Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I welcome the opportunity to make some remarks on the summer economic statement, which was published earlier. My main takeaway from the document is that we now have a better sense, although only an estimate, of the likely impact of a no-deal Brexit were it to materialise at the end of October or in subsequent months. The figures illustrate a stark picture. A projected surplus next year of in excess of €1 billion would become a deficit of between €4.5 billion and €5 billion in one calendar year, which is a dramatic change of fortune. Over the five-year period to 2024 public finances could worsen by close to €30 billion in the event of a disorderly Brexit, compared with an orderly Brexit underpinned by a withdrawal agreement. Those stark figures need to be read in conjunction with previous estimates and reports from the Department of Finance, the ESRI, the joint paper, the Central Bank's analysis and the stability programme update from this year, which showed that economic growth over a two-year period that the Minister indicated this afternoon would be largely front-loaded to year 1, would fall by approximately 3%. That would mean little or no growth whatever next year. It may not be that bad but some say the impact could be worse. If it is worse, we face negative growth.

This is the environment into which we are entering prior to budget 2020. My understanding of comments made by the Minister and the Taoiseach in recent weeks was that there would be two quite radically different alternative budgets under preparation and come September, the Minister would decide which was the more appropriate given the assessment at that time of whether a no-deal or orderly Brexit was likely at the end of October. However, that is not what we are getting today.

The Minister's policy decision is that come what may, the budget day package will be €2.8 billion. We have two very different estimates of what the outcome might be depending on the Brexit scenario that transpires. However, the budget package is €2.8 billion, of which €2.1 billion is set in stone. The flexible element of budget 2020, therefore, is €700 million. If my interpretation of what the Minister is saying is correct, his assessment of where Brexit is likely to settle will influence how he is likely to use that €700 million. He is saying that the automatic stabilisers, which are essentially demand-led, will kick in, and if people lose their jobs, welfare supports will be available and, therefore, welfare spending will increase. Equally, less economic activity than was forecast will mean that tax receipts will come in lower than expected. Those are the automatic stabilisers. However, there seems little headroom for what the Minister calls the temporary targeted funding for the sectors most affected. It appears that all that must come out of the flexible envelope of €700 million. The Minister might elaborate on that later in more detail.

It seems that he decided in June that the budget day package in October will be €2.8 billion, irrespective of what form of Brexit, if any, we face later that month or beyond. I am not sure that it is wise to lock in that budgetary strategy right now. I do not see that it is necessary, as much can change in the coming months. Much of the data on which this is based may change and the economic picture might change. Aside from Brexit, there are many moving parts. The Minister has touched on some, and many other risks are outlined in the summer economic statement such as the economy overheating. We are seeing elements of that working through in the extra cost of delivering capital projects, for instance, and in the construction sector. There is also corporation tax, and a much more uncertain and volatile international trading environment. Sometimes we do not fully appreciate and accept just how open an economy ours is. It would not take much by way of external factors to have a material affect on our economy's performance. That is an important point. I hope the Minister will come back on the amount of resources he will have in play to do anything tangible to support the sectors we all accept will need special supports in the event of a no-deal Brexit.

Apart from that, the core priority going into this budget must be to protect the essential, basic front-line services on which people rely as they are under strain. It is fine for the Government to criticise the Private Members' motions that come before the House week in, week out but they do so because of our experience as practicing politicians. We talk to people on an ongoing basis, as does the Government. Services, particularly in parts of our health service such as homecare, on which the House will focus during the week, are particularly strained. Young children are awaiting assessments of need, and have waited two and three years in my part of the country. There is a long and difficult wait for parents who do not have the money to pay for a private assessment but then there is nothing at the end of it. They get a diagnosis but there are no services. Apart from Brexit, the Government will have to focus on what the priorities are for us as a country going into the next year and beyond over the coming months. Apart from the economic backdrop, which must be accounted for, the other core priority must be protecting our citizens and ensuring that those basic services are in place when they need them. They are under serious strain now. It is particularly the case in health and I do not doubt that the Minister is frustrated that health spending has increased by so much yet the return is not there in any improvement in waiting lists, particularly with outpatients, which continue to worsen.

The Minister cannot do everything. He cannot promise a €2.3 billion tax cut and deliver on the full capital programme despite the overruns that are there and, at the same time, protect vital public services. Decisions will have to be made against the benchmark, as far as we are concerned, of what are our values, what are our priorities as a country and who are we seeking to protect. For me, this is the key issue.

I welcome the fact the Minister is initiating a review of the sustainability of corporation tax. I would have preferred if there was an external input into it. I have height of respect for the Department and its officials but they are the same people who are advising the Minister day in and day out. I would have thought a fresh perspective on Ireland's corporation tax receipts would have been the way to go. Perhaps this is something on which the Minister can come back and engage with us on the precise methodology that should be used in conducting this review. I know the review is not just into the sustainability in isolation, given the volatility in corporation tax but is also in the context of the international changes led by the OECD. Those issues are also very important.

The Minister is duty-bound to give a comprehensive response in a very public way to the Fiscal Advisory Council's latest report. The criticism of the Government was stinging. It was quite damning. It is questioning the fundamentals underpinning the budgetary numbers over the coming years, for example, stating the medium-term budgeting forecast on the spending side is not credible. This is the independent watchdog. Those arguments and perspectives need to be assessed and we need an open and honest debate about the demographic pressures we know we are facing. We know we have an ageing population. Every year, we can see the extra demands that arise for elderly care and the pressures on our hospital services. Have we really factored in the known costs that are there? I very much doubt that we have, based on the assessment I have seen so far.

I welcome today's publication. It is a sobering backdrop to the period ahead as we approach the preparation of budget 2020. Once again, it underlines the need for political stability in our country. When we look at the chaos continuing to play out in the UK, if in this country, against all of the unknowns that undoubtedly exist, we provide the stability to ensure that as best we can we guide our country through an incredibly fraught and challenging period then we will have done some good service.

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