No-deal Brexit dangers may be diluted with ‘rainy day fund’

Donohoe could borrow less by employing State nest egg fast approaching €2bn

Minister for Finance Paschal Donohoe: While details of how the  fund may be used to help deal with a disorderly Brexit are not  finalised, triggering the fund is being examined. Photograph: Niall Carson/PA

Minister for Finance Paschal Donohoe: While details of how the fund may be used to help deal with a disorderly Brexit are not finalised, triggering the fund is being examined. Photograph: Niall Carson/PA

 

The State’s “rainy day fund”, which will be worth €2 billion by the end of the year, could be used by the Government to deal with the effects of a no-deal Brexit under plans being considered by Minister for Finance Paschal Donohoe.

Mr Donohoe has €2.8 billion to spend on budget day on October 8th, but will borrow more to fund contingency measures to deal with a no-deal Brexit if needed.

The contingency measures are expected to be directed to support at-risk sectors of the economy, such as in the small business, agriculture and tourism sectors.

While the details of how the rainy day fund may be used to help deal with a disorderly Brexit have not yet been finalised, sources said triggering the fund in such an eventuality is being examined.

It was also suggested that using the rainy day fund for Brexit could reduce the amount of money Mr Donohoe would have to borrow.

Budget day package

Two Ministers whose departments will be at the frontline of providing supports through a crash-out Brexit – Minister for Agriculture Michael Creed and Minister for Business Heather Humphreys – have been among the first to hold bilateral budget talks with Mr Donohoe.

Of the budget day package of €2.8 billion, €2.1 billion has been pre-committed, with only €700 million available for new spending.

It is expected Mr Donohoe, who continues his budget meetings with Fianna Fáil on Tuesday, will detail on budget day exactly how the €700 million will be spent. But the borrowed, contingency element is being described by sources as the “virtual budget” which would only kick in in the event of a crash-out Brexit.

The establishment of the rainy day fund was a key element of the confidence-and-supply deal struck between Fine Gael and Fianna Fáil in 2016.

It was set up this year and is due to be capitalised with €1.5 billion from the Ireland Strategic Investment Fund in 2019, with an annual contribution of €500 million from the exchequer each year from 2019 to 2023.

Mr Donohoe last week told the Oireachtas Budgetary Oversight Committee these deposits into the fund have not yet been made.