Finance Minister Paschal Donohoe has decided not to put a long-promised €500m into a Rainy Day Fund next year.
As negotiations with ministers on Budget 2020 enter the final stages, Mr Donohoe has said it makes no sense to put additional money into the fund in the midst of Brexit.
It comes as he confirmed that a number of departments, including Health, have overspent for this year.
He will need to find supplementary budgets to the tune of around €450m to bail them out before the end of 2019. This money will come from higher than expected corporation tax and underspends in other areas.
Overall there will be a budget surplus of 0.25pc this year, amounting to in excess of €600m.
But the picture for next year is not upbeat, with Mr Donohoe saying the key theme of Tuesday’s announcement will be “how the country will respond back to a no-deal Brexit”.
He will move €1.5bn from the Ireland Strategic Investment Fund into a Rainy Day Fund this year – but a promised top up of €500m from the Exchequer next year will not happen.
“I won’t be going ahead with a further deposits of €500m into the Rainy Day Funds.
“The reason for that is if we find ourselves dealing with a no deal Brexit next year, and we are moving into a deficit in order to deal with it, if I look to make a further deposit into the Rainy Day Fund the €500m, I’ll have to borrow to do that,” Mr Donohoe said.
Reacting to the news, Labour Party leader Brendan Howlin said that the fund is clearly not working.
“Labour was critical of the so-called Rainy Day Fund from the outset.
“All Fine Gael has done is move money from one State bank account to another, without providing the legal basis for the new fund to be deployed any quicker or more effectively than the existing Strategic Investment Fund.”
Now the Minister for Finance has dropped his own plan to put €500 million into the fund as part of this budget.
“If the Rainy Day Fund idea really worked, surely the Government would have funded it this year just in advance of a potential ‘no deal’ Brexit.
“The fact that they didn’t tell us this is another failure by Fine Gael in managing the public finance,” he said.