Friday 23 August 2019

Editorial: 'Caution must prevail with budget amid Brexit threat'

Paschal Donohoe. Photo: Reuters
Paschal Donohoe. Photo: Reuters


The thing about chaos is that it comes without contours. Hence, Paschal Donohoe's valiant attempt to game Brexit is something of a shot in the dark.

Producing a Budget when all the parameters are known can be tricky enough; to do so in the asymmetrical Brexit-zone seems nigh on impossible.

Against such volatility caution has to be key.

Everyone from the Fiscal Advisory Council to leading economists is on the same page with regard to keeping spending down, and keeping within Budget balance.

If in London - and more particularly with regard to the race to become Tory leader, and next British prime minister - there is an insatiable appetite for wishful thinking; in Dublin, stark reality rooted in cold economic fact must prevail.

We learned from the crash a decade ago, how with a really intense shock the blow can be internalised before it is even felt.

You may not always see it coming, and even if you do, you can still be left stunned.

Across the water, the trite responses being offered to dismiss genuine risks are coming thicker and faster than ever.

But so far as taking care of our own interests, better to organise than agonise.

We must therefore avoid being put in a position of having to cut finances in emergency mode.

Mr Donohoe may be producing two Budgets, but the gravity of the situation suggests that he really only has one option: and that is be prudent.

In the event of an ultra-hard or a no-deal Brexit, we face the prospect of being catapulted back to austerity era spending cuts, unless we allow for braking distance.

While the economy is strong, provision must be made to contain damage down the line. Any impulse towards stimulus that could cause over-heating must be kept in check, whether there is an election on the horizon or not.

Whoever becomes Conservative leader, we must prepare for a prime minister ready to use the threat of no deal to exert further pressure on us.

Such a scenario would immediately undermine the economy.

The picture outlined recently by our Central Bank left no room for the imagination.

It warned we should brace ourselves for four percentage points to be shaved off economic growth in the first year, as well as 100,000 fewer jobs.

The unthinkable is becoming less so, as Conservatives coalesce around a hard-core "no deal, out at any cost" ideology.

Has ever so much economic damage been done in the misguided belief that delivering on Brexit is a service to democracy?

Democracy is served best by doing what is right by the people you represent.

Failing to tell the truth about the downside of a no deal is anything but democratic.

While dissuading Boris Johnson from aborting his march of muscular patriotism towards meeting a bogus promise may now be futile, we can at least cushion ourselves from its consequences.

Irish Independent

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