Finance Minister Paschal Donohoe has confirmed that a no-deal Brexit will result in the country’s budget surplus being replaced by a “temporary deficit”.
He said this is because additional supports will be needed to help those who lose their jobs and to help protect firms and businesses in the most exposed sectors.
Speaking in the Dáil, Mr Donohoe confirmed to Fianna Fáil’s finance spokesman Michael McGrath that, should a worst-case scenario look likely, additional spending in 2020 will exceed the €2.8bn committed to previously.
“With regard to the question on whether the resources would go beyond €2.8bn if we are in no-deal setting, the answer to that question is ‘yes’. The consequences of dealing with more people becoming unemployed or of having to support parts of certain sectors will mean reducing a surplus we would otherwise have and moving into what I would aim to be a temporary deficit,” he said.
Previous estimates have indicated that this additional borrowing could top €6bn next year alone.
Mr McGrath said the time has come to reveal the precise likely impact on people should a no-deal Brexit occur.
“People deserve to know and need to know the details of talks with the EU on cross-border trade,” said Mr McGrath.
In response, Mr Donohoe said: “I take the deputy’s point. If we move into October, Irish businesses will need to know what the contingency plans are. If a no-deal Brexit is averted on October 31 by means of, for example, an extension, that means the risk then shifts fully into the year which this budget oversees. Therefore, the risk is still there and it is absolutely inside the time period in which the House expects budgetary decisions to be made.”
Meanwhile, the Oireachtas Budgetary Oversight Committee has called on Mr Donohoe to expect the General Government Balance (GGB) to decrease by approximately €6.5bn in 2020 in the event of a hard Brexit.
“Should a ‘hard Brexit’ materialise, the SES does not forecast a return to surplus in the GGB until 2023 at the earliest,” found the committee report.
The committee also recommended that the finance minister provide it with clarity, in writing, on how the Rainy Day Fund can be utilised in the case of a hard Brexit.
Given the current uncertainty in the border area, Mr Donohoe should be mindful of any unintended consequences that fiscal policy decisions may have there, said the report.
The committee also highlighted concerns about the continued overrun in health expenditure.
It said it is of the view that there needs to be a much stronger link between published exchequer figures and the HSE’s financial reporting to allow the Oireachtas to carry out proper monitoring and scrutiny of expenditure in health.
“There should not be a big element of estimation surrounding expenditure levels in health at this stage in the budget cycle,” said the committee.