As expected, Budget 2020 has turned out to be a bit of a non-event. No surprises there, given the immense uncertainties surrounding it due to Brexit and the very uncertain global economic outlook.
The only surprise would have been if it contained any surprises.
In June, Finance Minister Paschal Donohoe committed to a budget package of €2.8bn regardless of the Brexit situation. Of this, €2.1bn was already pre-committed to expenditure items such as public sector pay and pensions, the National Children’s Hospital, and the National Broadband Plan, leaving just €700m to be given out on Budget day.
In the event, he raised some extra tax revenues of €300m and was able to deliver a net package of €2.9bn.
The economic forecasts accompanying the Budget indicate that the Department of Finance believes that 2020 will see the worst impact of a hard Brexit, with growth forecast at just 0.7%, but recovering to 2.5% in 2021. In the event of a hard Brexit, it is far from clear that the real impact would be felt for just one year.
However, at least some of the damage to the domestic economy will presumably be alleviated by the emergency Brexit fund announced. Mr Donohoe is setting up a fund of €1.2bn, of which €650m will be directed at enterprise, agriculture, and tourism, and to help stabilise the worst affected regions. Some An amount of €410m is being set aside to support those experiencing unemployment as a result of a hard-Brexit.
An additional €160m will be allocated to facilities and infrastructure at some ports and airports. This is a significant package, but it will be interesting to see how the monies will be allocated and how quickly.
There was little on taxation, which is not surprising, as it would be foolhardy to do anything in an environment of such uncertainty.
Another interesting aspect is that corporation tax receipts are projected at €10.5bn in 2020 and €12.1bn by 2024. This reflects an assumption that the current boom in corporation tax will be sustained, but there are risks associated with this assumption.
The minister described yesterday’s Budget as one without precedent.
He is spot on about that as Brexit presents the greatest level of uncertainty that we have experienced in generations.