The Minister of State for Financial Services and Insurance, Michael D’Arcy T.D., today (Thursday) welcomed the completion of the Seanad Stages of the National Surplus (Reserve Fund for Exceptional Contingencies) Bill 2018 on Wednesday 19 June. This Bill legislates for the establishment of what is referred to as the Rainy Day Fund. The Bill has now completed its passage through the Oireachtas and will be transmitted to the President for signing into law.
In welcoming the completion of the Bill’s passage through the Oireachtas, Minister D’Arcy said:
In spite of Brexit uncertainty Ireland’s recent and continuing strong economic performance has given the Government a valuable opportunity not just to address the remaining effects of the crisis, but to make prudent provision to be able to alleviate the effects of a future crisis.
The Rainy Day Fund is intended to be used as a defined-purpose instrument to address severe, unanticipated events, as opposed to the normal fluctuations within the economic cycle. This approach would align it with the current EU fiscal rules framework under the existing Stability and Growth Pact provisions.
To establish the Fund the Bill provides for the transfer of assets up to the value of €2 billion from the Ireland Strategic Investment Fund (ISIF) but the Government’s intention is that the transfer will be €1.5 billion. The Bill also provides that the Minister for Finance will transfer €500 million from the Central Fund to the RDF each year from 2019 to 2023. It is envisioning that the first payments into the fund would take place later in 2019.
Following the completion of consideration by the Oireachtas and subject to the President signing the Bill into law the practicalities of commencement means that in accordance with the Bill, the Minister for Finance will be required to issue an order to commence the Act before it can come into operation.
This commencement requires that the necessary delegation order to the NTMA and the investment guidelines for the fund be ready along with the NTMA confirmation that they are ready to make the transfer of the €1.5 billion in money or assets from ISIF.
Note for Editors
The purpose of the Rainy Day Fund is to mitigate severe economic shocks, in excess of the normal fluctuations of the economic cycle. In view of the unpredictability of such events, the Minister does not propose detailed economic triggers: this is to ensure that time-lags in assessing such triggers do not operate to make the Rainy Day Fund essentially inaccessible in case of need.
The drawdown criteria will be based on an assessment by his Department, based on which the Minister of the day may ask Government to decide that drawdown is justified; if Government agrees, the Minister will then seek a resolution of the Dáil authorising drawdown of funds to the Exchequer.
This process ensures that Dáil Éireann will be fully involved in any future decisions regarding drawdown, and further decisions on expenditure of the monies will be subject to voted expenditure procedures.
The in-year contingency reserve is intended for events which are not reasonably foreseeable, such as, for example, a recurrence of foot-and-mouth, or multiple very severe weather events.