Government to spell out how no-deal Brexit would affect budget

Details will be published in mid-June as part of the Summer Economic Statement

Taoiseach Leo Varadkar speaks to the media at an EU leaders summit in Brussels after elections to discuss who should run the EU executive for the next five years. Video: Reuters

 

The Government is to outline how a no-deal Brexit would impact the next budget within weeks, with warnings that resources for tax cuts and spending increases next year will be “vastly reduced” in such a scenario.

The details will be published in mid-June as part of the Summer Economic Statement, which will begin the process of laying out the last budget before the next general election.

Sources said Minister for Finance Paschal Donohoe will “spell out” how much money he will have for the October budget if Britain leaves the EU without a deal. Mr Donohoe will also outline how much money he will expect to be able to spend in 2020 if there is an orderly Brexit.

Britain is scheduled to leave the EU on October 31st, and candidates for the Tory leadership contest, the winner of which will replace Theresa May as prime minister, are pledging they will leave the EU without a deal at that point if they cannot secure changes to the withdrawal agreement, including the backstop.

European Commission president Jean-Claude Juncker repeated yesterday that the deal cannot be reopened.

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While work is said to be only beginning on calculating how a no-deal Brexit would affect the budget, sources said the money available to Mr Donohoe would be “vastly reduced”.

One Government figure also said Fine Gael must show it has control of the public finances after controversies over the national children’s hospital and the National Broadband Plan.

The budget will have to be agreed with Fianna Fáil. Taoiseach Leo Varadkar and Fianna Fáil leader Micheál Martin last year agreed to extend the confidence-and-supply deal for another, fourth budget.

Growing risk

Speaking in Brussels yesterday, Mr Varadkar said there was “a growing risk of no deal”.

“There is a possibility that the new British prime minister may try to repudiate the withdrawal agreement,” he said.

In the summer statement last year Mr Donohoe said there would be €3.4 billion available in the budget, although corporation tax receipts increased the total by a further €1 billion by budget day in October.

Mr Donohoe has already said a no-deal Brexit could make the unemployment rate rise by 2 per cent, as well as making the economy 4.5 per cent smaller in the medium term than it would be under existing projections.

Mr Varadkar told his Independent colleagues in Government he would inform them if he chooses to dissolve the Dáil early for a general election.

He reassured his Ministers at a Cabinet meeting on Monday that it was not his intention to give the impression in weekend comments that he favoured an election soon.

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