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THE SUMMER ECONOMIC STATEMENT setting out what we are likely to see for next year’s Budget has been published.
Unlike other years, Finance and Public Expenditure Minister Paschal Donohoe had to consider two scenarios when drafting today’s statement: One, in which there is a real possibility of a no-deal Brexit, and the other, in which it is all relative smooth sailing after the Brexit deadline of 31 October.
Speaking to reporters this afternoon, he said the “external environment” is becoming “increasingly challenging”.
Donohoe added that the “disorderly Brexit” in now a “real possibility”, which is why the Irish government needs to plan for such an event.
So, what is the Summer Economic Statement?
What is actually being talked about is how much money the government has to spend in the next Budget – on the likes of tax cuts, new transport systems, better roads, and improved health services.
How much extra money do we have to spend?
Donohoe said the budgetary package for Budget 2020 is €2.8 billion, with €700 million in fiscal space (the amount of money there for tax cuts or new spending measures).
Of the €2.8bn, about €1.9bn has already been allocated to fund capital projects and public pay. It should be noted, this is the case if there is an orderly Brexit.
Today’s statement predicts a surplus in GDP in an orderly Brexit of 0.4%.
What about Brexit? Will that change this year’s Budget?
The statement sets out an “orderly Brexit” would see small surplus next year, with a €300 million increase in public spending and €600 million in new taxation measures.
A “disorderly Brexit” would necessitate essentially the same budget but there would be “temporary, targeted funding” for sectors that are most affected by Brexit.
The surplus mentioned above would also turn into a deficit “in the region of -0.5% to -1.5%” in GDP next year.
Rónán Duffy / TwitterFinance Minister Paschal Donohoe publishes Summer Econimic Statement ahead of next year's budget.
— Rónán Duffy (@ronanduffy_) June 25, 2019
Two tables for two different Brexits, 'Orderly and Disorderly'. Basically deal or no-deal. pic.twitter.com/56FOoxrzKW
When will the minister decide what option to go with?
Speaking to reporters last week, Donohoe said he will have to make an “informed judgement” or guess as to whether there will be an orderly or crash-out Brexit in September, ahead of Budget day on 8 October.
The minister also reiterated what he said last week – that there are no plans to bring out another budget, post-Brexit.
Fianna Fáil’s Michael McGrath TD and Labour leader Brendan Howlin TD are among those who have said in the past few days that the government should not rule out an emergency budget.
“It is very important that Ireland sends out a signal that we will deliver and we are able to make our own decisions and project the right kind of tone about how we set our economic policy,” Donohoe said
I am absolutely certain that the right course of action for our country this year is for a single budget based on the parameters I have outlined.
Are we spending any of the cash on BIG projects announced?
The National Broadband Plan and the National Children’s Hospital are the two big projects mentioned in the statement today, with €200 million set aside for these two plans.
“Since the UK referendum result in 2016, a number of steps have been taken to build up the resilience of the economy so that we have the capacity to deal with adverse economic shocks. This includes building up our fiscal resources by balancing our books last year for the first time in ad decade, reducing our debt burden and establishing the Rainy Day Fund. The steady increases in public spending implemented in recent years, with a particular focus on public capital investment, play an important role in supporting resilience in the face of Brexit,” said Donohoe.
He added:
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 Summer Economic Statement 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.
But it is not just Brexit the government has to worry about.
Today, economic experts warned that Ireland runs the risk of recessionary spending cuts if it continues down the path of spending.
Stephen Kinsella, Associate Professor of Economics at University of Limerick, told the Budget Oversight Committee:
“Ireland risks replaying the 2007-9 period of dramatic cuts to public expenditure on its current forecasted path of spending increases.”
With the finance minister holding the nickname of ‘Prudent Paschal’, he runs the risk of damaging Fine Gael’s perceived reputation of looking after the purse strings if his predictions of Brexit dramatically go off course.
- With reporting by Rónán Duffy
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With Boris at the wheel disorderly is guaranteed!
@Big Knickers: we don’t need boris for disorder in our shambolic politics. And they tell us the country is one of the best performing in the EU, but we’re also one of the least prepared for brexit with our continuous budget deficits and no money reserves in the state bank account.
Be brexits fault for housing, HSE , banks etc ect ect.. FFG exonerated …
After the new hospital costs and broadband costs, there is definitely nothing prudent about this gov. 200 million set aside for these two projects, haha! They’re attempting a bit of numbers manipulation to produce a surplus and of course the resulting deficit will be all brexits fault, how convenient. And his rainy day fund of 500 million, its 1/400th of the national debt, its like having 1k rainy day fund for a 400k mortgage.
And no matter how much these overpaid political donkeys try to dress it up, while countries like germany and the netherlands have accumulated budget surplusses of 60 billion and 11 billion over the last few years, we have accumulated a big fat 0, so when brexit hits, we’ll struggle immedately because we have no money reserves to absorb any economic downturn, but not to worry, incompetent imprudent pascal and his useless idiot buddies in the dail will make off with a political furtune, the rewards for bankrupting the country and continuous poor national governance, but sur keep voting FFG in the next election, ye shower of gombeens!
@Adrian: where is the number manipulation? genuinely.
@Tim Pot: its all over the place in the gov finances. Just wait for the 6 one news to hear all the opposition politicians saying the numbers don’t add up.
Why is Ireland paying for a british problem?
@Matthew Gorman: democratic choices are not problems. Attempting to overturn that choice by means of the back-trap , and then belatedly discovering it’s just not going to be passed, ,,, is a problem ….but not for the brits
@jackbello: You do know that it was the UK Government negotiators that looked for and got the Backstop inserted into the Withdrawal Treaty. This was the UK’s choice of solution to the Irish Border Question. So crying about what the UK looked for and got and then couldn’t agree with amongst themselves is not the EU’s fault or problem.
@jackbello: kinda puts the statement from Eir yesterday that the National Broadband Plan could be done 2 billion cheaper by them.
@Matthew Gorman: The world is financially connected . What happens in one country effects another . If Britain sneezes Ireland catches a cold . Did you really think that changing a piece of cloth on a pole a hundred yrs ago was going to make Ireland independent . Nationalism only exists in the minds of people .
@Mick.: you do know that British and Irish civil servants engaged each other to discuss plans to overcome the issues related to our sovereign border and Brexit?
The EU told them it was none of their business and thus, the conversation ended. The withdrawal agreement is a consequence of that action.
@Mushy Peas: You do know that Irish Government with the other 26 EU Governments appointed Michel Barnier and his team as the sole negoatiors for the EU concerning Brexit. And has agreed with everything Barnier did and achieved.
@Mick.: The government may of come up with the idea but parliament didn’t . It means nothing unless parliament agrees to it .
@John Smith: Precisely what I said. A problem thought up by the UK and for the UK to solve with a solution that will be acceptable to the EU. And mentioning technologies that as yet do not exist is pointless. The easiest solution that would make English Conservative Party members happy and would very likely vote for, would be for England Scotalnd and Wales to leave the EU including the Customs Union while leaving NI in the Customs Union and placing an economic border down the Irish Sea. This way they would be free to go their merry way, commiting economic suicide.
Brexit is the gift that keeps giving to the fine gaulers. Every one of their failures they mention brexit. Bring on a GE..
@Greg Dunne:
And vote for who ??
@Duncan: Anyone but FF, FG or Labour……Easy
Ah, here we go again with more Project Fear. Remember those apocalyptic headlines about shortages of food and medical supplies in Ireland if Brexit goes through? Looks like Prudent Paschal’s Ministry of Plenty is now preparing us for yet more increases in the cost of living and further decreases in the quality of living.
No mention of any money for the climate emergency…
@iComment:
700m available for the ‘extra stuff’ (fiscal space)
@iComment:
4.5 million Irish will save the world with the Carbon Tax.
@George Vladisavljevic: shh it’s an invisible tax on being alive in this country
The Brits will now be voting with their eyes wide-open; hope common sense trump’s jingoistic bigotry Bojo
Am sure the EU will help Ireland financially. They’ll allow RoI to run an excess 3% budget deficit, break the SGP, but won’t impose financial penalties for doing so. The EU has Ireland’s back….
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