I move: “That the Bill be now read a Second Time.”
I am very pleased to introduce the National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018. This Bill will provide the legislative underpinning for the rainy-day fund, the Government committed to creating in A Programme for a Partnership Government. It is an important plank of the policies pursued by the Government of putting our national finances on a sound and sustainable footing, and building our resilience to external shocks.
The Government has worked hard to achieve these key economic aims, while committing to investing in the infrastructure and housing that are so important to our people. We have achieved a balanced budget and a sustainable tax base. This puts us in a much improved position to plan for the medium and long term. This Bill is part of that medium and long-term planning.
We have seen the effects of a severe economic shock. The economic crisis that started in 2008 continues to resonate for many of our citizens. The effects of that crisis were gruelling and although we have made huge progress, there is no doubt that they are still being felt today. That is why so much of our focus is rightly on addressing the shortage of housing in particular, with the proposed creation of the Land Development Agency and the legislation and funding to establish Home Building Finance Ireland. These measures will help deliver new homes on the large scale now needed and alleviate the upward price pressures in the housing market.
Our economy is currently performing strongly. This gives us a valuable opportunity not just to address the remaining effects of the crisis, but to make prudent provision so we can alleviate the effects of a future crisis. The purpose of the Bill before the House is to do exactly that.
The rainy-day fund, which will now be known as the National Surplus (Exceptional Contingencies) Reserve Fund, will be an economic buffer available for drawdown in the event of a sharp economic downturn. This will allow the Government of the day to mitigate the effects of that downturn. In particular, it will allow capital investment to continue even if there is a sharp reduction in tax receipts. We have experience of a sudden crash where, because we had no available reserves, current expenditure was cut back severely and capital programmes came to a near complete halt. The result was severe in terms of the impact on Government programmes and also in terms of underinvestment for which we are now seeing the consequences.
Our aim in establishing the National Surplus (Exceptional Contingencies) Reserve Fund is that in the event of a future shock, we can maintain capital programmes in particular. Our capital investment programmes deliver the infrastructure that is required by society and the economy. Maintaining capital investment is also likely to support employment and help us escape the self-perpetuating recessionary cycle of a sudden economic shock.
We cannot predict with any great certainty what will trigger a future economic shock. There are external risks that are very obvious, for example the challenges of Brexit, but these are known risks for which we are undertaking extensive preparedness planning. We have worked hard at national and European level first to stabilise our banking system and then to build in prudence and resilience. We have also worked hard to balance our tax base. I am confident that we are in a far better position to weather the storm when a future crisis hits. Setting reserves aside now will further strengthen our position.
I will now give an outline of the Bill's provisions. I will explain some of them in detail because there is a substantial and important role for this House.