Wednesday 23 October 2019

€1.2bn package for possible no-deal Brexit at centre of Donohoe's Budget 2020

  • Donohoe has announced a €1.2 billion package of measures to respond to a no-deal Brexit
  • Two-part package will see €200 million invested immediately next year, no matter what happens with Brexit
  • Rainy day fund would be used if further money is required to deal with economic shock of a no-deal Brexit
Minister for Finance Paschal Donohoe pictured in his office in the Department of Finance preparing Budget 2020. Photo: Gerry Mooney
Minister for Finance Paschal Donohoe pictured in his office in the Department of Finance preparing Budget 2020. Photo: Gerry Mooney
Hugh O'Connell

Hugh O'Connell

AN increase in carbon tax and a €1.2 billion spending package to respond to no-deal Brexit are at the centre of Finance Minister Paschal Donohoe’s Budget for next year.

In his Budget 2020 speech to the Dáil this afternoon Mr Donohoe said: "Brexit is the most pressing and immediate risk to our economy."

The government is allocating over €1.2 billion, excluding EU funding, to respond to Brexit in a two-part package that will see €200 million invested immediately next year no matter what happens with Brexit.

Unlike in previous years, the Fine Gael minister said there will be no cuts in personal income taxes and no across-the-board social welfare increases next year amidst increasing uncertainty over Brexit and the global economy.

In his final Budget speech before the next general election Mr Donohoe announced that carbon tax will rise to €26/tonne as part of a gradual increase to €80/tonne by 2030. This will add 2c to a litre of diesel and petrol at midnight tonight, but the increase on home-heating fuels has been postponed until May 2020.

Mr Donohoe said there will be no personal tax cuts "at this time of economic uncertainty" but outlined a series of other tax changes and welfare increases targeted at the elderly and most vulnerable in society including:

  • A €2 increase in the weekly fuel allowance
  • A €5 increase in the living alone allowance
  • A €15 increase in the one parent family payment
  • A €10 increase in working family payment income threshold for families with up to three children
  • A €3 increase in the qualified child payment for over 12s and €2 for under 12s
  • An increase in the home carer credit to €1,600
  • An increase in the earned income credit for the self-employed to €1,500
  • Other notable measures include a 50c increase in the price of cigarettes but alcohol duty has remained untouched.

Health and Housing

In Health, there will be 50c reduction in prescription charges and a €10 cut in the threshold for the drug payment scheme. There will also be an increase in medical card income thresholds to benefit up to 56,000 people. A €335 million bailout for the Department of Health was also confirmed by Mr Donohoe.

On housing, the Help-to-Buy scheme is being extended for another two years with no changes, despite widespread expectations that the house price threshold would be lowered.

There will be an extra €20 million for homeless services as part of a €2.5 billion investment in housing next year, but Mr Donohoe announced no new measures to helper renters other than €2m in additional funding to the Residential Tenancies Board to ensure compliance with rent pressure zones legislation.

Commercial stamp duty will rise from 6pc to 7.5pc from midnight tonight and there are a series of complex tax changes also being rolled to target institutional investors or so-called cuckoo funds with the aim of making them pay more tax.

The government will continue tax breaks to attract highly-skilled executives to work in Ireland with two schemes extended until the end of 2022.

Other notable measures include a tax break for small bookies who will be relieved from paying the 2pc gambling tax up to a limit of €50,000


Mr Donohoe said the €200m in immediate Brexit contingency funding will go towards increasing staff at ports and airports and will also pay for upgrades to these facilities. It will also be targeted at investment in technology and facilities management.

Mr Donohoe said that there would be a further no-deal package using borrowed money in the event that the UK crashes out of the EU later this month.

"If we do not need it, we will not borrow it," Mr Donohoe minister insisted.

The no-deal package would see €650m invested in the agriculture, enterprise and tourism sectors with €220m of this deployed immediately. Some €110 has been identified for the first wave of funding to the enterprise sector and another €110 million for agriculture to help farmers worst-affected by a no-deal Brexit.

The allocation of another €390m of Brexit contingency expenditure will be determined closer to the time and will assist farms, businesses and citizens, Mr Donohoe said. He said that alongside that would be €365m for extra social protection expenditure in the event that unemployment rises as a result of a no-deal Brexit.

Mr Donohoe said the rainy day fund would be used if further money is required to deal with the economic shock of a no-deal Brexit. He confirmed plans to abandon a €500m top-up of the fund next year because of the threat posed by the UK leaving the EU.

Mr Donohoe also announced funding to hire hundreds of new public servants next year including 700 new Garda recruits; 400 new teachers; over 1,000 additional Special Needs Assistants in schools; and 1,000 therapists, nurses and other healthcare professionals.

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