Spending in health must be contained this year as the government plans for worst-case scenarios under a no-deal Brexit outcome, Finance Minister Paschal Donohoe has warned.
Addressing TDs at the Oireachtas Budget Oversight Committee, he set out how the government's Budget 2020 plans were caught between possible "over-heating and the real possibility of economic disruption.
The government have announced that they are prioritising the budget around a possible disorderly Brexit, with just €700m fiscal space available for extra spending.
This is out of an extra €2.8bn available to the minister but most of this has already been allocated for wage rises as well as ongoing projects such as the rural broadband plan.
Speaking to the committee this afternoon, the minister explained that “the economy is caught between possible over-heating on the one hand and the very real possibility of significant economic disruption on the other.”
But the government is conscious of preparing for worst-case scenarios if Britain crashes out of the EU after the Brexit October 31 deadline. Mr Donohoe added:
“In the event of a no-deal Brexit, the Government has stated that it will provide counter-cyclical support to the economy through social protection payments occasioned by higher unemployment and on the revenue side, lower tax collections which help cushion aggregate demand.
“This could lead to a deficit of the order ½ - 1½% of GDP next year amounting to a negative swing in the headline balance of over €6 billion."
But the minister's strongest message was for the Health Minister Simon Harris.
“Given the priority placed on ensuring the delivery of sustainable improvements in the Health service, with an overall allocation of €17.1bn this year compared to expenditure of €14.1bn in 2016, it is crucial that Health expenditure, which was within profile at the end of August, continues to be proactively managed with all necessary measures implemented to mitigate the risk to the public finances from an overrun this year.”
Furthermore, other departments will have to put aside savings and any extra resources with emergency plans being prepared. The minister added:
“This places a requirement on all Government Departments to re-prioritise spending to ensure that offsetting measures can be put in place to mitigate the impact of emerging expenditure pressures and proposed new policy priorities.”