Sam Boal Sam Boal

A HEFTY €1.5 billion is to go into a rainy day fund, Finance Minister Paschal Donohoe announced today. 

In the Budget 2019 announcement in the Dáil this afternoon, Donohoe said that the fund:

will be capitalised with €1.5 billion from the Ireland Strategic Investment Fund and supplemented with an annual contribution of €500 million from the Exchequer starting from 2019. 

He also said that “historically high levels of corporation tax will be set aside for the purpose of capitalising the fund”.

The minister said that this fund is being added to because the “ability to withstand economic shocks [in Ireland] needs to be stronger”. 

Not new

But this isn’t the first time we’ve heard of this rainy day fund. Essentially, it’s a fund that’s meant to act as a buffer against any future potential economic shocks. It’s something that is supposed to help Ireland should we run into problems down the road. 

Back in December 2015, the Fianna Fáil Finance spokesperson Michael McGrath put forward the idea of a rainy day fund in a press release, saying it would “cushion the effects of any future shock in the economy”.

The party described the concept as “similar to the National Pension Reserve Fund”, which was set up in 2001. (Money from this fund was used in the bank bailout – this fund has been rolled into the Ireland Strategic Investment Fund).

On 7 June 2016, the Irish Fiscal Advisory Council released its tenth Fiscal Assessment Report - in which it mentioned the fund. 

On 21 June 2017, the then-Finance Minister Michael Noonan mentioned the establishment of a rainy day fund in the Summer Economic Statement, saying that it would be put in place once a balanced budget is achieved. The aim was for public expenditure not to increase at a pace that the economy couldn’t absorb. 

While the Public Accounts Committee was questioning officials from the Department of Finance in July 2017, PAC chairman Seán Fleming asked Chief Economist John McCarthy if there was anything in the fund.

McCarthy said that the fund was empty because the country’s books were not balanced.

“[There's] nothing in it yet, but there is a provision at the moment for €1 billion to be provided in 2019, 2020 and 2021,” he continued.

“It doesn’t come in until we balance the books. We balance the books in 2018 so it doesn’t come until the year after, 2019.”

So the fund was due to be put in place once the Budget was balanced – and today, Donohoe confirmed that next year it will indeed be.

Hence the filling up, at last, of the long-mooted rainy day fund.