Paschal Donohoe orders economic assessment given increased risk of no-deal Brexit

Paschal Donohoe orders economic assessment given increased risk of no-deal Brexit

Finance Minister Paschal Donohoe has ordered a new economic assessment for the country “given the scale of the defeat” for the British Government in the House of Commons on Brexit.

Mr Donohoe said that while a review was to be done by April when his department is due to tell Europe as to how the economy is performing, he has sought an earlier assessment from his officials, given the increased risk of a no-deal Brexit.

He confirmed Brexit will lead to Ireland's economic outlook deteriorating.

He accepted criticisms from the Irish Fiscal Advisory Council (IFAC) about increases in spending in his budget.

During a sometimes heated session with the Oireachtas Budgetary Oversight Committee, Mr Donohoe revealed that spending commitments for this year could be under threat should a no-deal Brexit occur.

He was responding to questions from Fianna Fáil's Lisa Chambers.

Mr Donohoe said that while he expects the €66 billion of budget allocations are likely to hold, he did stress that spending ceilings could be changed downward should tax revenues be impacted.

“What happens... and has been the case for the last number of years is that in any given year, we can change the spending profiles within government departments in response to events,” he said.

That is certainly something there could well be the need to engage in in the event of a disorderly Brexit. There are a couple of different ways in which that could happen.

"The first one is, we could make the decision whether priority decisions need to be made in the context of a more urgent and imminent need which we may have.

"Secondly, is whether decisions need to be made in terms of where current expenditure is allocated. I am very alive to the risk a disorderly Brexit can cause. This is a unique event,” he added.

Mr Donohoe was grilled by the Oireachtas Budgetary Oversight Committee over stinging criticisms of the budget from IFAC.

Pearse Doherty
Pearse Doherty

Sinn Féin's Pearse Doherty pressed him as to whether checks along the land border have been investigated by the Revenue Commissioners.

“Are we making a decision about checks on the border? The answer is no we are not. The focus is on the key ports which take in the majority of our goods. We are not doing anything beyond what is publicly known,” Mr Donohoe said.

“I met all the commissioners in the second half of last year. We explored some of the scenarios in the context of a no deal.

"I have had at least one further meeting and my officials have had a significant amount of engagement."

Before Christmas, IFAC said Budget 2019 did not adequately prepare for a future downturn.

While accepting the criticisms from IFAC in relation to the overruns in spending in health, the Minister offered a strong defence on his overall handling of the economy.

“The Government is not going to apologise for using this period of strength in our corporation tax receipts to accelerate infrastructural investment in the areas where we need it most,” he said.

“Given that the external economic outlook is deteriorating, the probability of a disorderly Brexit is rising and quantitative easing is ending - driving up our borrowing costs, our policy approach should be to target larger surpluses to build up our fiscal buffers for when times become less favourable."

More on this topic

Organic farms increasingly viable - We should all work as one on climateOrganic farms increasingly viable - We should all work as one on climate

Judges to decide if unsigned Brexit letter puts Johnson in contempt of courtJudges to decide if unsigned Brexit letter puts Johnson in contempt of court

More than 150 lorries hold cross-border protestMore than 150 lorries hold cross-border protest

Johnson faces fresh showdowns on Brexit as deadline loomsJohnson faces fresh showdowns on Brexit as deadline looms