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SOCIAL BOOKMARKS

50,000 jobs at risk in no deal Brexit as Minister reveals just €700m in additional spending for Budget

Up to 50,000 jobs will be lost if a no-deal Brexit occurs, Finance Minister Paschal Donohoe has said.

He was speaking at the launch of the Government's Summer Economic Statement at which he revealed he will have just €700 million in extra money to spend in October's Budget.

While the total increase in spending next year will amount to about €2.8bn but the vast majority of that is already accounted for to deal with pressures brought about by our ageing and growing population.

Finance Minister Paschal Donohoe today published his Summer Economic Statement in which he outlined two possible Brexit scenarios – one if a deal is secured and one if no deal is achieved.

Mr Donohoe said the numbers would accommodate a surplus of 0.4% of GDP next year and a budgetary package of €0.7 billion once pre-committed current and capital expenditure is accounted for.

Mr Donohoe signalled that Ireland is at “the top of the economic cycle” and external challenges are increasing.

With current and capital expenditure commitments amounting to €1.9 billion (including a €0.7 billion or 10% increase in capital investment) and an expenditure reserve of up to €0.2 billion being established to accommodate funding requirements for the National Broadband Plan and Children’s Hospital, this leaves €0.7 billion to be specifically allocated as part of the Budget, Mr Donohoe confirmed.

Should a disorderly Brexit occur, he said this could involve the budget surplus would become a deficit in the region -0.5% to -1.5% of GDP for next year, depending on the magnitude of the economic shock.

Mr Donohe said a decision will be taken in September, when additional information is available as to which is to become the central scenario underpinning the economic and fiscal forecasts for Budget 2020.

Speaking at the launch, Mr Donohoe said: “It is clear that the external environment is becoming increasingly challenging and at this point in time a disorderly Brexit is a real possibility. That is why I am setting out two budgetary scenarios in this SES – the first involves an orderly Brexit occurring, while the second involves a disorderly scenario.”

“While the sensible economic and fiscal policies implemented over recent years have placed Ireland in a stronger position to deal with challenges, including Brexit, continued careful management of the economy and of the public finances is needed now more than ever in order to chart our way forward through the uncertain times ahead. By approaching the SES in this way, we will ensure that we are prepared for all eventualities so that the public finances and our people are protected in the years to come.”

Mr Donohoe briefed Cabinet on the Summer Economic Statement this morning and it was approved by ministers for publication.

    The SES sets out that:

  • The Budget 2020 framework involves a budgetary package of €2.8 billion for 2020.
  • This would accommodate a surplus of 0.4 per cent of GDP next year and a budgetary package of €0.7 billion once pre-committed current and capital expenditure is accounted for;
  • In the event of an orderly Brexit and given that we are at the top of the economic cycle, the appropriate budgetary policy is to stay within the parameters set out in the Stability Programme Update (SPU) published in April (targeting a surplus of 0.4% of GDP);
  • With current and capital expenditure commitments amounting to €1.9 billion (including a €0.7 billion or 10 per cent increase in capital investment) and an expenditure reserve of up to €0.2 billion being established to accommodate funding requirements for the National Broadband Plan and Children’s Hospital, this leaves €0.7 billion to be specifically allocated as part of the Budget.
  • Under the disorderly Brexit scenario, this could involve a headline deficit in the region –½ to –1½ per cent of GDP for next year, depending on the magnitude of the economic shock;
  • This would allow for the automatic stabilisers to provide counter-cyclical support (i.e. absorb an increase in social protection payments and falling taxes) allowing for a smaller surplus; and temporary, targeted support for the sectors most affected by Brexit.
  • A decision will be taken in September, when additional information is available as to which is to become the central scenario underpinning the economic and fiscal forecasts for Budget 2020.
  • This is sensible budgetary strategy and one that the Government intends to follow.