Press release
Minister McGrath publishes the General Scheme of the Future Ireland Fund and Infrastructure, Climate and Nature Fund
Published on
Last updated on
Published on
Last updated on
The Minister for Finance Michael McGrath has today published the General Scheme of the Future Ireland Fund and Infrastructure, Climate and Nature Fund.
This follows the announcement made in Budget 2024 to establish two new funds:
The Future Ireland Fund will help deal with future recognised expenditure pressures including ageing, climate, digitalisation and other fiscal and economic challenges. Its purpose is to support government expenditure in strategic areas that have been flagged as inevitable strains on the public finances with no limit on the potential size of this Fund.
Contributions will be made to the Future Ireland Fund until 2035 after which a decision will be made on further contributions.
The forecasted level of contributions to the Future Ireland Fund is c. €70 billion over the period, or c. €6 billion per year (0.8% of GDP). For each year from 2024 to 2035, 0.8 per cent of GDP will be invested in the Fund (c. €4.3 billion in 2024). Approximately €4.1 billion will also be transferred from the dissolution of the National Reserve Fund in 2024. With contributions and return from investments over the long-term horizon the Fund could grow to €100 billion by 2035.
The Infrastructure, Climate & Nature Fund will seek to deal with the pro-cyclicality of capital spending. A reserve of funding will be established over time to provide for resources for capital spending in a future downturn to support capital expenditure through the business cycle. This will help us prevent a reoccurrence of ‘stop-start’ public capital investment that we have experienced in the past.
This would, in turn, avoid generating backlogs in capital projects due to a lack of spending during downturns. It is intended that €2 billion will be invested in this fund each year from 2024 to 2030, building a fund of up to €14 billion. That €14 billion figure equates to the average annual amount of capital expenditure under the National Development Plan over 2023-2028.
The resources of the Future Ireland Fund and the Infrastructure, Climate & Nature Fund – will amongst other uses help to support climate related initiatives over the medium and long term.
However, there is a need for additional investment to assist Ireland deal with the transition to climate neutrality as the impact of rising global temperatures as a result of climate change will affect all parts of our society.
In recognition of this, it has been agreed that a second avenue of access to the Infrastructure, Climate & Nature Fund, be developed, specifically related to the achievement of climate goals. This remains a single fund with different access routes to drawing down its resources.
Speaking today, the Minister for Finance said:
“Following government approval of the General Scheme on Budget day, I was delighted to announce the establishment of the Funds in my Budget speech. The Future Ireland Fund will provide multi-generational benefits and deliver the widest benefits to the public. It will also prevent the reliance of current expenditure on temporary or “windfall” sources of income. The Infrastructure Climate & Nature Fund will help smooth the investment cycle and avoid a ‘stop-start’ approach and help provide support for the economy in times of exceptional need and capital spending in periods of economic dislocation. I would again ask all colleagues across the House to put aside political differences and support the passage of this legislation through the House.”
Government has approved the establishment of two funds:
A long-term savings fund to deal with future recognised expenditure pressures including ageing, climate and the digital transitions.
Its purpose is to support government expenditure in strategic areas that have been identified that will inevitably cause strain on the public finances.
There is no limit on the potential size of this Fund.
Contributions will be made to the Long Term Savings Fund until 2035 after which a decision will be made on further contributions.
It is intended to draw down the return on the Fund to support government expenditure.
The level of contribution was agreed in the context of Budget 2024. For each year from 2024 to 2035 0.8 per cent of GDP will be invested in the Fund (c. €4.3 billion in 2024). Approximately €4.1 billion will also be transferred from the dissolution of the National Reserve Fund in 2024.
In periods of economic stress and pressure on the public finances, capital expenditure has typically been reduced at a time when it would be of economic and societal benefit – creating a ‘stop-start’ approach which is not conducive with creating certainty or medium-term strategic planning.
The Infrastructure, Climate & Nature Fund will seek to address this pro-cyclicality of capital spending.
The Fund would ensure that the State would have certain resources available in a future downturn to support capital expenditure through the business cycle, instead of reducing capital expenditure in a pro-cyclical manner. This would, in turn, avoid generating backlogs in capital projects due to a lack of spending during downturns.
It will help to maintain growth-enhancing investment through periods of lower or negative growth and often where capital expenditure is reduced as a response.
This Fund will also support economic growth during a downturn, with the spending on capital projects resulting in knock on spending in the broader economy. In turn it will ensure that the relevant expertise required for capital projects (builders, engineers, architects) are not lost to the construction sector with negative outcomes for the State and society, as was the case following the Global Financial Crisis.
The Fund will be released for capital expenditure under specific economic conditions to be set out in legislation.
It is intended to resources this fund to the order of one full year’s capital expenditure c. €14 billion with the final numbers to be decided in Budget 2024.
The resources of the Future Ireland Fund and the Infrastructure, Climate & Nature Fund – will amongst other uses help to support climate related initiatives over the medium and long term. However, there is a need for additional investment to assist Ireland deal with the transition to climate neutrality.
In recognition of this, it is proposed that a second avenue of access to the Infrastructure, Climate & Nature Fund, be developed, specifically related to the achievement of climate goals. This remains a single fund with different access routes to drawing down its resources.
The proposition is that separate to the drawdown criteria linked to economic downturn in order to support the NDP, up to 22.5% of the balance of the Infrastructure, Climate & Nature Fund may be drawn down to support climate and nature related capital projects in any given year from 2026, up to a cumulative maximum of €3.15 billion by 2030.
As part of these changes the National Reserve Fund will be dissolved and its resources transferred to both funds.
It is intended that responsibility for investment of the funds will be allocated to the National Treasury Management Agency (NTMA), where the Ireland Strategic Investment Fund (ISIF) is already situated. This will deal with all the investment related issues including Environmental, Social and Governance (ESG), governance and accountability issues.