Brexit fear delays €500m destined for rainy-day fund

Fears of a crash-out Brexit have resulted in the Government withholding a €500m top-up for the so-called rainy day fund.

The move comes as confusion increases further over the UK’s Brexit plans with court papers suggesting prime minister Boris Johnson is prepared to seek an extension to the tense talks.

Taoiseach Leo Varadkar said such a request would be considered. With the Halloween deadline for a deal looming, EU negotiators also warned an agreement must be ready for leaders by next Friday.

Amid the prospect of a potential disorderly British EU exit, Finance Minister Paschal Donohoe has pulled back a planned €500m injection into the so-called rainy day fund.

Mr Donohoe confirmed that he would still put €1.5bn into the fund. However, the decision to withhold €500m would give the Government a financial buffer if there is indeed a hard Brexit.

“The reason for that is if we find ourselves dealing with a no-deal Brexit next year and we are moving into a deficit in order to deal with that, if I look to make a further deposit into the rainy day fund of €500m, I’d have to borrow to do that,” said Mr Donohoe.

Next Tuesday’s Budget for 2020 will in essence be a no-deal Brexit plan, including contingency options as well as what Mr Donohoe said would be “opportunities”. Extra funding options for tourism, agriculture, and transport are expected in the event of a no-deal Brexit.

Bailout funds to plug overspending in departments amounting to about €450m, most of which is in health, were also announced as the Government published the white paper overnight on public finances.

It is expected that overspending in health will exceed €320m and possibly come close to €400m while Garda overtime has cost €32m. Pensions for teachers have added to costs in education. Overspending in Social Protection will help pay for welfare Christmas bonus payments this year.

Mr Donohoe said the health overspend was less than the €645m for last year.

Some of the supplementaries will be covered by a windfall in corporation tax receipts, over €800m, and savings from departments.

Sinn Féin’s Pearse Doherty was critical of the department bailouts, saying: “Year after year the Government under-provide for our public services, and then announces over-runs at each year’s end.

“This makes a mockery of the budgetary process and is a dangerous way to manage our public finances.”

Meanwhile, court papers opened in Scotland show that Boris Johnson will ask the EU for a Brexit delay if a deal is not agreed by October 19.

Mr Johnson last month said he would rather “die in a ditch” than delay Brexit.