State to build capital spending buffer as part of savings strategy

Reuters

The State will set up a public investment fund in tandem with a planned new sovereign wealth fund to ensure capital spending levels are not cut in future economic downturns, Minister for Finance Michael McGrath said on Tuesday.

The Government has pledged to put most of the large budget surpluses expected as a result of surging corporate tax receipts into a sovereign wealth fund that the Department of Finance estimates could meet as much as 82 per cent of projected healthcare and pension costs linked to Ireland's ageing population by 2035.

McGrath said he also plans to introduce legislation later this year to set up a countercyclical public investment fund to avoid a repeat of the collapse in capital spending that followed the economic and banking crash of just over a decade ago.

"The primary purpose is to ensure that capital investment levels are protected into the future, that if we do hit a shock, or a significant downturn, that capital spending is not the first victim when it comes to framing annual budgets," McGrath told reporters.

McGrath will seek Cabinet approval on the broad parameters of the plan in the coming weeks – which may also include paying down some national debt – and lay out how much should be put into each fund for the next decade on budget day on October 10th.