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Government will only borrow if it needs to for no-deal

Government will only borrow if it needs to for no-deal

The Minister for Finance has said €650m will be made available to support the Agriculture, Enterprise and Tourism sectors and to assist regions most impacted by a no-deal Brexit.

The money will be made available in the event of a no-deal.

€220 million of that would be deployed immediately.

From this, €110m will be made available for enterprises for the first wave of funding for targeted interventions to help “vulnerable but viable firms” adjust to a no deal Brexit.

Paschal Donohoe said the Government would only borrow money if it needs to intervene to protect the economy in the event of a no-deal Brexit.

Delivering his budget speech, Mr Donohoe said the Government would not borrow money for other purposes.

He said support by way of grants, loans and equity investments would include a €45m transition fund.

Among the additional measures would be €5m to Micro Finance Ireland and €5m for a Local Enterprise Offices Emergency Brexit Fund.

€110m will be provided through the Department of Agriculture.

The minister said the provision of supports to the beef sector would be a priority as would supporting the fishing fleet.

€40m of funding would be provided to the tourism sector.

€365m would also be provided for extra Social Protection spending on the Live Register and related schemes.

Simon McKeever, CEO of the Irish Exporters Association, said he cautiously welcomed the Budget measures to prepare the economy and business community for a potentially disastrous no-deal Brexit.

Mr McKeever said while he noted the Government’s budgetary constraints, he was concerned that the announcement of €110m for vulnerable, but viable, companies affected by a no-deal Brexit will not be enough.

“In this context, we are calling on the Minister for Finance and the Government to further clarify how today’s committed spending will be distributed between affected companies.

“There are serious concerns that a no-deal Brexit will lead to an immediate and accelerating deterioration in businesses’ credit profile and we are calling on the Government to clarify any measures to support and protect any such affected businesses,” Mr McKeever said.

The Irish Exporters CEO said he was worried about the small take up of the Brexit loan scheme so far, adding that more needs to be done to help companies understand, prepare for and mitigate the financial impact of a no-deal.

“The Irish Exporters Association calls on the Government to further engage in talks with the European Commission to investigate both national and EU-measures to support excessively affected businesses,” he added.

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Government urged to set up €1bn Brexit Response Fund

Government urged to set up €1bn Brexit Response Fund

The British-Irish Chamber of Commerce has called on the Government to set up a €1bn Brexit Response Fund to help Irish businesses withstand a ‘Brexit shock’.

It said such a fund would assist the most vulnerable businesses through the Brexit period.

The chamber said the Government should re-allocate Corporation Tax revenue to the fund to offer targeted supports for industries and regions most likely to be affected by a ‘no-deal’ Brexit.

The chamber’s Budget 2020 submission proposes a fund that it said would be much broader in nature than the Government’s current loan scheme.

It said the fund should contain supports such as:

Resource workers and companies that need to introduce new training/upskilling programmes to address impending Brexit challenges,
Introduce a support grant for Irish SMEs that export to the UK.
Introduce a customs voucher scheme to support Irish companies dealing with customs processes for the first time.
Offer financial support for the freight and haulage ‘Intermediary’ Sector in Ireland.
Make readjustment supports available to workers who may lose their jobs as a consequence of a no-deal Brexit.
Invest in recruitment and training of official agents with responsibility for ensuring compliance with food and drug safety rules and quality standards.
The chamber said such supports should be open, transparent and easily accessible to applicants.

Director-General of the British Irish Chamber of Commerce John McGrane said: “Budget 2020 will be one of the most consequential budgets in the history of the State.

“Ireland is facing the real and growing prospect of a ‘no-deal’ Brexit outcome that will place untold obstructions on UK-Ireland trade. At this critical time, we have to balance short-term uncertainty with long-term imperatives.

“In the shadow of ‘no-deal’, our members are requesting the Government to do more to reassure businesses as they prepare for all eventualities.

“By redirecting €1bn from the larger than expected corporate tax intake into a Brexit Response Fund, Government can shore-up indigenous businesses which are most at risk from a disorderly Brexit. From the agri-food sector to freight and haulage, SMEs across Ireland will need urgent protection.”

Mr McGrane said highly regulated industries like pharmaceutical and finance had to be ready by law so they are prepared for a no-deal Brexit.

However, he said, a lot of smaller businesses are not ready and do not have the money to prepare.

He believes that there is an attitude of “we’ll get ready when it comes”, but he says it is too late for that.

Mr McGrane is also concerned that it is a bit late for the level of risk some businesses are exposed to if there is a hard Brexit.

Every business in Ireland will be affected, he says, and he believes that supply chains behind all sectors will be affected even if businesses do not directly trade with the UK

He said companies need to be prepared at a realistic level and “expect the worst but hope for the best”.

In relation to what businesses can do straightaway, Mr McGrane is encouraging them to think of their own business models and plan and decide what supports they can avail of alongside their various trading partners.

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Government to borrow to cushion impact of hard Brexit

Government to borrow to cushion impact of hard Brexit

October’s Budget will involve a package worth €2.8 billion, Minister for Finance Paschal Donohoe said as he published the Government’s Summer Economic Statement.

However, €2.1 billion of that is already committed to current and capital spending plans, which leaves just €700m to be allocated on budget day on 8 October.

This is three weeks before Britain is due to leave the European Union.

The Summer Economic Statement also targets a budget surplus of 0.4% of GDP as being appropriate to an economy at the top of an economic cycle.

However, the Budget also has to account for the possibility of a disorderly, or no-deal Brexit, which is expected to deliver a severe economic shock to the economy.

In that case, the Government proposes to spend more on social welfare provisions and targeted support schemes.

Along with the loss of revenues associated with an economic shock, the Government is planning to borrow funds to pay for extra spending.

This would result in a deficit on between -0.5% and -1.5% of GDP, depending on the size of the economic shock.

A decision on which case will become the central scenario for planning October’s budget will be taken in September, when more information will be available to the Government concerning the Brexit situation.

“The external environment is becoming increasingly challenging, and at this point in time a disorderly Brexit is a real possibility,” Minister Donohoe said.

“That is why I am setting out two budget scenarios in this SES – the first involving an orderly Brexit occurring, while the second involves a disorderly scenario.”

The Summer Economic Statement said the “appropriate budgetary strategy must be to avoid further inflating the economy and, concurrently, build up resources which can be deployed in the event of the UK leaving the EU without a trade agreement at the end of October”.

“In summary, the economy is caught between possible overheating on the one hand and the very real possibility of a disorderly Brexit on the other hand,” it said.

It added that budget policy must take account of the fact that “the virtual attainment of full employment means the budgetary policy must lean against the wind, it must be counter cyclical so the mistakes of the past must be avoided”.

The Minister for Finance said the Government this year was targeting a surplus of 0.2% of GDP and a surplus of 0.4% for next year.

Speaking at today’s press conference, he said the Government was outlining two different scenarios for the country, but one Budget.

Mr Donohoe said the first scenario outlines what the economy will look like in the event of an orderly resolution to Brexit – an extension of current arrangements for the UK’s trade relationship with the EU.

He said that will result in an environment of continued growth.

The second scenario outlines what will happen in the event of a no-deal Brexit and Mr Donohoe said this builds on the Stability Programme Update published in April.

He said from an economic point of view we would have an economy that instead of growing 3.5-3.75% next year would grow by just 0-1%.

He also said the Government believes the early years of Brexit would result in 50,000 jobs being lost, which he described as a major challenge.

To respond to this, Mr Donohoe said the Government would allow its finances to move into a deficit position to deliver two really important goals.

The first of these is to ensure that we have the resources to meet the needs of citizens who lose their jobs as a result of Brexit, the so-called Automatic Stabilisers.

He said the type of supports that are available through our social welfare and taxation system will be maintained.

The second goal is that the Government will ensure that the parts of the country and economy that need resources will have them to get through the Brexit period.

He said the resources available will be along the lines of those suggested by the Fiscal Advisory Council.

This would put in place resources for demographic change, commitments to public servants and money to go ahead with a planned increase in capital spending next year of €700m.

The minister said the Government this year increased capital spending by 24%.

“We will increase that investment by a further €700m to continue the work we have started to ensure our economy gets what it needs and ensure additional spending at a time of an economic shock,” he said.

That will leave €700m of unallocated resources and it will be up to the Cabinet to allocate that sum, and indicate how that sum could grow if it introduces further tax measures to raise revenue, he added.

“If we have an orderly Brexit we will target a surplus of 0.4% of GDP. In the event of a no-deal Brexit we will run a deficit to be determined on Budget day,” the minister stated.

“We are giving our best judgement at this point in time of the scenarios we will have to grapple with in the autumn. The budget parameters I believe are the safest parameters for dealing with those scenarios,” he added.

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