Minister for Finance Michael McGrath has transferred a further €4 billion of exchequer funds to the National Reserve Fund (NRF). The transfer brings to €6 billion the total that has been placed in the fund since last year.
The funds were generated from bumper corporation tax receipts, which drew in a record €22.6 billion in 2022, ahead of the previous year by €7.3 billion (48 per cent), making it the State’s second largest income stream last year.
At budget time last September the Government signalled it would set aside €2 billion in 2022 and €4 billion this year, placing them in the National Reserve Fund as a buffer against future shocks.
The Department of Finance said the decision to replenish and further bolster the fund “improves the resilience of the public finances and allows the State to deal with future crises”.
“On budget day the Government committed to putting aside additional resources, from excess corporation tax receipts, to prepare the public finances for future challenges,” Mr McGrath said. “This commitment was made while also providing over €11 billion in economic support to households and businesses in Budget 2023 to help individuals, families and businesses deal with the rising cost of living. While we have acted to deal with this immediate challenge, there are future costs which we must be prepared for, including the consequences of an ageing population, the digital transition and climate change.
“Recent history has taught us that we must also be prepared for unforeseen challenges, which are becoming more frequent and increasingly impactful,” Mr McGrath said.
“The transfer of €4 billion to the National Reserve Fund today is an important step in that preparation. Today’s transfer comes after the €2 billion transfer made in 2022, and brings total transfers to the fund since budget night 2022 to €6 billion. This means that the NRF will have a strengthened position to respond to the type of unforeseen challenges that the fund was established to deal with in 2019.”
The NRF was initially seeded with €1.5 billion from the Ireland Strategic Investment Fund in 2019 but this was later removed and used to fund the Government’s response to the pandemic.
Commenting on the Government’s move, Ian Talbot, chief executive of Chambers Ireland, said: “We have seen in recent years how volatile the economic environment has become. As such it is vital that we minimise our State’s dependency on the extremely high levels of corporation tax inflow which we are experiencing.
“There is always a strong temptation to use such a windfall to cover current expenditure, and we welcome the decision to save these funds. This capital will be of tremendous use when it comes to delivering key National Development Plan projects.”