Government has agreed to base Budget 2020 on the assumption of a no-deal exit of the United Kingdom from the European Union at the end of October.
The Minister for Finance and Public Expenditure and Reform, Paschal Donohoe TD, today (Wednesday) secured Government agreement to base Budget 2020 on the assumption of a no-deal Brexit at the end of October.
Three main factors influenced the government’s decision:
The Summer Economic Statement 2019 (SES), published in June, set out two scenarios; the first involved an orderly exit of the UK while the second involved a disorderly exit. In both scenarios, the government committed to a budgetary package of €2.8 billion:
The government highlighted in the SES that it would decide in September which scenario would form the basis for Budget 2020. Given (1) the lack of clarity regarding the timing and format that the UK’s exit will take, and (2) that the budget is just four weeks away, a decision was taken by Government today that the budget would be formulated on the basis of a disorderly exit.
The approach being adopted by Government to Budget 2020 involves a ‘twin-track’ approach, namely:
In the event of a no-deal Brexit, the government has previously indicated that it would allow the automatic stabilisers to operate. This allows for a reduced tax-take due to fewer people at work and increased social welfare supports due to an increase in unemployment. The government will also introduce timely, targeted, temporary measures for the sectors most exposed. In terms of the public finances, this could lead to a swing from a general government surplus of 0.4 per cent of GDP to a deficit of the order of ½ - 1½ per cent of GDP next year.
Budget 2020 will aim to build on the success of recent years. It will be delivered at a time of unprecedented uncertainty but it will be delivered from a position of strength.
Speaking after the Cabinet meeting, Minister Donohoe said:
Work on no-deal Brexit preparations has the highest priority across Government. The government recently published the Brexit Contingency Planning Update which reflects the extensive work which has taken place at EU level and on a whole-of-Government basis, including the Brexit Omnibus Act, to prepare for a no-deal Brexit. It sets out the next steps to be taken between now and 31 October.