Budget 2020: Brexit impact to hit social welfare increases

The level of social welfare increases in next month's budget is likely to be lower than previous years as the Government scales back its spending plans to deal with a potential no-deal Brexit.

Minister for Finance Paschal Donohoe has said social welfare increases in the October 8th package will be "focused" and "targeted at those who are vulnerable".

“We will have a social welfare package in the budget but it will be different in scale to previous years.”

Previous budgets agreed between the Government and Fianna Fáil under the confidence-and-supplyagreement have seen €5 across-the-board increases.

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Income tax

Mr Donohoe ruled out any cuts in personal taxes on Wednesday as he confirmed he would introduce a no-deal Brexit budget. Sources involved in drafting the final budget before the election said it would be difficult to substantially increase welfare without cutting taxes, meaning it would be hard to give to one group and not to another.

Some Fine Gael figures said they expected to see an emphasis on children and families in the budget. And it is also expected to contain some revenue raising measures, such as an increase in carbon tax.

On reducing personal tax, Mr Donohoe said: “I’m not going to do that, I am going to make a set of very safe choices in relation to taxation.”

He said it is “too early”to say that €5 across-the-board welfare increases are off the table.

An increase of anything less than €5 is seen as politically difficult, and TDs recall the negative reaction among pensioners to a €3 increase given in Budget 2016.

Ministers who attended Wednesday’s Cabinet meeting also said Mr Donohoe gave the impression that welfare increases would not be of the order of recent budgets. One Minister said the welfare package would be “scaled back”. The Independent Alliance also met Mr Donohoe for a budget meeting on Wednesday.

Fianna Fáil social protection spokesman Willie O'Dea has already called for €5 increases this year, although other party sources noted the high cost of such a package, saying it would cost about €400 million.

Mr Donohoe confirmed he would have a budget package of €2.8 billion, of which €2.1 billion has already been committed.

If the UK leaves the EU in an orderly fashion, the Government will run a small surplus of 0.4 per cent but this will swing to a deficit in the range of 0.5 to 1.5 per cent if there is no deal.

Sectors of the economy seen as at risk from a no-deal Brexit at the end of October will be supported through greater Government borrowing.

Mr Donohoe said the €2.8 billion spend could increase if he decides to borrow more and sources said the €700 million available for new spending will be allocated on budget day. The vast majority of no-deal supports will then be funded through borrowing, it is understood, with Mr Donohoe providing a rough outline of such plans on budget day, rather than spending specifics.