The Government will announce details of a new fund today that will use resources from the National Pension Reserve Fund to finance strategic investment.
The Strategic Investment Fund will be presented by Government as the forerunner to a strategic investment bank, a key policy of the Labour Party included in the Programme for Government.
The fund will be set up following legislative changes affecting the investment policy of the pension fund, the discretionary portion of which is now below €5 billion. This will allow resources to be channelled from the fund towards what is described as “productive investment in the Irish economy”.
In addition to the money transferred from the pension reserve fund into the new strategic fund, the Government will also seek matching commercial funding from private industry. The intention will be to “target investment into areas of strategic significance for the future of the Irish economy,” said a source.
Today’s announcement will represent the first steps towards establishing a strategic investment bank and is designed to face down criticism that such a development is impossible. The feasibility of such a bank has been questioned since the Coalition has been formed, especially when the bank recapitalisation programme remained silent on the issue.
Opposition parties have claimed that the bank will not be realisable.
Yesterday Fianna Fail’s Billy Kelleher said Taoiseach Enda Kenny had all but confirmed a “Government U-turn” on the bank. In a letter to the Cork North Central Deputy, Mr Kenny had stated: “The concept of a Strategic Investment Bank would be difficult to implement in current market conditions.”
A Government source accepted that it was not possible to set up such a bank at this moment in time but insisted the Strategic Investment Fund would be its forerunner.
A second development will be signalled today when the Minister for State in charge of the New Era programme Fergus O’Dowd will announce the setting up a new unit within the National Treasury Management Agency to drive the programme forward.
The programme envisages the selling of State assets to allow the set-up of new State utility companies for water, energy and natural resources. The Programme for Government has committed the Coalition to the sell-off on up to €2 billion worth of State assets and companies.
A report produced by the International Monetary Fund, separate from its negotiations with Government, has suggested that up to €5 billion be realised. However, the Memorandum of Understanding between the Troika and the Government does not state a specific figure, rather seeks an “ambitious programme” of asset disposal.
It is understood that Fine Gael sought a higher disposal of State assets in Government negotiations but that Labour was unwilling to go beyond €2 billion. Both parties are agreed that funds raised through asset disposal should be used for investment purposes, rather than for debt-reduction, as desired by the Troika.
The use of such funds will be one of the key issues for negotiations when the Troika’s assessment of Ireland’s performance in the third quarter begins next month.
In his speech yesterday, Mr Hayes said he believed the Troika would accept the Government’s arguments on the need for investment and a credible growth strategy.
“The final decision on what State assets to sell rests with the Government and not with external agencies. These assets belong to the Irish people,” he added.