Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I join colleagues in expressing disappointment at the outcome of the UK referendum. The UK has been a valued ally for Ireland within the European Union. However, the UK electorate has spoken and we must fully respect its decision. It is important to remember that we are at the start of a process. The UK remains a full member of the EU and this will continue to be the case until the arrangements for its withdrawal have been completed. As the Taoiseach said, there will be no immediate change in the free flow of people, goods and services between our islands.

As Minister for Finance, I assure the House I will be working to ensure that throughout this process, we will seek to support the continuation of the important and mutually beneficial economic ties that exist between the UK and Ireland. I assure Deputies that officials in the Department of Finance have been actively preparing for the outcome of the referendum over a considerable period, for example, by developing the Government's contingency framework. A summary of the key actions arising from this was published last Friday. As part of the planning process, the Department of Finance has been liaising closely with the Central Bank and the National Treasury Management Agency, both of which have been preparing for this outcome and closely monitoring developments. This close engagement will continue.

When I spoke to the Governor of the Central Bank on Friday morning, he advised me that the Central Bank is confident that the appropriate contingency measures are in place to address any immediate issues of financial stability that may arise. As part of the euro system and the Single Supervisory Mechanism, the Central Bank is closely monitoring the market impact and banking sector and will liaise closely with the Department of Finance again in the coming days. When I spoke with the chief executive of the National Treasury Management Agency on Friday morning, he confirmed that the agency has prepared for this eventuality, that it is well funded for this year and that its debt dynamics are improving. We are also engaging closely with the EU and international partners to ensure short-term volatility in the markets is closely managed.

In terms of the budgetary process, the national economic dialogue is being held in Dublin Castle this week. A number of colleagues in the House will have participated in the first session of the dialogue today. Unsurprisingly, the outcome of the UK referendum was a key discussion point this morning when the landscape for budget 2017 was debated. While it was not our preference, the outcome of the referendum is one we have planned and prepared for. The summer economic statement set out a macroeconomic assessment of the impact of a UK decision to leave the EU. We know the decision that has been made will have an adverse impact on the growth outlook. Our initial estimate, based on the assessment in the summer economic statement, is for reduced growth of approximately 0.5% for 2017. The fiscal space of just under €1 billion for 2017 set out in the summer economic statement is not expected to change very much because the factors used to calculate it are largely fixed at this stage.

The estimates of fiscal space for 2018 and beyond depend on the impact on our macroeconomic and fiscal position. At this point, it is far too early to speculate on potential impacts. The Department of Finance will produce its next official forecasts for the budget in October. These will contain updated estimates of economic growth, public finances and the fiscal space. It is worth pointing out that the fiscal rules focus on the structural, or real, state of the public finances, but also contain specific smoothing mechanisms so that expenditure should be insulated to a reasonable degree from the effects of the cycle and from one-off volatility. Our proven track record is evidenced by the fact that on Friday, immediately after the UK vote, one of the main credit rating agencies, Standard & Poor's, said that the UK's vote to leave the European Union "does not immediately affect" Ireland's A credit rating. It noted that it expects "the Irish economy to stay resilient enough to withstand the negative impact of the Brexit".

As the Taoiseach noted on Friday, it is important to reiterate that Ireland's future lies within the European Union. We will continue to work with our EU partners to develop and implement policies that will deliver jobs, stability and growth for our citizens. Of course, we will also continue to work to maintain our excellent bilateral relationships with the UK.

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