Tuesday, 8 October 2019
Financial Resolutions - Budget Statement 2020
A Cheann Comhairle, this is a budget without precedent.
In bringing it to this House, we seek to manage risk for our nation while aiming to make progress on so much, from the health of our national finances to the quality of our public services and to the great challenge of climate change. But these are also times without precedent. As we respond, we do so with the resources of a well-run economy and the purpose and certainty of good government and responsible politics. This is a budget that has been developed in the shadow of Brexit. And the context for Brexit has now shifted to no deal as our central assumption. This does not mean that no deal is inevitable. But equally we stand ready if it does happen.
In preparing for no deal, we can ensure that the Government has the necessary resources at its disposal to meet the impact of Brexit while keeping our public finances on the credible path they have been on since 2011. Our responsible management of the public finances means that we will meet the challenge of a no-deal Brexit from a position of strength. This year we have eliminated our deficit and are projecting a surplus of 0.2% of our national income. In the event that the UK leaves the EU with an agreement, we will continue to build on this surplus. In the event of no deal, we will intervene in a sustained and meaningful way to support jobs and our economy. We stand ready to act.
Intervening to support the economy in the event of a no-deal scenario will see our surplus swing to a deficit of 0.6% of our national income next year. However, there is large uncertainty around this given the unprecedented nature of a disorderly Brexit. While this would be a setback, it is important to place it in the context of our recent strong performance in restoring the public finances – for example, moving from a deficit of 2% of national income in 2015 to a balanced budget last year while meeting the demands of a growing population. It is also the right thing to do for our economy, for our society and for our citizens for whom Brexit is something they did not choose and had no hand, act or part in. Make no mistake, a no-deal Brexit will be very challenging for our country, but it is a challenge Ireland has the measure of. I wish to acknowledge the contribution of my Government colleagues in preparing this budget and the very positive and constructive engagement of the main Opposition party in the context of the confidence and supply agreement.
PREPARING FOR BREXIT
Brexit is the most pressing and immediate risk to our economy and with just 23 days to go before the UK is due to withdraw from the EU, the decisions I am announcing today have been influenced by the increasing likelihood of a no-deal scenario. I stated in the summer economic statement that the economy is poised at a point between the twin risks of potential overheating and Brexit. In addition, risks to the global economy are multiplying. A no-deal Brexit will mean a slower pace of growth in Ireland. However, this would be on a different scale to the multiple crises our economy faced during the great recession. Employment growth will slow, but we still expect to be able to create an additional 19,000 jobs next year. An increase in tax revenue is also in prospect.
Equally however, the risks associated with a no-deal outcome could become more severe than forecast. The rate at which we create new jobs may be slower, which could influence the tax we collect. And while currently low, the cost of borrowing and market sentiment can shift rapidly, as our recent experience shows. The Government is clear about the challenges posed by Brexit. It is why we have been preparing since before the referendum in 2016.
At all times we have sought to protect our citizens and support the economy, enterprise and jobs. To date, we have published two comprehensive contingency action plans, increased physical capacity at our ports and airports, provided training and financial supports to increase our customs capacity and recruited 750 additional staff. In addition, we have made up to €600 million available through the future growth loan scheme and the Brexit loan scheme. This is already helping our businesses to mitigate the risks of Brexit. However, our central economic scenario is for a no-deal Brexit. This means that we must increase again the level and range of supports to ensure our economy is protected. That is why I am today announcing a package of over €1.2 billion, excluding EU funding, to respond to Brexit. This package is in two parts. In the first part I am making approximately €200 million in Brexit expenditure available next year. I am allocating this across a number of Departments and agencies to increase our staffing, upgrade our ports and airports and invest in technology and facilities management we will need. This is to ensure we are ready for Brexit, whatever form it takes.
STANDING READY FOR NO DEAL
However, if a no-deal Brexit happens, we will intervene to further protect our economy. This intervention will be based on the following principles. This funding is available to manage a no-deal Brexit. It will be borrowed money. If we do not need it, we will not borrow it. If a no-deal Brexit does not happen, it will not be borrowed for other purposes. A no-deal Brexit is unpredictable and different sectors could be impacted on in different ways. Our response will demand flexibility and responsiveness. In the event of no deal, €650 million will be made available to support the agriculture, enterprise and tourism sectors and assist the most affected citizens and regions. Of this, €220 million will be deployed immediately in the event of a no-deal Brexit. From this, €110 million for enterprises has been identified for the first wave of funding for targeted new interventions to help vulnerable but viable firms to adjust to a no-deal Brexit. These interventions will support firms of all sizes at all levels of difficulty, with a particular focus on sectors most exposed, including food, manufacturing and internationally traded services. Support will be by way of grants, loans and equity investment and include a €45 million transition fund, a €42 million rescue and restructuring fund, an €8 million fund for food and non-food businesses, extra funding for Microfinance Ireland, €5 million for the local enterprise offices' emergency Brexit fund and additional funding for InterTradeIreland and our regulatory bodies.
The figure of €110 million will be provided through the Department of Agriculture, Food and the Marine's Vote in the event of a no-deal Brexit. The provision of immediate supports for our beef sector will be a first priority, as will support for our fishing fleet. We also want to support food companies to reorient towards new products and markets. To do this, €85 million will be provided for beef farmers, €14 million for fisheries, €6 million for other livestock farmers and the mushroom sector and €5 million for the food and drinks processing industry.
In addition, €40 million of funding for the tourism sector will be provided from this contingency fund. This funding will focus on regions most affected by a no-deal Brexit, how we would further advertise in the British market, dedicated promotions in other key tourism markets, encouraging direct access to our regional airports and ports from overseas markets and domestically for Fáilte Ireland to support tourism enterprises through the Brexit response programme.