Paschal Donohoe (Dublin Central, Fine Gael) | Oireachtas source

The sequencing and deployment of the balance of the €390 million of Brexit contingency funding will be determined closer to the time. This funding will assist our farms, businesses and citizens should a no-deal Brexit happen. Alongside this, €365 million will also be provided for extra social protection expenditure to support those at risk of losing their jobs or who have lost them, with a further €45 million being made available to assist people to transition to new work. I believe these supports will be sufficient, but, if required, this Government stands ready to do more.

RAINY DAY FUND

If the economic impact of a no-deal Brexit is more severe than forecast, I am prepared to use resources that would otherwise have been dedicated to the rainy day fund. The rationale for this fund is to accumulate funding that can be deployed in the event of an adverse shock to our economy. Given the small size and openness of our economy, the use of this type of funding is an important way to protect our economy in challenging times. My original intention was to transfer €500 million to this fund from the Exchequer this year, with an additional €1.5 billion being transferred from the Ireland Strategic Investment Fund. While I am committing to the transfer of the €1.5 billion, given that a no-deal Brexit is more likely, I have decided not to transfer the additional €500 million from the Exchequer this year. This is the appropriate response to the more challenging economic environment we may be facing. It will ensure we have in place the right supports in order that our economy is protected from the impacts of Brexit and that the Government can continue to protect public services in the years ahead.

ECONOMIC PROGRESS IN 2019

As we prepare for Brexit, I can confirm to the House that our economy is in a strong position. After a long and difficult journey, balance was finally restored to the public finances last year. Despite many challenges, our economic growth is broadly based. Public capital investment, investment in our future, will increase by 22% this year. The unemployment rate has fallen to 5.3% from a peak of 16% in 2012. Tax revenues are largely in line with forecasts for this year, with €40.7 billion collected to the end of September, an annual increase of 8.7%. We expect to meet our revised target of €58.6 billion by the end of the year.

The Department of Finance, with the endorsement of the Irish Fiscal Advisory Council, IFAC, is forecasting gross domestic product growth of 5.5% for the year, up from 3.9% in our update earlier in the year. The economy is forecast to grow by 0.7% next year. IFAC has also pointed to the uncertainty around this, given the unprecedented nature of a disorderly Brexit and I share this assessment. The same is true for the forecast of the budgetary position for next year. My Department is forecasting a deficit of 0.6%, but in reality there is a wide margin around this, given the unprecedented nature of this event. Furthermore, it does not take into account any expenditure from the rainy day fund.

It is imperative to boost the resilience of the Irish economy in order to minimise, in so far as is possible, any future disruption.

This budget is designed to protect recent progress in our economy. It will act as a bridge to a better future for our country. Crucial to this will be how we manage our public spending.

SUSTAINABLE EXPENDITURE

Since 2011 we have diversified our economy and it is now more balanced. In the run-up to the crisis, nearly 11% of jobs in the Irish economy were in construction. Today, that figure is just above 6%. When it comes to the public finances, the contrast is stark. At the peak of the last economic cycle, day-to-day spending had grown by 57%, an average increase of 11% each year. By contrast, between 2015 and 2019, as we emerged from the bailout period and with significant pent-up pressures in our society and economy, day-to-day spending has grown by a more modest 19% – an average annual growth rate in the region of 4%. As such, we are entering a time of change with this strength and I am confident that we are more than capable of meeting the challenges ahead.

Therefore, today’s budget has two strands to it. The first strand, much of which I have dealt with, deals with the extra steps we are now taking to face up to the very real risk of a no-deal Brexit. The second will ensure that we can improve our public services and help our most vulnerable citizens. The sustainable funding and effective delivery of our public services is the touchstone for good government. It is an important principle that, when a Government sets out its plans for the future budget, people should have confidence that the Government will indeed deliver a budget of this scale – not more, and certainly not less.

As Minister for Finance and Public Expenditure and Reform, I take this responsibility very seriously and this is what we have endeavoured to do. In the past, it has proven difficult to deliver a budget in October which lines up closely and exactly with the Government’s plans from the first half of the year. In part, this was due to cost pressures that have arisen especially in the health sector. Those overruns have had to be dealt with, on top of the planned budgetary package. As the Irish Fiscal Advisory Council, IFAC, has stated, this is not a satisfactory way to manage the budget process from year to year. I accept that.

This year marks a turning point in responding to these issues. In total, the Supplementary Estimates that I am providing this year are less than half of last year's. Yes, they are still high, but a significant reduction has occurred.

My colleague the Minister for Health and the new leadership team in the HSE have succeeded in containing the additional pressures in the health sector to less than half of the level of last year. The new HSE governance board can now prepare a 2020 national service plan with improved health services for our citizens and without carrying over a large financial overhang from this year. In other words, we will see a full transition to a new and more stable model of governance within the health sector.

In the summer economic statement I stated that €2.8 billion of additional resources were available for 2020. Of this, €2.1 billion has been pre-committed, leaving €700 million to be allocated. To enhance the resources available for allocation in the budget, I am implementing targeted tax changes to the net value of around €300 million. This is paying for additional expenditure, bringing the total net budget package to just over €2.9 billion. This package incorporates fully the extra expenditure pressures to be carried over from 2019. Current spending will increase by 3.5% compared with what we expect to spend by the end of this year. I believe this is appropriate at this point in the economic cycle.

It is different; we are looking to take on board concerns that been offered. This approach balances stability – a very precious commodity in these uncertain times – with the need to protect and enhance the public services that our citizens depend upon. The details of these increases, and what they mean for our public services, are set out in the expenditure report. Total voted expenditure in 2020 will be €70 billion. This will allow Government to fund new capital projects, respond to change in our society and provide targeted improvements in public services.

CLIMATE CHANGE

While Brexit represents our most immediate economic risk, climate change is without doubt our defining challenge. We need to prove that we can grow the economy while reducing our environmental impact. For the first time, we now have a plan that sets out a pathway towards achieving our 2030 climate and energy targets. The climate action plan will be supported by the climate-related national development plan investment of €8.1 billion and a further €13.7 billion of investment by our State companies. However, this investment, by itself, will not solve our climate challenge.

Carbon Tax

Bold and new decisions are needed on our investment priorities but also on taxation and regulation. Carbon pricing is part of this. There is cross-party support, or nearly cross-party support-----

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