Borrowing for Savings Funds Always a «Very Real Possibility», Says McGrath
Former finance minister Michael McGrath confirmed that borrowing for Ireland's saving funds was always a considered possibility, especially if low borrowing rates yield higher investment returns. Despite criticism from the Irish Fiscal Advisory Council regarding increased spending and reliance on volatile tax revenue, McGrath defended the strategy as sound financial management for long-term demographic and investment needs.
European Commissioner Michael McGrath, former finance minister, stated that borrowing to fulfill saving fund commitments was always a «very real possibility». During his tenure, several saving funds were established, including the Social Insurance Fund and Future Ireland Fund, to protect public finances from economic shocks and finance long-term policy commitments.
In June, the Irish Fiscal Advisory Council (IFAC) criticized the government for increasing spending faster than other European economies and relying on risky corporate tax revenue, stating it would need to borrow to top up these funds. IFAC noted that planned surpluses were insufficient for fund contributions and that the government was spending volatile revenues rather than saving them.
McGrath clarified that the possibility of borrowing was considered during the funds' design. He explained that borrowing at low interest rates to invest in funds earning higher returns can be a prudent financial move, especially for meeting long-term commitments like healthcare and pension costs. He emphasized that these funds are not just «rainy day funds» but are designed for known future demographic costs and to ensure consistent capital investment. McGrath expressed satisfaction that the two long-term funds he proposed are operational, providing long-term resilience to Ireland's public finances.