Paschal Donohoe claims Brexit won't derail 2019 budget
Even a “hard Brexit” will not derail budget plans for this year, Minister for Finance Paschal Donohoe told the Oireachtas Finance Committee, although the minister said he would re-evaluate impact assessments on the economy.
The questions came after the British parliament rejected Prime Minister Theresa May’s proposed deal to leave the European Union, which raised the prospect of the UK crashing out without a deal unless the negotiations can be restarted and extended.
“I am confident as we go through 2019 they will be maintained,” Mr Donohoe said of his overall budget spending plans.
The Minister had been called to testify after a scathing report from the Irish Fiscal Advisory Council in November last year said the Government had let spending run out of control and was acting too slowly to bring the budget into balance.
Soon after the report however, the Department of Finance issued data that showed the State had in fact produced a budget surplus in 2018, ahead of schedule, in a major boost for the Government.
The Minister said that action was being taken to review health spending overshoots, which were the main contributors to spending that exceeded planned levels and that there were now monthly meetings between his ministry and health officials to analyse spending patterns.
Mr Donohoe said however that spending overall was not out of control and said there had been no return to pre-crisis levels, noting that from 2003-8 spending had risen 63pc while from 2014-19 it was up just 23pc.
The Minister said he would ask his department to look again at the economic impact of a hard Brexit, which had risen after Westminster’s “exceptionally disappointing” vote, but cautioned that any economic models were heavily dependent on the inputs that went into them in.
The ministry’s current forecast is that a hard Brexit would lop 3-3.5pc points off longer term growth.
Minister Donohoe said any forecasts would however be based “upon assumption, upon assumption, upon assumption” due to the unprecedented nature of Brexit and the difficulty of calculating the impact of regulatory non-alignment, or the degree to which UK rules would conform to EU rules.
Economic projections of the impact of, for example, Donald Trump’s trade wars have been well wide of the mark and it is almost impossible to measure anything other than direct impacts with any degree of certainty, especially in complex areas like trade.