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

I acknowledge that significant risks still face the economy in respect of Brexit. As for the economic relationship between Ireland and the UK, the issue has just been moved into the next phase, namely, the negotiation of the future relationship. In light of what has emerged from the newly elected British Government, whereby a hard deadline will be imposed on the talks, the risk of a disorderly Brexit has resurfaced. We all know what the consequences would be for Ireland's economic and trading relationship with the UK. A disorderly Brexit at the end of 2020 would mean the imposition of customs and an effective regulatory border between Great Britain and Ireland. They are significant issues, and notwithstanding what has been agreed in the withdrawal agreement, the core economic relationship in the future will be determined by the negotiations. There are other risks, not least the weak European economy, the prolonged period of low growth among a number of our main trading partners and the trade tensions that persist among the main trading nations of the world.

It should be acknowledged that while the rainy day fund has been established in law, which is welcome, as is the €1.5 billion in the fund, arising from the one-off transfer from the ISIF, the rainy day fund should be in a much stronger position than it is. The criticisms of the Irish Fiscal Advisory Council, IFAC, about the Government's handling of the public finances, were well made, not least in light of the points it made about the tailwinds at our back as a country in recent years, the boom in corporation tax receipts and the historic prolonged period of low interest rates. IFAC has estimated that yearly tailwinds have risen to between €10 billion and €14 billion, yet the deficit in the public finances improved by only approximately €3 billion between 2015 and 2018. The council made the point that budget 2020 projected a surplus for 2019 and a return to deficit in 2020, even without disorderly Brexit-related spending, although the central scenario in the budget was a disorderly Brexit, which we all continue to work to avoid.

On the issue of the overdependence on corporation tax, which is acute and is now a significant risk to the public finances and the economy, we are likely to collect approximately €11 billion in corporation tax by the end of the year, which is welcome. The receipts are very strong but IFAC estimates that the excess could contribute between €2 billion and €6 billion to the Government's yearly revenues.

There is a prospect, albeit unquantifiable, of the receipts not recurring. The Government has made permanent expenditure commitments on foot of the receipts but if they do not repeat year in, year out, we will be left very exposed. IFAC also made the point that the structural budget balance, based on the Department's measure, has deteriorated in recent years. Despite all the factors in our favour, the underlying public finance position has not improved in a manner that one might have expected.

We will reluctantly support the motion. We support the concept of a rainy day fund, as does IFAC. In its recent summary assessment, it stated the Government needs to "use the rainy day fund and a prudence account to save temporary receipts, including saving unexpected corporation tax receipts so that they cannot be used to finance overruns in other areas". We agree with that, but in the round, given that the risk of a disorderly Brexit remains in place and may not be as remote as we had thought a matter of days ago, we will support the motion.

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