Brexit-proofing the budget might sound wise in the current climate but without knowing what Brexit entails or the likely impact on Ireland it can be little more than a shot in the dark.
That didn’t stop various Government Ministers, and Taoiseach Enda Kenny, trotting out the phrase several times this week.
But the specific measures presented under this heading in the budget appear to be a collection of existing or previously flagged initiatives lumped together and rebranded as a Brexit buffer.
Take the so-called rainy-day fund: this was announced back in June in the Government’s summer economic statement, largely as a shield against the inherent volatility of the domestic economy, which is being warped by the actions of multinationals.
"As the Irish economy tends to be more variable than elsewhere, it is appropriate to set aside a certain amount each year," Minister for Finance Michael Noonan said without mentioning Brexit, albeit it was before the UK's referendum.
Repackaged
This week the initiative was, however, repackaged as one of the Government’s key Brexit containment measures.
The commitment to put aside €1 billion annually from 2019 onwards, while prudent economically, will probably be for someone else to keep. It will also be an extremely difficult sell given the current demands on the public purse.
The other big gun in the Government’s Brexit arsenal was the more stringent debt-to-gross domestic product (GDP) target of 45 per cent, designed to give future governments more leeway to borrow in bad times.
However, this was advocated by the Central Bank governor Philip Lane in a letter to Noonan several weeks ago in response to the 26 per cent upward revision in GDP last year. The revision significantly flattered Ireland's debt metrics, reducing the State's debt-to-GDP ratio from 105 per cent to 78 per cent. Again the commitment, which takes us to at least 2025, will be for someone else to deliver on.
Then there was the retention of the 9 per cent VAT rate for the hospitality sector. Was this ever in doubt given the intense lobbying from the sector?
While Noonan said the economic rationale for keeping it had waned he considered it a necessary buffer for the sector against the weakness in sterling.
Self-employed
Perhaps the most nebulous Brexit-proofing article of all was the €400 hike in the tax credit for the self-employed. Noonan had signalled an intention to unwind various elements of tax discrimination against the self-employed in last year’s budget.
Equally, income averaging for farmers has been touted for months as a response to price volatility in commodity markets.
The other Brexit measures including the reduction in capital gains tax for entrepreneurs and the extension of the Special Assignee Relief Programme and the foreign earnings deduction schemes had been on the cards as a means of beefing up Ireland’s competitive tax offering amid the global clampdown on multinational tax avoidance and the end of the double-Irish loophole.
The only purely Brexit-oriented initiative was the funding allocated to Revenue for a scoping exercise on the potential customs issues that might arise as a result of Britain’s exit.
Credit facilities for firms
The Taoiseach also made noises in the Dáil on Wednesday about putting in place long-term, low-interest credit facilities for firms following Brexit, suggesting €1 million had already been ring-fenced in the budget.
However, in the context of Ireland’s €34 billion export trade with the UK €1 million appears paltry.
“We did Brexit-proof this budget, but it’s not the last word on Brexit by any manner of means and future budgets – and, you know, policies in between budgets – will have to reflect the threat that Brexit poses for us,” Noonan said.
A departmental spokesman also said the best and most immediate policy under our own control to mitigate this risk is to control the public finances through budgetary policy.
However, Fianna Fáil leader Micheál Martin said the Government's Brexit package was mere tokenism and pathetic in the context of the challenges the economy faced.
