Wednesday 23 October 2019

Disorderly Brexit will severely reduce potential for tax cuts in next Budget

Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Kevin Doyle

Kevin Doyle

A DISORDERLY Brexit will severely reduce the potential for tax cuts in the next Budget as the country reverts to borrowing money for day-to-day expenditure.

Finance Minister Paschal Donohoe has predicted that he will have €700m for discretionary spending in Budget 2020.

Under normal circumstances this will be used for new spending and tax cuts. However, if the UK crashes out of the European Union on October 31, it will be diverted elsewhere.

At the launch of the Summer Economic Statement, Mr Donohoe said the economy is in "good health at present".

Employment is at the highest level, moving above the 2.3m mark.

"That said, it is clear that the external environment is becoming increasingly challenging and at this point a disorderly Brexit is a real possibility," he said.

Mr Donohoe will have €2.8bn of extra money for next year but more than €2bn of this is already pre-committed to public sector pay restoration, full-year tax cuts and other items.

Another €100m is going to be required to fund shortfalls in the budget for National Children’s Hospital.

The Minister hopes the current economic trajectory will accommodate a surplus of 0.4pc. But if Brexit hits hard this will be turned into a deficit.

Mr Donohoe warned that up to 55,000 jobs could be lost in the event of a no-deal Brexit.

"We want to be in a position where we will respond back to that and support those people," he said.

"If a disorderly Brexit does occur and if it is the job of this Government and the Government after that to deal with this, it is absolutely still the case that across the lifetime of dealing with that, that tax reform and tax reduction will be possible."

Asked if tax cuts will still be possible in the event of a hard Brexit, Mr Donohoe replied: "That was the case when we were dealing with our last set of economic challenges, but I think it is important to emphasise that in the early phases of dealing with Brexit, we will be mobilising all of our resources to support the economy and to support the hard working families that you are referring to in ensuring their jobs are there, and for those who face difficulty put in place the resources to help them and if needs be, create new work and new jobs for them," he said.

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