Still no clue where the Brexit bandwagon is headed

Still no clue where the Brexit bandwagon is headed

After the theatrics and bizarre antics in the UK parliament last week, one might be forgiven for thinking that things couldn’t get much worse, but this week they have. Boris Johnson lost his final vote on an election prior to the shutting down or prorogation of parliament and ended for him a pretty dire first short period in office.

His visit to Dublin was strange, to put it mildly, and strongly suggests that he really hasn’t got a clue about what is really going on, and - as expected - the European Research Group (ERG), which was responsible for putting him into the highest political office in the land, really are pulling all of the strings.

The ERG is the tail wagging the Boris dog and a close examination of the ERG would suggest that this is not a good thing.

The official publication of the 'Operation: Yellowhammer' document on Wednesday, which had been leaked by the Sunday Times some weeks back, paints a pretty dire picture of what Brexit might mean for the British economy and British society.

For the North, the prognosis is really pretty dire and one would have thought that the DUP might just have the vision to stand back and realise that their ideologically-driven agenda could do very serious and long-lasting damage to the economy and society of the North.

Alas, logic seems to be in short supply in that part of the island at the moment and the fact that the Assembly is not sitting is a real pity.

Then, Boris was hit with the news that Scotland’s highest court had ruled that his five-week suspension of parliament was not legal, and while it didn’t rule that parliament should re-open, it does set an interesting backdrop for the impending Supreme Court appeal in the UK.

All in all, we still have not got a clue where this Brexit bandwagon is likely to take us. Some sensible people seem to be thinking more about the original backstop deal, which basically had the border in the Irish Sea.

However, getting the DUP to agree to this would be challenging. However, I am told that secretly some in the DUP are realising that they risk being on the wrong side of history and would welcome an escape route from the corner into which they have backed themselves.

We are facing into an interesting six weeks and while the risks of a no-deal Brexit - on either October 31 or January 31 - are high and have certainly heightened since Boris took the reins of power, there is still no certainty or visibility.

Unfortunately, for the Irish Minister for Finance a budget has to be delivered on October 8. The Irish Fiscal Advisory Council was out of the blocks, earlier in the week, and laid out the fiscal parameters in the event of a no-deal Brexit.

However, there was little contained therein that the Department of Finance had not pointed out in its Summer Economic Statement in June. The basic point is that official economic modeling is suggesting that a no-deal Brexit would result in a budget turnaround of around €6.5bn in 2020.

The problem for Minister Donohoe is how does one set a budget in such uncertain circumstances. At one level, the economy is growing quite strongly and needs little in the way of fiscal stimulus.

On the other hand, it is threatened with a very significant hammer blow from Brexit, and fiscal stimulus is exactly what is called for in such circumstances. The Minister has sensibly decided to prepare a budget on the assumption of a no-deal Brexit.

A budget package of €2.8bn is still at play, but €2.1bn of this has already been pre-committed to parts of the economy that are largely immune from the effects of Brexit. That leaves just €700m to be played with on October 8, and one suspects most of this will be directed at social expenditure.

The more interesting aspect of the budget will be the size of and the projected uses of an emergency fund to help those sectors of the economy most exposed to a no-deal Brexit event. Agri-food, tourism and smaller indigenous exporters are the sectors most exposed and are presumably the ones that will get most assistance.

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