Plan for Brexit will be welcomed by business, but overall, a missed opportunity to invest more in long term challenges for economy

Following today’s Budget 2020 statement by Minister Paschal Donohoe, Chambers Ireland welcomes the overall approach of the Government to opt for prudence and to prepare for the very real possibility of a No-Deal Brexit.

Speaking this afternoon, Chambers Ireland President Siobhan Kinsella said,

“Under normal circumstances, with the economy performing as well as it has been, we would be expecting a very different Budget. But in the words of the Minister, this is an uncertain and unprecedented time. We called for a Budget which would focus on steadying the ship of state and provide greater clarity regarding the measures that are to be made available in a no-deal Brexit scenario. Minister Donohoe delivered this clear statement today.

Brexit:

We agree that it is a wise approach to provide financial flexibility into the Budget which will allow the government to respond and adapt to the consequences of a No-Deal Brexit, particularly if its impact is worse than foreseen. One recommendation we would make to Government is to call for any new support to be easy to access and easy to understand. The likely chaos of a crash-out Brexit will mean that SMEs will need access to immediate support and swift interventions.

Carbon Tax:

The approach by the Government to increase the Carbon Tax and ring-fence the revenue is welcome in principle, but it is our view that these measures do not go far enough.  We had called on Government to ring-fence all revenue from carbon tax, which is likely to exceed €500m in 2020, not just the revenue from the increases. So we would like additional clarity on what the Government’s intention is on this.

Further, while the types of green investment that Government has announced are welcome, including the initiatives to support the Midlands, it’s difficult to see the approach as anything more than a missed opportunity. We could have used this Budget to do much more to support investment in grid infrastructure, a nationwide roll-out of EV charging points and the retrofitting of homes.

Green Investment:

Linking the carbon tax to tangible actions that help decarbonise the economy will be essential if these taxes are to gain public acceptance. If carbon taxes are to change behaviour then low-carbon alternatives will need to be available, in both urban and regional areas. While public transport will play a large role in urban areas, the regional areas will need the widespread take up of E-Vehicles, and this will need considerable investment in our electricity grid.

In addition, our members need to see an advance multi-year schedule of committed increases, rather than a vague undated commitment, so that businesses can plan and invest accordingly. This schedule needs to come in tandem with an ongoing impact assessment to see how tax increases and green investment is actually contributing to a reduction in the use of carbon fuels and switch to more environmentally friendly behaviour.

Housing

The supply of affordable and appropriate housing remains a critical issue for the business community, affecting productivity, recruitment and inflating wage growth demands. With so many economic threats on the horizon, policy uncertainty would discourage investment, therefore the maintenance of existing housing policies, such as Rent Pressure Zones and Help to Buy, is useful.

But while this certainty is welcome, an independent review of all our housing policies is essential so that any wasteful policies can be culled, and those resources made available for the most effective measures that will support supply and affordability.

We are disappointed with the low level of funding available to the Land Development Agency which suggests that there will be another year of missed opportunities for that agency. There needs to be a more ambitious vision for housing policies and this vision must integrate the requirements of the climate action plan and the national development plan. For example, while we welcome the continuation of the Living City Initiative, for it to be effective it needs to be amended so that it benefits a broader range of urban areas, and the Government has an opportunity to amend this in the Finance Bill.

Supporting SMEs

Last but not least, the reforms to the KEEP scheme and the increase to Earned Income Tax Credit, which are long over-due, will be well-received by the self-employed and entrepreneurs.

While the Minister has been adamant that there will not be another budget if a no-deal Brexit emerges, perhaps it may become necessary to have an interim budget should the threat of Brexit recede. Ultimately, it’s the big things, like affordable housing and childcare, that businesses will need to see much more progress on in the months and years ahead.