Thursday 19 September 2019

Editorial: 'All politicians have a duty to brace us for no deal'

Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Finance Minister Paschal Donohoe. Photo: Gareth Chaney, Collins
Editorial

Editorial

It was always going to be a "Brexit Budget" on October 8. The only outstanding detail - which we now know definitively - is that it will be prepared as a "no-deal Brexit Budget".

That means setting aside funds for vulnerable sectors, like farming, tourism and retail. More ominously, it means allowing the State's finances to revert to deficit after Irish citizens' huge pain putting the national books back into the black.

This raises serious questions about tax cuts and welfare increases for the year 2020. It means we need to brace ourselves about things which may be possible and things which are not.

Please log in or register with Independent.ie for free access to this article.

Log In

We must revisit recent, but painful memories of the recession which descended upon us in 2008, and keep a sense of perspective. We must also remember the other economic storm clouds out there.

Brexit is far from the only threat. US President Donald Trump's ongoing jousts with the economic juggernaut which is China is one; Mr Trump's general pulling back from free global trade is another. His belligerent attitude to the EU trade bloc is the third. Some of these big threats are likely to land in Ireland's economy soon.

We cannot stop such events descending upon us. But we can - and we must - prepare for potential grim eventualities.

Back in June, Finance Minister Paschal Donohoe presented two Budget strategies for the coming year. The preferred option would have seen the Budget surplus remain static, or even grow. But that scenario assumed the UK leaving the EU in an orderly way of some kind.

Less hopefully, a Brexit no-deal scenario presaged a return to deficit spending to help vulnerable sectors, like farming and tourism, and absorb the shock of that result. We now know that we are going with the grim no-deal outcome for Budget day preparations.

Mr Donohoe has confirmed what many of us already knew from looking at ongoing trends.

"Given the uncertainty and lack of clarity regarding the timing and format that the UK's exit will take, preparing for a no-deal scenario is the most sensible approach," he has summed up.

So, where does that leave the average citizen? Well, in reality with few options beyond facing harsh reality.

Popular demands for any kind of significant welfare increases, or tax cuts, are far less likely. It is neither encouraging nor popular to suggest otherwise at this stage.

The coming weeks are about ensuring there can be no return to the grim years of what amounted to a "lost decade" after the international slump and banking collapse in 2008. In facing that we must also keep in mind a huge debt overhang which leaves us badly fixed to face global economic woes.

In the past three years we have emerged from economic darkness. The challenge now is to avoid a return to anything comparable.

That involves waking up to political reality. It requires this hybrid minority Government doing very straight talking and it demands that all opposition parties behave responsibly.

Irish Independent

Today's news headlines, directly to your inbox every morning.

Don't Miss