THE Government should set up a contingency fund to cushion against economic shocks after European Monetary Union, according to a report from the Dail Select Committee on Finance and General Affairs. The report, issued yesterday, also urges longer term Budget planning.

The all party Dail committee heard Budget submissions this year from a range of interest groups for the first time. In the resulting report to the Minister for Finance, it recommends that the Government should make statutory provisions for a contingency fund in the next Budget to hedge any possible shocks to the economy after EMU.

The fund, which it says should be controlled by the Central Bank, would provide the "flexibility" to react to any downturn in the economy. The conditions governing the drawing down of funds and the decision as to when they should be used, should be a matter for the Central Bank, it recommends.

The committee, chaired by Mr Jim Mitchell, also calls for the detailed scrutiny of Government depart mental estimates by Dail committees in advance of the financial year, and for twice yearly reports by the Comptroller and Auditor General into anti fraud measures in the Department of Social Welfare.

The committee has also urged long term planning of Government spending, saying that projections should be framed for periods of up to three years. The January 1997 Budget should be framed to cover the period to the end of the decade, with provision for index linked tax bands and allowances.

The Government's top priority in the next Budget should be to tackle unemployment, with particular emphasis on measures to reduce long term unemployment, it says. It recommends moves to alleviate the burden of taxation on workers and to provide a greater incentive for the unemployed to take up work where available.

The report also calls for the continuance of social partnership and for a new three year agreement, with emphasis on reducing the tax burden for workers and employers and increasing employment. In its negotiations with the social partners, the report says the Government should direct attention to profit sharing agreements. The report calls for specific action to alleviate the poverty traps faced by many families, who lose out financially by accepting employment.

Changes in the treatment of allowances for children, it suggests, would go some way towards alleviating this problem. The committee's main recommendation this regard is for the accelerated phasing out of child dependent allowances alongside increases in child benefits.