Tuesday, 9 April 2019

Questions (156)

Peadar Tóibín

Question:

156. Deputy Peadar Tóibín asked the Minister for Finance the amount he expects to spend in each of the next ten years on making Ireland Brexit ready; the estimated financial implications of Brexit for the next ten years; and if he will make a statement on the matter. [16383/19]

View answer

Written answers (Question to Finance)

I, as Minister for Finance, will focus on the latter part of the question. The joint ESRI and Department of Finance estimates of the potential macroeconomic impacts of Brexit on the Irish economy was published on 26th March. Given both the political and economic uncertainty, a range of alternative scenarios are considered.

This new study finds that, compared to a no Brexit baseline, the level of GDP in Ireland ten years after Brexit would be around 2.6 per cent lower in a Deal scenario and 5.0 per cent lower in a Disorderly No-Deal scenario respectively. This assessment shows that all Brexit scenarios will imply a slower pace of growth with negative consequences throughout the economy.

The study emphasises the negative impact Brexit will have on the Irish labour market. The results from the study show that, in the long-run, employment would be 1.8 per cent lower in a Deal scenario, and 3.4 per cent lower in a Disorderly No-Deal scenario respectively, compared to a situation where the UK stays in the EU.

The impact would be significant with employment growth slowing sharply and unemployment rising. Tax revenue would be lower, and expenditure would rise. The general government balance would worsen by an average of ½ a percentage point of GDP over the medium-term, and by nearly 1 per cent over the long-term, in the disorderly no-deal Brexit scenario.

The deterioration in the fiscal balance would be structural, not cyclical in nature. This would reflect a permanent reduction in the size of the economy and consequently in the amount of tax revenue it generates. The implication of such an adjustment would require detailed reflection and this will be addressed in the Stability Programme Update and the Summer Economic Statement in the coming months.

It is important to recognise that such estimates may not capture the full impact, and the figures may be conservative. Indeed, the impact in certain exposed sectors and regions will be worse than the average.

It has always been clear from the published studies, including those by the Department of Finance, that Brexit, in whatever form it takes, will have a negative impact on our economy and our living standards, and that this impact increases with the harder Brexit scenarios.

It is imperative to boost the resilience of the Irish economy in order to minimise, in so far as is possible, any future disruption. Since the UK referendum in 2016, all of our national Budgets have been framed to prepare for the challenge of Brexit. The economic and fiscal policies, which we have pursued, mean that the economy is now in a better position to weather the impacts of Brexit.