Government should legislate for Rainy Day Fund – Hayes

Brian Hayes MEP today said that the government should put in place the Rainy Day Fund by way of legislation through the Houses of the Oireachtas.

“The best way to ensure the success of a Rainy Day Fund would be to establish it by way of legislation. This would give it the stamp of approval from the Dáil and Seanad and would ensure that the Fund has a long-term horizon beyond the current and next government. Legislation would show that Fine Gael and Fianna Fail are truly committed to putting money aside for the long-term.

“We should follow the path of the National Pension Reserve Fund (NPRF) which was established through an Act of the Oireachtas in 2000. The Exchequer contributed 1% of GNP annually to the NPRF which built up a significant buffer for Ireland and was very much needed during the financial crisis. Before the NPRF was used to recapitalise the banks, it was worth €23 billion.

“We should be looking to build up similar levels with the Rainy Day Fund. The government has set out its plan for the first three years of the Rainy Day Fund, whereby €500 million would be contributed to the fund annually from 2019-2021. After this period, I believe the amounts could be higher. A sensible option for the Rainy Day Fund would be to link the contributions to the level of growth – for instance, when we have a high level of annual growth, the contributions would be larger.

“Whatever the contributions, the best way of establishing this Fund is through legislation. The legislation should set out how the Fund would operate, who manages the fund, the investment policy of the Fund and several other issues.

“The Rainy Day Fund will provide a vital safeguard for our economy. As the Fiscal Advisory Council said, it is one of the ‘most effective measures available to any government to prevent a boom-bust cycle.’ It also will help us deal with the potentially massive pension liability coming down the tracks. People are living longer and demographics are changing; therefore we need to have ‘piggy bank money’ in place to have enough future pension reserves.

“But the upmost priority for the government must be achieving a balanced budget by 2018. If we achieve a balanced budget by next year, then we will have reached our Medium Term Objective under the Fiscal rules – meaning that there are far less restrictions on our spending levels as we will no longer be running a deficit. We will be freer to invest in things like housing and infrastructure. So balancing the books is vital.”