The Government will frame next month’s Budget plan on the basis of a no-deal Brexit and will not generate any major taxation increases, Minister for Finance Paschal Donohoe has verified.
At a rundown outlining the method behind next month’s Budget plan, Mr Donohoe said Budget Plan 2021 will concentrate on supplying further fiscal support to the coronavirus-hit economy.
He said the Cabinet had concurred that broad-based boosts in tax would be counter-productive at this stage and there would be no change to earnings tax credits or bands, USC or PRSI.
“There is a heightened air of economic uncertainty and this Federal government wishes to give confidence to those who are making earnings or who have a high level of deposits within our economy for this year and for next year,” he said.
Minister for Public Expense Micheal McGrath, however, decreased to eliminate modifications to pension and welfare rates.
Both ministers verified that the Budget would be based on the assumption that a free trade agreement in between the EU and the UK would not be agreed prior to the end of the year and that from the beginning of next year bilateral trade in between the 2 would be on World Trade Organisation(WTO) terms.
This could lead to the imposition of tariffs on Irish exports to the UK with the food and beverage sector here especially exposed.
The Reserve bank forecasts the economy here might contract by 2 per cent in the event of a no-deal Brexit. It is unclear if this impact will be amplified by a revival in Covid-19 cases.
The UK has thrown the Brexit talks into chaos by proposing legislation that efficiently breaches parts of the Withdrawal Arrangement which it checked in January.
Mr Donohoe stated the likelihood of a no-deal Brexit had actually increased in current days and the safe thing to do was to prepare for the repercussions.
The other major assumption underpinning Spending plan 2021 would be “that, in the lack of a vaccine, the economy– and wider society– should co-exist with the virus,” they stated.
“Typical budgetary adjustments” needed to pave the way to the State’s response to the Covid-19 crisis but that the plan of procedures to be revealed would endeavour to keep existing levels of public services, they said.
According To the Program for Government, the sectoral top priorities would be health, real estate and climate change.
A healing fund is also to be established to enable the State react to issues that developing in 2021, but no decision on its scale has actually been made.
Mr Donohoe said the Government was anticipating to run a budget deficit of 4.5-5.5 percent of gross domestic product (GDP) next year, that included substantial Covid-related expenditure.
” This corresponds to ‘cash’ loaning in the area EUR15- EUR19 billion for next year,” he said, while keeping in mind extra policy choices – to be announced on Budget day – would add to this.
The Federal government is anticipated to run a budget deficit this year of about EUR30 billion as an outcome of lost tax revenue and increased costs on pandemic-related wage supports and heath.
“Our objective is to guarantee that the total deficit remains in line with that of our European neighbours,” he stated.