State can afford to borrow for Brexit if necessary - Taoiseach

Government ‘will have to find a lot of money to save people’s jobs’ with no deal, Varadkar tells Dáil

Taoiseach Leo Varadkar said a no deal Brexit “will cause the economy to slow down very sharply but not to the extent that we go back into recession”. File photograph: Simon Dawson/Bloomberg

Taoiseach Leo Varadkar said a no deal Brexit “will cause the economy to slow down very sharply but not to the extent that we go back into recession”. File photograph: Simon Dawson/Bloomberg

 

Ireland can afford to borrow to negate the costs of Brexit if necessary, the Taoiseach has told the Dáil.

Leo Varadkar said the Government did not feel the need to revisit the budget because of the prudent approach it had taken.

But during leaders’ questions on the nurses’ strike Mr Varadkar said the Government “will have to find a lot of money to save people’s jobs,” in the event of a hard Brexit. He said this when he was pressed on increasing nurses’ pay in advance of the 24-hour stoppage planned by nurses on Wednesday.

“We could be in a situation in a few weeks’ time where people are losing their jobs” and “it would be irresponsible of me not to admit that to this House”.

But he said during Taoiseach’s questions that in the event of a hard Brexit the Department of Finance projected a 0.2 per cent budget deficit this year, 0.5 per cent next year and in 2021 and to go back into surplus in 2022. He also said “quite a lot of money will come in from Vat increases”.

Fianna Fáil leader Micheál Martin said the Government’s projections showed a “low impact” compared to the Central Bank’s assessment.

Mr Varadkar said the Government’s was “probably a bit more optimistic”. It was always a difficulty that they are forecasts. “Nobody knows for sure what impact it will have.”

Speaking after a phone call with British prime minister Theresa May earlier on Tuesday in advance of a series of crucial votes in Westminster on the withdrawal agreement, Mr Varadkar said “we intend to speak again after those votes happen and we will take if from there as to the next steps”.

A no deal Brexit “will cause the economy to slow down very sharply but not to the extent that we go back into recession”.

He said the Government was “not projecting a return to recession. The economy will grow but not grow fast enough to keep pace with an expanded labour force” and unemployment would increase in the event of no deal on the UK withdrawal from the EU.

‘Unwise’

But he warned that linking Brexit with the issue of a united Ireland would be unwise. Mr Varadkar said it would be “unwise” to do so and debate on a united Ireland was for “some point in the future”.

Sinn Féin leader Mary Lou McDonald had renewed her call for a border poll in the event of no deal.

“Given the scenario of a crash and a hard border people want the opportunity to resolve the issue for themselves democratically and to offer a united Ireland,” she said.

Mr Varadkar pointed out that unionist voices opposed to a Brexit deal were concerned that “some people in this House or some political forces may try to exploit Brexit to bring about Irish unity.

“That’s not the Government agenda. That’s not what we’re at at all.We don’t want to threaten anybody’s loyalty or identity.

“We want to deliver an agreement that avoids a hard border and gives us a transition period that secures free trade between Britain and Ireland.”

He stressed that “the issue of Irish unity is a separate issue and should be dealt with at some point in the future”.

And he told Independent TD Tommy Broughan that no work was underway on the border to facilitate the imposition of physical infrastructure.

“Any works that are happening are as far as I imagine improvements to roads.”

The Dublin Bay North TD also expressed concern that countries like France and the Netherlands are beginning to make bilateral arrangements in the event of no deal.

The French are making arrangements on trade and travel and the Dutch are also taking steps to protect their agrifood sector with the UK, Mr Broughan said.

He asked if these bilateral moves “echo slippage in the unanimous support I thought we had with the 27 on the backstop”.

The Taoiseach said that where states “engage with bilateral agreements it needs to be done with the knowledge of the European Commission”.