Varadkar seeks to spend part of €3bn ‘rainy day’ fund on infrastructure

Money diverted as first of new policies in 10-year capital-investment programme

The Government is to continue to set aside hundreds of millions of euro in a “rainy-day” fund even as Taoiseach Leo Varadkar diverts greater resources towards spending on infrastructural projects.

Mr Varadkar and Minister for Finance Paschal Donohoe will this week announce they will accelerate capital spending by using much of a €3 billion pot that former minister for finance Michael Noonan previously intended would be set aside. They will not, however, entirely abandon Mr Noonan’s plan to build up a fund to guard against future economic shocks, such as Brexit.

This week’s summer economic statement will mark Mr Varadkar’s first big policy move away from his predecessor’s position as he seeks to increase infrastructural spending. The statement is set to be brought to the Cabinet’s next meeting and then be announced by Mr Donohoe in the Dáil on Thursday.

It will be the first of a number of policy measures this year that will culminate in a 10-year capital-investment programme to be announced in November.


Mr Noonan said in last year’s budget that up to €3 billion would be set aside in a rainy-day fund, with €1 billion a year allocated from 2019 onwards. One senior Government figure has said that some but not all of the €3 billion will now be used for infrastructural spending, “so there will still be a rainy-day fund”.

The exact figures have yet to be decided by the Cabinet, which will sign off on Mr Donohoe’s plan this week.

Fianna Fáil had warned that the establishment of a rainy-day fund is part of the confidence-and-supply deal it has with Fine Gael to underpin the minority-government arrangement.

Alternative plans

The Government examined alternative plans recently, such as redefining funds held by the National Treasury Management Agency and its Ireland Strategic Investment Fund for “rainy day” purposes. Michael McGrath, the Fianna Fáil finance spokesman, is understood to have written to Mr Donohoe objecting to this approach.

“From a Fianna Fáil point of view, we remain committed to the rainy-day fund once we have achieved a balanced budget” in 2018, Mr McGrath said. “It is possible to combine a rainy-day fund [with increased] on- and off-balance-sheet capital investment.”

Government sources maintain the confidence-and-supply deal commits only to the establishment of a fund and does not spell out the amount of money that must be put into it.

One well-placed figure pointed out that any money diverted from Mr Noonan’s original plans will go entirely towards infrastructure and not be used for day-to-day spending.

Mr Varadkar signalled during the Fine Gael leadership campaign that he would use this money to accelerate infrastructural projects such as motorways and Metro North, a move that Mr Noonan criticised.

The Irish Fiscal Advisory Council, the International Monetary Fund and the Economic and Social Research Institute have all cautioned against scrapping the rainy-day fund.