The Rainy Day Fund (RDF), which has the statutory title National Surplus (Exceptional Contingencies) Reserve Fund, is intended to act 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 RDF 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 aligns it with the current EU fiscal rules framework, whereby there could be a drawdown from the RDF for an “unusual event” under the existing Stability and Growth Pact provisions. Withdrawals from the RDF will be transferred directly to the Exchequer so as to support shortfalls in revenue and voted expenditure to address the specific downturn. The RDF 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.
A drawdown from the RDF 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 include dedicated measures, and economic and fiscal policies to get Ireland Brexit ready in Budgets since 2016.
I would, therefore, envisage that the occurrence of a Brexit with a significant fiscal impact and/or an economic downturn would justify draw down from the RDF. This is the sensible approach to using the Rainy Day Fund so as to ensure its funds are available and used to support measures that are timely, targeted and temporary, to assist in converting our economy and its businesses to a post-Brexit world. I would note that the Exchequer holds significant cash balances that are available for use immediately in responding to the fallout from all Brexit scenarios.