Statement on Brexit
Minister for Finance & Public Expenditure, Paschal Donohoe TD
11 March 2019
Check against delivery
This morning the Cabinet was briefed by the Taoiseach, the Tanaiste and Minister McEntee on the current state of play in EU-UK discussions on Brexit ahead of a series of significant parliamentary votes later this week in the UK.
I also briefed the Cabinet on our economic preparations for all possible Brexit scenarios.
This morning I also met with the Chief Executive of the NTMA, the Chair of the Revenue Commissioners and the Deputy Governor of the Central Bank to discuss their detailed preparations for all possible scenarios.
It is clear that Brexit in any scenario will have a negative impact on the economy and the public finances.
In particular, a departure of the UK from the EU without an agreement or transition period, would have a sudden, immediate and negative impact on our economy.
That is why the Government has prioritised building up the resilience of the economy so that we have the capacity to deal with any such adverse economic shock.
This includes building up our budgetary capacity by balancing our books, reducing our debt burden and establishing the Rainy Day Fund.
The Government is already significantly increasing capital expenditure for this year by an additional €1.5 billion to support our economy at a time of extreme change.
On the basis of the economic policies we have pursued, we are approaching the prospect of a hard Brexit from a position of strength.
Our economic growth rates are among the highest in Europe and we are within touching distance of full employment with the unemployment rate currently at 5.6 per cent.
Furthermore, the indicators for exports and job creation are all strong.
Last week, with the constructive support of the Opposition, the Brexit Omnibus Bill completed Committee, Report and Final stages in the Dáil and will move to the Seanad this week.
The Government will work closely across the Oireachtas to ensure the Bill will be ready for 29 March.
The necessary infrastructure is being developed, in conjunction with contingency plans, to ensure that trade flows continue although some disruption is inevitable.
The Chair of the Revenue Commissioners updated me this morning on progress with their preparations for the increased East-West controls that will be required when the UK becomes a third country, outlining that:
- The upgrade of our national Customs ICT system to deal with increased volume of customs is complete;
- The recruitment of Customs Officers is in train and on target to have over 400 additional Customs officers in place by the end of March and
- A trader outreach programme as part of Revenue’s Brexit information Campaign is well underway.
It is my determination that the appropriate short-term budgetary strategy to a departure of the UK from the EU without an agreement or transition would be to allow the public finances to absorb the shock.
The strength of the public finances will allow us to support economic activity through the operation of the automatic stabilisers on tax revenues and social transfers.
This will support economic growth in the short-run and provide the economy with a safeguard against the most immediate negative impacts that would arise.
As the situation becomes clearer, the strategy for Budget 2020 will be based on an appropriate response to the economic circumstances.
NTMA and Central Bank
The Chief Executive of the NTMA confirmed to me this morning that our financial position is strong.
The Deputy-Governor of the Central bank updated me that the Bank is working closely with the regulated financial institutions to ensure that they have contingency plans in place for March 2019 for minimal disruption to consumers.
The Central Bank expects the firms to ensure they have robust contingency plans in place to minimise the impact on customers, investors and markets.
The Central Bank is also working as part of the ECB on contingency planning at EU level.
The Government has been very clear, and I reiterate, that there will be support for those sectors most at risk from a departure of the UK from the EU without an agreement or transition – and that this may be under pinned by EU assistance.
As the manner of the UK’s departure from the EU becomes clearer, additional supports will be made available and we will focus on further stabilizing the most affected sectors with long term plans in place to deliver further diversification.
The Department of Business, Enterprise and Innovation has been working closely with the EU Commission and the Department of Public Expenditure and Reform on the establishment of a number of vehicles to support vulnerable but viable firms.
The Minister for Business, Enterprise and Innovation, Heather Humphreys, recently announced that the EU Commission has given State Aid Approval for a budget of up to €200m for the Rescue and Restructuring scheme.
The Rescue and Restructuring Scheme will allow the Government to offer either rescue aid or temporary restructuring aid, to companies in financial difficulty or experiencing acute liquidity needs as a result of Brexit.
As Ireland’s largest indigenous industry, the Government is particularly aware of the potential impact a Hard-Brexit could have on the Agri-Food Sector in Ireland.
Both the Departments of Agriculture and Business are working closely with officials in the European Commission in respect of flexibilities under both State aid rules and the common agricultural policy.
The Irish Government, with our EU Partners, stand ready to assist these sectors in the event of a departure of the UK from the EU without an agreement or transition.
Brexit is an immense political, economic and diplomatic challenge.
I would like to acknowledge the concerns of our citizens and businesses and the risks that all our social and economic sectors and partners face as we reach a decisive period in the Brexit process.
The Government understands these concerns and is determine to mitigate the risks that the country faces by planning and preparing for all Brexit scenarios.
Ultimately our EU membership is our greatest protection from the challenges that Brexit will bring.
Whatever the outcome of the Brexit process, Ireland will remain a committed member of EU with all the solidarity, stability and certainty that membership brings.
We stand ready to act.