Budget could turn into Brexit bulwark

The Government could be forced to scrap a series of financial promises and turn October’s budget into a no-deal Brexit defence plan amid fears the crisis could have a “huge” impact on the economy, two ministers have warned.

Paschal Donohoe, the finance minister, said the call needs to be made in the coming weeks as his junior finance minister Michael D’Arcy predicted a crash-out Brexit which could lead Ireland grasping for EU economic aid.

Speaking on RTÉ Radio One’s Morning Ireland just 24 hours after meeting new British chancellor Sajid Javid in London, Mr Donohoe said he still believes a no-deal Brexit can be “avoided or mitigated”.

However, amid ongoing fears a breakthrough between the EU and the UK will not be struck before the October 17-18 EU summit and the October 31 Brexit deadline, the finance minister admitted Ireland must now make a decision on its own defence plans.

Deciding a budget on no deal scenario happening has very significant consequences on the content of that budget, and also the measures to be included in it and our national finances.

“In that scenario [a no-deal Brexit budget], Government will make a call and explain the rationale, and I will put together a budget on that basis,” Mr Donohoe said, adding: “I don’t want to be in a situation where our economy has to deal with the consequences of a no deal Brexit.”

Mr Donohoe’s comments came as junior finance minister Michael D’Arcy yesterday predicted the EU-UK stand-off will lead to a crash-out Brexit which will leave Ireland grasping for EU financial aid. Speaking to international news agency Reuters, Mr D’Arcy said he believes that a deal will eventually be struck after the October 31 deadline passes.

However, he added: “Could Brexit go badly wrong? Sure it could.

Ireland ... is the country that will be impacted more than anybody else. Potentially, this could have a huge impact on the Irish economy.

While the Government published its no deal preparation plans last Christmas, changing the budget into a no-deal scenario plan is likely to have a significant impact on a number of long-flagged ministerial promises seen as key to any Fine Gael general election campaign.

Among the promises which could be sacrificed in such a situation are planned income tax cuts for middle-income earners, with Taoiseach Leo Varadkar admitting last week the tax changes may have to be shelved for now.

Speaking to reporters in Kilkenny last Thursday, Mr Varadkar said: “This budget is going to be characterised by Brexit and by climate action...

The budget hasn’t been written yet, but obviously Brexit is a game-changer in terms of everything.

“Certainly a no deal Brexit would be a game-changer in terms of budget plans, but that doesn’t mean the five-year [economic] plan doesn’t stand.”

Mr Donohoe’s comments came after he met new British chancellor Sajid Javid in London yesterday, during which time both politicians outlined their Brexit views.

Government sources said Irish and British government officials are still discussing a potential meeting of Mr Varadkar and British prime minister Boris Johnson.