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July 2008 Archives

Pension Fund Strategies

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The National Pension Reserve Fund has lost about €3 billion (15% of value) over the past four quarters as a consequence of the international credit crisis.

In these circumstances, it makes no sense for the Exchequer to continue borrowing about €1.6 billion a year from abroad for the Fund to continue to making risky overseas investments while cutting back on domestic investment and turning to expensive Private-Public Partnerships and massive tax breaks to progress critical national projects.

This nonsense is compounded by the fact that the Fund must achieve a return on its investments in excess of the cost of borrowing "to wash its face". It is noteworthy that the NPRF is one of the few funds in the world not financed by oil and commodity revenue surpluses. Has the government forgotten the rules about never borrowing money to buy shares or investing what you cannot afford?

Surely it makes more sense for borrowings earmarked for the Fund to be redirected immediately to finance much-needed, major infrastructural projects now instead of being used to make overseas investments for pensions payable decades hence. This could be done simply by legislating a "contributions holiday", say, for three-years to free up about €5 billion.

This would enable critical projects to be progressed more quickly and kept in public ownership. For example, the eight co-located hospitals which will cost the taxpayer a fortune and further fragment our two-tier health service could be progressed in public ownership using a fraction of these liberated funds.

By 2025, the NPRF could be valued €80 billion at current prices (€150 billion at 2025 prices). Given that every taxpayer and consumer will have contributed to the Fund, what guarantees can be offered that payments out of the Fund after 2025 will be equitably distributed and not skewed towards increasingly unsustainable, unfunded "gold-plated" pensions for politicians and the public sector at the expense of much more numerous, poorly pensioned citizens in the private sector?

For example, the NPRF has indicated that public service pension costs will reach 3.7% of GDP by mid-century while social welfare pensions for a far larger number of people will only rise to 10.1%. 

As contributors to the Fund, we should be given absolute assurances that future governments will not treat the Fund as a massive "slush fund" to support vested interests as done with decentralisation, benchmarking etc.

Lead letter published in Irish Times on 26th July 2008.

Citizens' Initiative

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Given that the main political parties all supported the Lisbon Treaty, would they consider adopting a measure for Ireland similar to the Treaty's Citizens' Initiative whereby at least a million EU citizens from a significant number of member States could request the EU Commission to bring forward proposals on a particular issue?

Based on the Lisbon model, we could be talking about a minimum of eight thousand citizens from, say, six counties being able to oblige the Cabinet or Dail to consider an issue or for the Government to hold a referendum. Apparently, such a proposal was included in a draft of the 1922 Constitution of the Free State. Citizens' initiatives operate in Switzerland, New Zealand, Estonia and about half the States in the US. A measure along these lines might help bridge the yawning gap exposed by Lisbon between our politicians and the electorate. What issues would readers propose as citizens' initiatives?
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This page is an archive of entries from July 2008 listed from newest to oldest.

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