Stephen Donnelly (Wicklow, Fianna Fail)
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136. To ask the Minister for Finance the preparations made in his Department in the event of no agreement being reached between the United Kingdom and the European Union on the terms of the UK's exit from the EU; if such preparations involve the drawing up of detailed and specific contingency plans in the event of a hard Brexit and a trade regime based on WTO tariffs; and if he will make a statement on the matter. [48777/17]

Paschal Donohoe (Dublin Central, Fine Gael)
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As Minister for Foreign Affairs and Trade with special responsibility for Brexit, Minister Coveney has responsibility for coordinating the whole-of-Government response to Brexit.

Work at Cabinet level is being prepared through cross-Departmental coordination structures. These represent a frequent and active channel through which all relevant Departments are providing their research, analysis and overall policy input to the Government’s wider response to Brexit, including its priorities for the ongoing Article 50 negotiations between the EU and the UK.

As the outcome of the negotiations is not yet known, an important focus of the planning and preparation being undertaken through these structures is on deepening the Government’s analysis and understanding of the exact consequences of a range of different possible scenarios. This represents an intensification of efforts to build on the Government‘s contingency planning. 

Department of Finance contingency work is ongoing and continues to examine all possible scenarios and challenges, and is a key input into the whole of Government approach. The Department has been assessing and preparing for the impact of Brexit since well before the UK referendum in June 2016, with this work now intensified. The Department's macro-economic forecasts have been updated on a number of occasions in order to take into account the economic impacts of Brexit. In addition, the Department has been to the fore in producing and funding a number of Brexit-related studies, both before and since the UK's referendum decision, including:

- :'Scoping the Possible Economic Implications of Brexit on Ireland' – Scoping study of scenarios for the future relationship between the UK and the EU. Published under the Department of Finance-ESRI research programme in November 2015;

- ‘An Exposure Analysis of Sectors of the Irish Economy’. An in-depth analysis of the possible sectoral and regional impacts of Brexit arising from Ireland's trade relationship with the UK, published by Department of FinanceOctober 2016 (Updated March 2017);

- 'Modelling the Medium to Long Term Potential Macroeconomic Impact of Brexit on Ireland' - Published under the Department of Finance-ESRI  research programme in November 2016, which modelled the medium to long term macroeconomic impact of Brexit under a number of scenarios, including a hard Brexit whereby trade between the EU and UK reverts to WTO tariffs, and;

- ‘Trade Exposures of Sectors of the Irish Economy in a European Context’ – An analysis of trade exposure to the UK in comparison to other EU Member States, published by Department of Finance September 2017.

It is clear from the Department's own published research that the potential impact on the Irish economy is significant. The medium to long term economic impacts of a ‘hard Brexit’ with reversion to the WTO trade rules are set out in the November 2016 study referenced above. Looking at the effect ten years after a UK exit, a hard Brexit scenario results in the level of GDP being almost 4% below what it otherwise might have been in a no Brexit scenario.

The best and most immediate policy under the Government's control to counter the likely negative economic impacts of Brexit is to prudently manage the public finances in order to ensure that Ireland's economy continues to remain competitive in the face of future economic headwinds. 

The Government has taken a number of important steps to prepare our economy for the challenges of Brexit, including in Budgets 2017 and 2018, the Action Plan for Jobs, our Trade and Investment Strategy and the preparation of a new 10-year Capital Plan. On the fiscal side, the Government has continued its policy focus of enhancing the resilience of our public finances to any Brexit-related shock. Specifically, it is projected that Ireland will achieve its medium-term budgetary objective of a balanced budget next year. Linked to this, over the forecast horizon, it is projected that the General Government Debt-to-GDP ratio will continue on a downward trajectory, reaching the Stability and Growth Pact (SGP) 60 per cent threshold in the early part of the next decade and continuing to improve thereafter. Whilst not complacent to potential challenges, including our currently elevated debt level, these developments will help provide fiscal capacity in the event of Brexit. Complementing this, Budget 2018 further established the ‘Rainy Day Fund’, which provides a further counter-cyclical buffer, and represents an important measure to strengthen the shock absorption capacity of the national finances to such external risks.

Budget 2018 also announced further measures to prepare Ireland’s economy for the significant challenges ahead. These measures include: a doubling of capital investment between 2015 to 2021 - boosting the growth potential of the economy;  improving the competitiveness of our personal tax system - through income tax reform; introducing a Key Employment Engagement Programme (KEEP) – a new incentive to attract key employees; a new €300 million Loan Guarantee Scheme for Brexit-impacted business and a complementary €25 million Agriculture Brexit Loan Scheme – targeted at enhancing the competitiveness of the businesses most exposed to Brexit; the retention of the 9% VAT rate in the hospitality sector – to reduce the impact of currency volatility in the wake of the UK’s decision; and a the doubling of additional Brexit-related staff in state agencies.

The Department of Finance will continue to monitor the economic impacts of Brexit, to carry out relevant analysis and contingency planning and  and to frame budgetary policy advice in this context.