Wednesday 26 October 2016

Brexit Aftershock: Irish ministers told to curb new spending plans

Philip Ryan, Maeve Sheehan and Claire Mc Cormack

Published 26/06/2016 | 02:30

Restraint: Minister Noonan
Restraint: Minister Noonan

The devastating impact on Ireland's economy from Britain's seismic decision to leave the European Union can be revealed for the first time, as ministers scramble to limit the damage from the UK referendum result.

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The Sunday Independent has learned details of a series of individual departmental risk assessments carried out by ministers ahead of the British vote.

The Department of Justice is concerned that a large number of migrants may arrive on the Border with Northern Ireland as the Republic becomes the entry point for the EU. It is also expected Ireland will become a gateway for migrants seeking to enter Britain, which could result in the need for strict customs controls in border counties.

At an emergency Cabinet meeting convened after the British vote, Finance Minister Michael Noonan told colleagues to "show restraint" and stop promising new spending as Ireland faces into the uncertainty of a post-Brexit Europe.

Mr Noonan's warning came as Public Expenditure Minister Paschal Donohoe yesterday told the Sunday Independent that the Government will have to be "even more realistic about what we can afford to do".

He said: "We can deliver our Budget plans for 2016 and 2017 but, as we work beyond that, we have to be conscious that we are in a volatile environment."

The Government position - that there will be little or no immediate impact - was last night seen as an effort to limit the negative effect on Irish business and consumer confidence.

Yesterday, German Chancellor Angela Merkel sought to temper pressure from Paris, Brussels and her own government to force Britain into negotiating a quick departure from the EU.

Britain's EU Commissioner Jonathan Hill resigned following Britain's decision to leave the EU but will remain in the role of Financial Services Commissioner on a temporary basis to ensure an "orderly handover".

Fine Gael MEP Brian Hayes said his departure was a huge loss to Ireland.

He said: "It's a major loss to Ireland in my view, and highlights the seriousness and the immediacy of the problem with which we have been confronted."

Britain's exit from the EU is expected to lead to at least some new trade barriers, and while the departure is unlikely to happen until late 2018 at the earliest, there will be more immediate effects.

Weakening economic growth in the UK and a stronger euro against sterling will hit Irish exports over the remainder of 2016 and beyond. Confidence issues in Ireland flowing from the shock of the Brexit vote could also have the most serious effect on the economy here.

As the Brexit debate intensified yesterday, Foreign Affairs Minister Charlie Flanagan said the future unification of Ireland would be in the best interests of its citizens, but that holding a referendum while the British government was negotiating its exit from the EU would only cause division.

"I share the view that, at some stage in the future, unification would be in the best interests of the people but only when there is a majority consent of the people in Northern Ireland," he said.

At Friday's Cabinet meeting, Mr Noonan set out the potential impact of Brexit on the Irish economy and urged colleagues to be prudent ahead of next year's Budget negotiations.

A senior government source added: "The big issue is the Border. In Dundalk and Carlingford and all around there - it effectively becomes the border for Europe."

There are also concerns at the highest level of government that criminals will escape justice as the European Arrest Warrant, which fast-tracks the extradition process between member states, will be no longer binding once the UK leaves the EU.

Cross-border healthcare agreements which see Irish patients treated in the North are also under threat from the Brexit vote. Irish people will no longer be able to avail of health services in the UK under the EU Cross-Border Directive. It means EU citizens who need medical treatment in other EU countries can claim back the costs from their governments when they get home.

Officials in the Department of Health have held a series of meetings with the HSE in recent months. The Department has said that nothing will change in the short term but the prospect of a return to the border means these agreements will almost inevitably have to be revisited.

The medical card entitlements of almost 30,000 British pensioners living in Ireland is also under threat, but Health Minister Simon Harris is understood to be anxious to address this issue as a matter of urgency.

According to the most recent Department of Social Protection figures there are 122,000 UK-born residents who now face uncertainty over welfare benefits they receive - this is more than half of all British people living in Ireland.

Social Protection Minister Leo Varadkar issued a statement after the Brexit vote saying he would seek to "fully protect" these benefits and those paid to Irish people living in Britain when bilateral negotiations between the two countries begin.

A senior Government source said people urgently need to be "reassured" about the potential impact of the vote.

"There were people waking up on Friday with social welfare and health benefits believing they were gone," the source said.

The Government is also anxious that access between UK and EU university programmes are maintained and students are not forced to pay exorbitant college fees in Britain.

There are a number of cross-border research projects which may suffer in the Brexit fallout. The fate of essential North-South road projects, which are part-funded by the EU, also hangs in the balance.

However, Communications Minister Denis Naughten has insisted his plan to roll out nationwide broadband access by 2021 will not be affected by the referendum result.

Minister for Jobs, Enterprise and Innovation Mary Mitchell O'Connor said she instructed Enterprise Ireland to "beef up" the number of trade missions.

Ms Mitchell O'Connor said these missions will be specifically focused on German and French industries, adding: "We have a huge responsibility and we see it as a challenge, but there are opportunities. The IDA is actively up there and they are making sure their client base is looked after and letting people know."

Public Expenditure Minister Mr Donohoe said he was confident that the Government would meet its spending and tax-cut commitments for the next two years, but beyond that the economic outlook is unclear. He also said the delivery of capital investment projects is "now more important than ever".

In a major blow to the farming community, Teagasc economist Kevin Hanrahan yesterday warned that farmers may face lower prices as early as this summer. He said the decline in the value of sterling is likely to continue and this will have a major impact on Irish exports to the UK.

He said: "It will lead almost certainly to lower cattle, milk and grain prices this summer - lower prices all around in just about everything."

Sunday Independent

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