Budget day (9 October) is in full swing and Minister for Finance Paschal Donohoe, TD, has outlined the financial plan for Ireland’s year to come.
Of course, there are many factors that have influenced today’s figures, but none have made their presence felt quite like Brexit.
The challenge of a generation
It was clear from Donohoe’s remarks that the Government and his department have been grappling with the “political, economic and diplomatic challenge of our generation”. The unrest caused by Brexit was amplified today, as the Bank of England issued a warning to the EU, accusing it of not planning enough for the projected exit of the UK from the bloc, according to The Guardian.
Meanwhile, in Leinster House, Donohoe explained how Brexit has affected today’s Budget. He noted that the Government has made some decisions based on the possibility of a no-deal Brexit. The Department of Business, Enterprise and Innovation is receiving €950m in 2019, with this set to increase to €970m by 2021.
The figure for 2019 is an increase of 9pc for the department headed by Minister Heather Humphreys, TD, and it will go towards further Government supports for SMEs. A number of other Government departments will receive more than €110m between them in a series of targeted Brexit mitigation measures, such as essential customs requirements.
Loans to mitigate Brexit unrest
A Future Growth Loan Scheme for SMEs is also on the cards. New legislation is required to implement the scheme, which will provide up to €300m. Donohoe said: “This builds on the €300m invested through the Brexit Loan Scheme last year and forms an important part of the Government’s Brexit response.”
Humphreys said: “This scheme is crucial as it will provide businesses the opportunity to borrow for up to 10 years to support capital investment. It addresses the lack of availability of loans in the marketplace for loan terms of longer than five to seven years”.
The Future Growth Loan Scheme will offer loans over seven to 10 years to allow businesses to strategically invest in a post-Brexit environment. Local Enterprise Offices as well as the global enterprise agencies are due to receive further resources. Brexit will also see increased resources given to the passport service.
Absorbing the economic shock
Donohoe added that a Rainy Day Fund is to be established to protect the economy against larger shocks such as Brexit. It will be capitalised with €1.5bn from the Ireland Strategic Investment Fund, supplemented by an annual contribution from the Exchequer, beginning 2019.
A €300m Human Capital Initiative fund is earmarked for two years’ time. This will form a major part of the Government’s response to Brexit in the future.
In the agricultural sector, there will be financial provisions for initial staffing and ICT needs relating to Brexit’s regulatory requirements. SMEs in the food sector will receive further investment in public sector research equipment and facilities such as the National Food Innovation Hub.
Donohoe also made mention of border relations, adding that the Government would protect the peace between the Republic and Northern Ireland as Brexit unfolds. “The Government has been clear on our objectives, robust in our negotiations and thorough in our planning. We will remain at the heart of the European Union and open to the world. We will protect our hard-won peace.”
He said that funding would be provided for organisations promoting mutual understanding between both Britain and Ireland as well as the Republic and Northern Ireland.
Tourism is one of the country’s key industries and Donohoe added that VAT in the tourism and hospitality sector will rise to 13.5pc from 9pc. He noted that the increase would present a challenge to the industry, but claimed that increased departmental funding would provide supports. He added that it was important to deal with the possible drop in visitors from Britain due to Brexit.
John Stewart, tax director at Deloitte, said: “With Brexit looming on the horizon and the resulting uncertainty, there is a concern that any change to the VAT rate could negatively impact the level of UK tourists coming to Ireland.
“However, it is expected that the change in the VAT rate will not have a material impact on the number of UK visitors, particularly as almost half of all British tourist stays in Ireland in 2016 did not contribute to the domestic accommodation sector, as they stayed with friends and family.”
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