The briefing notes in question were drafted both before and during the passage of the National Surplus (Reserve Fund for Exceptional Contingencies) Bill through the Oireachtas and so at those times, Government was working to achieve the best Brexit solution, while also preparing for a no-deal scenario. The Government's preparations included the Brexit Omnibus Act, which was signed into law by the President on 17 March 2019.
The Act to establish the Rainy Day Fund was subsequently signed into law by the President on 26 June 2019. Section 9 of the Act, provides for the Minister for Finance of the day to propose a resolution to Dáil Éireann for a drawdown from the Fund to “remedy or mitigate the occurrence in the State of exceptional circumstances”.
Under the Fiscal Responsibility Act 2012, “exceptional 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 tax shortfalls and/or voted expenditure to address the specific downturn.
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.
It is envisaged that the occurrence of a force majeure event could justify deployment of the Fund. Therefore, I expect a significant fiscal impact and/or an economic downturn arising from a no-deal Brexit would clearly allow for a drawdown from the Rainy Day Fund.
I should stress that a drawdown from the Rainy Day Fund should not be the first action taken in the face of a no-deal Brexit, as the Government has already taken significant steps to prepare for Brexit and will continue to do so.
These steps to prepare for the fallout of Brexit include dedicated measures, and economic and fiscal policies to get Ireland Brexit ready in Budgets 2017, 2018 and 2019. Such 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. “tail-risks” related to Brexit and in advance of seeking approval to withdraw from the Fund, the magnitude of the impact would have to be properly considered.
My sensible approach to using the Rainy Day Fund is that I want to ensure its funds are available and used to support measures that are timely, targeted and temporary, which assist in converting our economy and its businesses to a post-Brexit world.