It will depend on whether there will be an orderly departure of the United Kingdom from the European Union or a dreaded ‘no-deal Brexit,' which would lead to us having to run a further budget deficit.
MINISTER for Finance Paschal Donohue is hedging his bets as regards the shape of Budget 2020, telling us in the government’s Summer Economic Statement that it will depend on whether there will be an orderly departure of the United Kingdom from the European Union or a dreaded ‘no-deal Brexit,’ which would lead to us having to run a further budget deficit just as we were getting into modest surplus territory. However, which choice he has to make for Budget 2020 may not be apparent right up to the day of its announcement, October 8th next – if even by then – as the extended deadline for the UK to leave the EU is October 31st and, as has been the case since the Brexit decision was taken by British voters in the June 2016 referendum, further confusion and uncertainty are likely to prevail, especially if Boris Johnson wins the Conservative Party leadership race and becomes British Prime Minister. Notwithstanding, massive overruns on the National Children’s Hospital, the National Broadband Plan and in the health sector, Mr Donohue claims he is a prudent minister and has two budget alternatives for next year. The good news budget, ahead of a possible general election year, hinges on an orderly Brexit and would see a projected €2.8bn surplus – of which €1.9bn is already committed for pay rises and spending on infrastructure, and €200m for contingencies – leaving €700m available for a combination of tax cuts and extra spending, so everybody would be about a fiver a week gross better-off next year as has happened throughout most of the tenures of this government and the last.
However, a ‘no-deal Brexit,’ which is the greater likelihood one would think at this stage, would see the Minister having to deploy his worst-case scenario budget option and, instead of running a surplus of 0.4% of GDP in 2020, could lead to a deficit of between 0.5% to 1.5%, which may amount to as much as €30bn over the next five years – money that would have to be borrowed and added to the national debt.
Such a scenario would obviously rule out a giveaway budget for 2020 and, while this would be regrettable, taxpayers generally would prefer that as much as possible should be done to cushion the financial fall-out a ‘no-deal Brexit’ would mean for us. The big question is: will it be enough?