The claims have been made in a draft version of the Oireachtas budgetary oversight committee’s pre-budget review, which has been seen by the Irish Examiner and is due to be published next week.
As part of Oireachtas rules established in response to the ‘new politics’ era after the February 2016 general election, all Government plans for upcoming budgets must be examined in various degrees of detail by a cross-party group.
The group, known as the Oireachtas budgetary oversight committee, is made up of TDs and senators from across all political parties and has been examining the country’s finances before the negotiations leading up to the October budget.
While it has not been able to come to a universal agreement on the value of the rainy day fund, due in part to the fact both Government and opposition politicians are involved, the committee’s draft report has raised serious concerns over whether the fund will offer any real protection to Ireland in the event of another economic crash.
“With an initial sum of €1.5bn and €500m per annum, the committee notes it would take approximately 20 years to deliver a fund of €11.5bn,” states the report.
“Having considered the matter, the committee is of the opinion the proposed size of the rainy day fund will not be of sufficient scale to provide an effective counter-cyclical stimulus in the even of a severe economic crisis.
“The committee is concerned the use of an in-year contingency fund could result in Government departments viewing these monies as part of available budget allocations.
“This could potentially contribute to expenditure overruns, poor budget planning, and ultimately result in an under-funded rainy day fund.
“On this basis, the committee is not convinced of the merits of a rainy day fund to be used as an emergency fund, or an ‘in-year contingency reserve’.”
In a separate section, the report notes that while the rainy day fund may be of value, using all of the money available could also breach EU financial aid rules.
“The committee notes that existing EU fiscal rules treat any monies lodged or withdrawn from a rainy day fund as financial transactions,” states the report.
“Therefore, the accounting and statistical rules would significantly restrict the use of such funds during an economic downturn.
“This is because monies lodged or withdrawn from a rainy day fund would be recorded as financial transactions.
“As a result, any significant withdrawals during a time of need could potentially result in Ireland breaching the stability and growth pact.”
The committee’s criticisms regarding the proposed rainy day fund are likely to lead to fresh rows between Government and opposition politicians.
Fine Gael and Fianna Fáil are both in favour of setting up the fund while Sinn Féin and other parties are insistent that the money should be used to help vulnerable people now.