The Irish Times view on Budget 2020

If Brexit uncertainty means the budget has to be a dull exercise, then so be it

Taoiseach Leo Varadkar  with British prime minister Boris Johnson at Government Buildings in Dublin on September 9th, ahead of intensive discussions on Brexit.  “Managing the public finances will be no easy task if there is a no-deal Brexit.” Photograph: Lorraine O’Sullivan/AFP/Getty Images

Taoiseach Leo Varadkar with British prime minister Boris Johnson at Government Buildings in Dublin on September 9th, ahead of intensive discussions on Brexit. “Managing the public finances will be no easy task if there is a no-deal Brexit.” Photograph: Lorraine O’Sullivan/AFP/Getty Images

 

The Government faces a difficult job in agreeing the shape of Budget 2020, due to be presented on October 8th. In all likelihood, the Brexit outcome will still be in the balance then, with all the implications this carries for the economy and the public finances. Budgets are always presented against the backdrop of some economic uncertainty but the difference for Ireland between an agreed and a no-deal Brexit is enormous.

Unless there is some sudden and unexpected change, it looks wise to plan the budget on the basis of a no-deal Brexit. If a deal is agreed, then all the better. Going in the opposite direction – ignoring the risk, and then having to reverse direction and take emergency action, would be damaging. If this means that Budget 2020 has to be a dull exercise, ignoring many of the pleadings for extra cash or tax cuts, then so be it.

Minister for Finance Paschal Donohoe looks set to recommend to cabinet colleagues that the package be prepared with a crash-out Brexit as the central scenario. It remains to be seen, however, just exactly what this will mean in practice.

Today the Minister also receives advice from the Irish Fiscal Advisory Council (IFAC), calling on the Government to ensure 2019 spending targets are adhered to and that initial plans for 2020 are not exceeded. This would mean that over-spending in health, which has been a feature of recent years, would need to stop, or to be balanced by cuts elsewhere. The IFAC warns that relying again on surging corporation tax receipts to make the numbers add up will just increase our exposure if these receipts suddenly fall.

Managing the public finances will be no easy task if there is a no-deal Brexit. As the IFAC says – and the Government intends – it makes sense to allow the budget to move into the red next year to help soften the blow and pay for special supports. But with a high national debt, Ireland needs to keep a check on overall borrowing level. Fortunately low interest rates give the Government some leeway but planning how to use it against the backdrop of such uncertainty is difficult.

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