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€6bn fund set up to invest in profitable projects

THE Government is going to convert the remnants of the state pension fund to invest in projects that will produce a profit.

The Cabinet will sign off today on the creation of a new €6bn fund to spend on development of infrastructure with money also coming from the private sector.

The new strategic investment fund will be a compromise on the coalition partners' different ideas for putting a stimulus into the economy, by combining the elements of their pre-election proposals.

Fine Gael proposed the New Era plan to invest funding in water, energy and broadband, telecoms and forestry, which would generate a return for the investment.

The Labour Party put forward the idea of a Strategic Investment Bank to channel funds from the National Pension Reserve Fund (NPRF).

The new fund will take money from the NPRF to act as an economic stimulus.

New legislation will remove a legal obstacle to allow the NPRF to invest in infrastructure projects, by converting it into a strategic investment fund.

The law will also set up New Era on a statutory basis.

The projects to be funded would be entirely separate from the Government's regular funding for infrastructure, such as roads, schools and hospitals.

"It is an additional €6bn for stimulus. It will be available to projects capable of generating a reasonable return," a source said.

New Era was Taoiseach Enda Kenny's much-hyped plan to create 100,000 jobs before the General Election.

But the plan was mothballed when the party came to power because there was no funding for investment in infrastructure projects.

Fine Gael promised that their flagship New Era plan would create the jobs through new infrastructure projects funded by the sell-off of state assets.

But these sell-offs haven't happened to date and the distribution of the proceeds is caught up in negotiations with the troika.

Employment

The vast bulk of the proceeds of future sales of state assets will go to paying down debt with one-third going towards stimulus packages.

Labour proposed the establishment of a Strategic Investment Bank in two phases. During its initial phase, the Strategic Investment Bank would act as a way to channel funds from the NPRF.

The funding would focus on projects aimed at enhancing infrastructure, boosting growth and generating employment, giving start-up and scale-up finance to small and medium businesses.

But it too has had a slow start due to a lack of funding and a debate within government circles over whether another bank would actually be required.

Irish Independent