Friday, 6 September 2019

Questions (155)

Pearse Doherty


155. Deputy Pearse Doherty asked the Minister for Finance if funds from the contingency reserve fund established under the National Surplus (Reserve Fund for Exceptional Contingencies) Act 2019 can be withdrawn and used to fund supports for businesses exposed to markets affecting the UK's withdrawal from the European Union within the terms of the legislation and the fiscal rules; and if he will make a statement on the matter. [36622/19]

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Written answers (Question to Finance)

The creation of the National Surplus (Exceptional Contingencies) Reserve Fund (known as the Rainy Day Fund) forms part of the Government’s policy to stabilise the public finances and increase the State’s resilience to external economic shocks.

The Fund is intended as a reserve which may be drawn upon under certain circumstances, outlined under section 9(2) of the Act, contingent on Government and Oireachtas approval. One criteria for drawdown is that it can be used to remedy or mitigate the existence of “exceptional circumstances” in the State. Under the Fiscal Responsibility Act 2012, such circumstances are defined as either a period of severe economic downturn or a period during which an unusual event outside the control of the State has a major impact on the financial position of the general government.

The Fund is intended, therefore, to be used as a defined-purpose instrument to address severe events, as opposed to the normal fluctuations within the economic cycle. This approach would align it with the current EU fiscal rules framework, whereby it could be accommodated as an “unusual event” under the existing Stability and Growth Pact provisions. Withdrawals from the Fund will be transferred directly to the Exchequer so as to support the State’s voted expenditure to address the specific downturn.

The Government has taken extensive actions to prepare for the fallout of Brexit including dedicated measures, and economic and fiscal polices to get Ireland Brexit ready in Budgets 2017, 2018 and 2019.   These policies include amongst others moving to fiscal balance, the rolling out of support schemes, and the provision of advice to businesses.  I would, therefore, envisage the National Surplus (Exceptional Contingencies) Reserve Fund only being used for an extreme outcome, i.e. a “tail-risk” Brexit and in advance of seeking approval to withdraw from the Fund, the magnitude of the impact must be properly considered. 

The Act deliberately does not describe specific events, such as Brexit or others, so as to give flexibility to Governments to withdraw from the Fund for all severe downturns, many of which are not possible to specify in advance.