits. Unfortunately, I had to step in to do the work the State ought to be doing in developing the infrastructure required to allow homes to be built. Nevertheless, we got there in the end. Ultimately, we got there in the end by using taxpayers’ money but in another way, through ISIF and a long-term investment through a special-purpose vehicle specifically set up to deliver that infrastructure for additional housing.

I argue that my amendment is broad enough while, at the same time, explicit in directing the agency to have regard to the economic affairs of the country into the future. I think it is useful to place that obligation, if we can call it as such, in primary legislation as much as we can.

Deputy Damien English

My understanding is that there is nothing preventing investment in these areas in the current wording. It is to be done on a commercial basis. Is that right? The amendments want to list them out. Going back to even 2016, ISIF would have invested in housing projects that kick-started housing in many counties. It has a history of doing it and there is no change here to prevent that - it is just the “commercial basis”. Am I right? The amendments want to focus on it. We are at one really, apart from explicitly naming them out here. Am I right in saying that? Yes.

Deputy Pearse Doherty

The investment strategy is clear. It is so broad it can allow investment within or outside the State, so Deputy English is correct. Taking the argument forward, there is no reason to suggest we do not include this text. They may or may not invest in housing.

They may not consider housing issues. This does not dictate they have to. What it does with respect to the investment strategy is to state an intention, that the Legislature, in establishing this fund, believes this area is a priority. If we were to take every political party at face value, they will all say that housing is the No. 1 issue, yet this is a multi-billion euro fund and we are not identifying housing as a priority. What is the argument against this? Yes, the NTMA can do this. Why not make it clear in this legislation that the NTMA should particularly "have regard to the promotion of the economic development....across sectors including but not limited to housing, infrastructure, energy and water"? This is the problem and it ties in with parts of the other legislation. There are commitments in this Bill, although there are ways out for the Minister to make the payments, which, as I said, I would not be surprised if those are not utilised, even in a growing economy. Commitments are made to put a substantial amount of money beyond the reach of a Minister to deal with infrastructural deficits.

Let us forget about housing for a minute. The cost of meeting our climate challenges will be massive. It will be bigger than the infrastructure and climate fund. That in itself will be a challenge. We have housing, water infrastructure and issues in the energy grid infrastructure that we need to deal with and this legislation has no requirement. All this money could be invested in the east coast of America or elsewhere. The fund should have regard - this is the mildest of the issues - to the needs of certain sectors, which are already under constraint as a result of this.

IBEC does not support the fund. That is surprising because naturally the suggestion would be that IBEC and business would argue for a fund like this to be established, but it has pointed out time and again that the infrastructural challenges that have built up in the State and are growing are now a constraint for businesses. They also cause serious problems for workers and families and, from the point of view of businesses, for employees, which push up demands for wages. IBEC is also looking at this from that angle. I have not heard anything from the Minister to not put in this legislation the need for the strategy to have regard to the challenges we have, especially those known to us in the area of housing and other areas such as water, energy and infrastructure.

Deputy Jim O'Callaghan

We need to recall we are in the unusual and fortunate fiscal position that the country is running a significant surplus this year, which is unusual when we compare ourselves to our closest neighbour and other European partners. It is because we are running a surplus that we are in a position to establish this fund. My understanding is that the purpose of the fund is so that in the future a significant sum of money will be available to the Government of Ireland to help the people of Ireland to deal with additional costs that will inevitably be incurred when we come to 2040.

On what Deputy Nash's amendment proposes, section 7(3) and (4) as already drafted provide:

(3) The Agency shall, in determining and reviewing the FI Fund investment strategy, consult with the Minister and the Minister for Public Expenditure, National Development Plan Delivery and Reform.

(4) The Minister shall, in formulating views for the purposes of subsection (3), consult with such other Minister of the Government as the Minister considers appropriate having regard to the functions of that other Minister.

There is a statutory mechanism in section 7 whereby the agency shall consult with the Ministers and Government. I presume that consultation would centre on necessities of investment in certain areas. However, I am conscious of what the Minister, Deputy Michael McGrath, said about ISIF and the NewERA fund where considerable funding is being invested at present, necessarily and as is required, in housing and other areas. If we are going to set up this fund, it should not simply replicate or be a continuation of other funds. The whole purpose of setting up a new fund pursuant to a different statutory regime is that this fund is intended to do something different. It does not mean it cannot or will not invest in the important areas of infrastructure Deputy Doherty referred to, such as housing and other infrastructure. However, we should not be too prescriptive in that respect. I would like to let the fund have a significant amount of leeway in investments, since its primary objective is to maximise the funds for the benefit of future generations.

Deputy Ged Nash

The fund absolutely has to have, as the Minister said earlier, a commercial focus and there must be a commercial return. I limited my remarks earlier when I proposed the amendment to the requirement to invest in our indigenous SME base because it is not as productive as the SME base of the countries we like to compare ourselves to. It is not as competitive or innovative and with the challenges with foreign direct investment in the future, we have to have a specific remit in that regard and we need to focus the fund on that challenge. It is also a regional development challenge. The implication is that we are investing in high potential firms, arguably unicorn-type firms that are sometimes hard to come by and high potential start-ups that Enterprise Ireland is always on the lookout for. Other enterprise agencies across Europe have different kinds of investment funds to ours and are successful at it - we cannot assume we will always be - in a competitive investment environment globally. I stand over this. We need a specific focus on what we use these funds for, namely indigenous SME investment.

Deputy Damien English

I agree with the need for a fund to invest in SMEs and start-ups and so on. Our two Ministers have that new fund at their disposal that can invest in those companies at key times. That also needs to be addressed at a European level. There is an element of risk with some of that finance, which is fine. We need to do it and back our companies, but this kind of fund is more about investing in sites or commercial buildings that would give a return to this fund, as well as possibly provide the space for Irish prisons to be located. They are two different types of investments. There is the other fund and I would encourage the Ministers to put more money into it to invest in the share capital of companies to give them a chance to grow and expand. However, I presume this money would be put into capital projects that are guaranteed a return so that we can spend the return as day-to-day income, if needs be in years to come. It is slightly different. I want to see both happen, but my interpretation is that they are different funds. While I welcome both, they are slightly separate.

Deputy Michael McGrath

I thank the Deputies. I want to give the NTMA the capacity to earn the best possible financial return for the State from the investment of the funds we will entrust it with. We have to go back to the primary purpose of setting up this fund. I have looked at the trends and data and the challenges we will face in coming years. In the absence of these funds, and to a lesser extent even with these funds, future Governments will face extremely different decisions to provide for the cost, for example, of an ageing population. We all know what the statistics are. A recent report, Health in Ireland Key Trends 2023, points out the population grew by 14% between 2014 and 2023. The largest change we have seen is in the over-65 age group which increased by 37% between 2014 and 2023. We know the direction of travel on the age dependency ratio. The ratio of the population aged 65 or over, relative to the population aged 20 to 64, is expected to increase by 30% between now and 2050.

That is not to say people aged over 65 will not make an economic contribution, of course they will. Many of them will continue to work beyond that age, nonetheless the overall conclusion we can reach from the data is really stark. It is estimated that age-related expenditure will increase from approximately 22% of GNI* in 2022, to approximately 28% of GNI* in 2050. That is an increase of 6% and we have many more statistics to back this up. I want to give the NTMA the ability to get the best return for the State it possibly can. I note the recommendation from the budgetary oversight committee among others, which recommended that the fund should be solely invested outside Ireland to protect against low-key inflation and lobbying. We are giving the NTMA the discretion to invest inside or outside the State. However, the key objective is that this fund will build a financial asset to generate long-term returns that will offset costs coming over the years ahead. Were we not to do that, these costs would have to be met from existing resources which would mean less money in the future to invest in the things people are calling for the Government to provide.

I think this is the right policy for all of those reasons. It is designed to get the maximum return. The NTMA has considerable expertise in this regard and will design the investment strategy within the parameters of the legislation before the committee this evening.

Amendment put:

The Committee divided: Tá, 3; Níl, 6.

Tá

Boyd Barrett, Richard.
Conway-Walsh, Rose.
Doherty, Pearse.

Níl

Durkan, Bernard J.
English, Damien.
Matthews, Steven.
McGrath, Michael.
McGuinness, John.
O'Callaghan, Jim.

Amendment declared lost.

Deputy Pearse Doherty

I move amendment No. 3:

In page 8, between lines 15 and 16, to insert the following:

An Leas-Chathaoirleach

We now have a question on amendment No. 3, which we hope to dispose of fairly soon. Otherwise, we will be here all night on the same amendment.

Amendment put:

The Committee divided: Tá, 3; Níl, 6.

Tá

Boyd Barrett, Richard.
Conway-Walsh, Rose.
Doherty, Pearse.

Níl

Durkan, Bernard J.
English, Damien.
Matthews, Steven.
McGrath, Michael.
McGuinness, John.
O'Callaghan, Jim.

Deputy Pearse Doherty

As regards the investment strategy here, we have been told in the past when we have raised the issue of divestment by the NTMA from the occupied territories that this Bill would show how the NTMA would ensure that appropriate investments are made. However, there is nothing in this legislation that stipulates clearly that we would not have a repeat of what the NTMA is doing with other taxpayers' money in terms of investment in companies involved in the illegally occupied territories. When we came to this legislation, it was said - and it was used as a rebuttal for the Illegal Israeli Settlements Divestment Bill - that this investment strategy under these funds would show how the reputational damage that has been incurred by ISIF investments in illegal Israeli settlements could be addressed. However, I do not see anything in this legislation that actually addresses the reputational damage that was done by that strategy.

Deputy Michael McGrath

I will set out the approach to dealing with ESG in the context of the two funds.

In the investment strategy, the NTMA will be required to describe how it proposes to manage ESG risks - in effect, how it will identify and assess such risks as part of its investment process. In addition, the NTMA will be required to set out in the strategy the basis on which it identifies categories of investments in which the fund shall not be invested. It will also have to describe the categories of investments, which have been so identified at the time of publication of the investment strategy. It is possible that after the publication of the investment strategy, additional specific investment categories may be identified by the NTMA for exclusion from the fund's portfolio, in which case these additional exclusions may be described in the revised strategy following the NTMA's next review. The NTMA will have freedom to determine if there are specific categories of investment that should be excluded and in which the NTMA determines it will not invest. Such decisions will be made in line with the approach set out in the investment strategy.

In developing this legislation, we have sought to strike an appropriate balance between the NTMA's ability to practically operate the fund and implement its investment mandate and the need to recognise the wider societal aspects and the ESG risks, which may need to be considered as part of the investment process. To that end, the investment strategy will be subject to a consultation process with both the Minister for Finance and the Minister for public expenditure. The investment strategy will also be subject to consideration by any other Ministers across the Government as the Minister for Finance considers relevant, recognising the importance of the investment strategy and the value of wider consultation on the strategy. Outside of these legislative processes, the Government has decided that the strategy will be noted by the Government.

Finally, I have agreed that I will include a provision in the oversight agreement between the Minister for Finance and the NTMA providing for the issuance of a letter of expectations to the NTMA which would set out my expectations with respect to the operation of the funds. The latter two elements of the approach, that is, it being put before the Government and the letter of expectations, are not included in the Bill as they are actions that do not need a legislative basis and can be achieved administratively. It is normal to exclude from legislation such actions as engagement with the Government.

Deputy Pearse Doherty

Does the Minister believe that the letter of expectation will address the issues I raised, particularly the strategy of ISIF, which is currently investing in companies that are involved in the illegally occupied territories? As we know, millions of euro in taxpayers' money is being invested there. Notwithstanding the divestment of about a quarter of the portfolio, does the Minister believe that the letter of expectation will stipulate clearly that we should not see a repeat of that? Is that the Minister's intention?

Deputy Michael McGrath

I have not yet given consideration to the level of detail that will go into the letter of expectations. I will consult on that issue within the Department and across the Government. I would be happy to take the views of the Oireachtas on board and perhaps give the committee an opportunity to input into that before I would finalise such a letter. I have an open mind on the level of detail. It is about striking the right balance, giving the NTMA the freedom to invest but also recognising that there are ESG risks that we will want to pre-empt and avoid. I am happy to engage and solicit the views of the committee before we finalise that.

An Leas-Chathaoirleach

I call Deputy Richard Boyd Barrett.

My last question is to ask the Minister whether he envisages, in what he describes as his letter of expectation on the development of the investment strategy, that investments in companies that would be involved in illegal occupation, sustaining apartheid, actions that might be deemed to be war crimes or crimes against humanity would be excluded from this letter?

Deputy Michael McGrath

I certainly recognise that that is an environmental, social and governance, ESG, risk that we would need to take on board in order to address the precise wording and it is one that would require consideration and legal advice. I would not recognise that as being an explicit ESG risk.

Deputy Richard Boyd Barrett

Obviously, we may consider amendments and we will also consider what the Minister has said.

Question put and agreed to.

SECTION 8

Amendment No. 4 has been ruled out of order.

An Leas-Chathaoirleach

Amendment No. 4 not moved.

Question proposed: "That section 8 stand part of the Bill."

Deputy Pearse Doherty

On section 8, this is probably where the real meat is with regard to the legislation because we are being asked to pass legislation here which stipulates a percentage of our economy, where it has been drummed before into everybody in the finance committee that GDP is not the measure of our economy but GNI* is and we all use that reference now. When we are dealing with this legislation, however, we revert to GDP, which is an issue in itself. It is not the big issue, however, because if one uses GNI*, one could use a different level and GDP captures some of these corporation windfall taxes in a more accurate way, and so on.

The issue here is that in the legislation we are being asked in the first paragraph, between the years 2024 and 2035, to commit 0.8% of relevant GDP into the future Ireland fund. As I said, I supported the resolution last year to transfer €4 billion from the Exchequer into the previous fund and I believe that that surplus should be invested into the fund but this legislation does not stipulate that it needs to be in the case of surpluses, in the first instance. That is not the case.

Today, we have to look at legislation which goes out to 2035 and beyond, as this first paragraph deals with 2035. One may be in a situation where there is not a surplus. One may also be in a situation where one may not see a significant deterioration in the fiscal environment. One might have a gradual step change that would leave one in a situation where one does not have those large surpluses. Some 0.8% of GDP in 2030, for example, is one of the years in which we are going to have to make that transfer. Does anybody in this room know what that amounts to? Do we have any projections from the Department of Finance on what the transfers we will make out to 2035 will be? We have in the stability programme update 2024 numbers which go out to 2027, which is for the next three years. We do not know the numbers but, more importantly, there are no projections. Even in the stability programme update 2024, we do not have a five-year projection at the minute and the Irish Fiscal Advisory Council continuously criticises the Government on its failure to do that. This legislation even goes way beyond that.

The point I am making is that we are putting a number in legislation which looks good and is absolutely affordable in terms of where we are at today but we are committing ourselves to that over a period of time, notwithstanding the provisions within this section which allows the Minister to bring a resolution either to reduce the payment by 50% or not to make a payment at all.

The point I am making is that this approach is the wrong one. The current Minister's predecessor, the Minister, Deputy Donohoe, brought in legislation on the rainy day fund which committed a set amount of expenditure each year but none of those expenditures was actually met. Resolutions had to go before the House at least three times each year to ensure that the commitment was not met. One can argue that there were circumstances, and all of the rest, and there were. I am not denying that scenario. Using those types of numbers is problematic.

The second concern I have on this is in regard to the next section, which I will mention because I am sure the Minister will mention it in his response. It states that the Minister for Finance, in consultation, can bring forward a resolution which would allow for 0.4% of GDP to be transferred into the fund from the Exchequer in a scenario where there has been an assessment carried out by him or her, and also on foot of a recommendation from the Irish Fiscal Advisory Council that it is warranted and that a smaller amount is paid into the fund, or, indeed, to make no transfer whatsoever. I do not believe that is good scenario either. The reason is that one may be in a situation where if one looks at 0.8% of GDP, taken in today's numbers, that is in excess of €4 billion. This legislation will say - in today's numbers it is €4 billion - it will increase and will go up-----

An Leas-Chathaoirleach

Vótáil in the Dáil.

Deputy Pearse Doherty

Okay.

Deputy Richard Boyd Barrett

Are there amendments to the Bill?

Deputy Pearse Doherty

I am dealing with this section. I would ask that I might be allowed to finish my sentence, if that is okay. The €4 billion will increase but the point is that the Minister has three options. The Minister can put in the €4 billion, put in €2 billion, which is half of that, or put in zero. There will be scenarios where one does not have the surplus that allows the Minister to put in €4 billion or €2 billion, or there might be a scenario where the Minister might be able to put in the €3 billion, but he or she does not have that flexibility in the legislation. There may be a scenario where one cannot put in €2 billion for other reasons such as the investment strategy of the Government, or the pressures which may be on the budget, but one could put in €1 billion or €1.5 billion. The flexibility does not exist in this legislation to do that.

This future Ireland fund should be discretionary and should have the ability to put more than 0.8% in, which in fairness it does, but it also should have the flexibility to put in a lesser amount. I have no problem forcing consideration of a certain level and of half of that level as there is not enough flexibility.

I will come back in later on what this means to capital spend, and so on.

The select committee adjourned at 7.49 p.m. until 1.30 p.m. on Wednesday, 8 May 2024.

Select Committee on Finance, Public Expenditure and Reform, and Taoiseach debate - Wednesday, 1 May 2024

Future Ireland Fund and Infrastructure, Climate and Nature Fund Bill 2024: Committee Stage

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Select Committee on Finance, Public Expenditure and Reform, and Taoiseach debate -
Wednesday, 1 May 2024