Words and pictures by Kevin Kline award winning American Journalist.
DUBLIN (IRISH TECH NEWS) – Brexit will have an impact on the Irish economy, that much members of the Dáil are certain as they debate Budget 2017. But what kind of impact and how big of an impact remain a mystery.
In his budget presentation on Tuesday, Fine Gael Finance Minister Michael Noonan forecasted gross domestic product growth to slow from 4.2% in 2016 to 3.5% in 2017, much because of Brexit and the drop in the Pound. A weak sterling hurts Irish companies that export to the United Kingdom.
So far, most of the attention into the €58 billion budget focused on the €5 a week increase to state pensioners, but it will also have a major impact on those connected to the Irish technology industry.
To insulate against Brexit implications, the budget increased funding at IDA Ireland and Enterprise Ireland. The €3 million extra mainly would involve hiring more staff to recruit businesses leaving or avoiding Britain. Another €30 million in capital investment will go to the agencies to increase the number of clients they can serve.
Fiana Fáil, which had a role in crafting the budget through their consent agreement but maintained a position as opposition, argued that money wasn’t enough. TD Michael McGraths said some EU countries have less to lose in Brexit than Ireland but are investing more into recruiting businesses.
— Fianna Fáil (@fiannafailparty) October 7, 2016
Despite the scolding over the Apple tax deal, the budget specifically encouraged focusing on “maintaining and attracting new Foreign Direct Investment.”
Fine Gael leadership argued investing in innovation will pay off: “ Ireland’s innovation capability is a key factor in maintaining and developing FDI capability and enhancing indigenous enterprise.”
Rainy Day Fund
Noonan proposed a rainy day fund for the country to help prevent the economic boom and bust cycle. In his finance bill, the country would have the power to put aside up to €1 billion per year in strong years to use in weak ones.
Rainy day funds are common among governments typically dependent on commodities like agriculture or energy. In the case of another economic downturn, that money in the savings account could help stabilize the budget.
One thing to watch out for is how the Government defines that economic downturn. In several instances, rainy day funds are left untapped despite budget shortfalls. It can create a potential point of tension with opposition parties in coming years.
In their speech about the budget, Independants 4 Change argued the country didn’t need to put money away. Instead, they proposed funding education at a higher level. They believe an educated workforce is the best protection of the economy.
Budget 2017 will be the first since the recession to “significantly” increase funding to higher education, according to Minister for Public Expenditure and Reform Paschal Donohoe. All told, universities will receive approximately €36.5 million more in the budget.
€36.5 million investment to the higher education sector- the first significant additional investment in higher ed in a decade #Budget17
— education.ie (@Education_Ire) October 11, 2016
Universities, of course, play a major role in spawning new technology firms. Trinity College recently announced 192 alums went on to form 180 companies in the last decade. In that time, those businesses raised about $2.166 billion US, making Trinity the leading European university for producing entrepreneurs. The hope is for other Irish universities to create similar results.
The budget also promises a 4% increase to education spending overall, enough to create 2,400 new teaching positions.
In all likelihood, the budget will pass because Fiana Fáil members plan to abstain. Still, there are chances to shape the budget outcome in the coming days. As members of the Oireachtas debate and vote on the national finances, it’s important to remember businesses throughout Ireland will feel the impact.