Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I thank the Ceann Comhairle for the opportunity to speak on budget 2022. I would like to share time with the Ministers of State, Deputies Damien English and Robert Troy.

This is my second budget as Tánaiste and Minister for Enterprise, Trade and Employment. We have experienced many ups and downs since I spoke last year, including a serious third wave of the virus and prolonged periods of lockdown but also a highly successful vaccination programme and a substantial reopening of the economy. We certainly have not always got things right as a Government, but we have always sought to protect lives and livelihoods as best we could, stepping in to protect jobs and businesses quickly and decisively.

We are all very much aware of the rising cost of living and this budget includes measures to help families, young people and senior citizens to meet some of these costs. The budget is written against the backdrop of Covid-19, but it is also a budget that plans for a new chapter in our recovery. It is guided by the economic recovery plan and sets out to restore our public finances to good health, to restore existing jobs and create new ones in areas such as construction, climate action, digital and the care economy and to reach 2.5 million people at work in Ireland by 2024, setting a new record.

Budget 2022 provides a much-needed boost for business in Ireland, to businesses that are still struggling with the effects of the pandemic and to businesses looking to grow. The pandemic still weighs heavily on many enterprises. It is not yet over and they will need support for some time to come. For those businesses, we have provided certainty on the main State financial supports, such as the employment wage subsidy scheme, EWSS, which will continue until April next year. This is the largest single action in the budget at a cost of €1.4 billion. When other jurisdictions such as Northern Ireland and Britain are closing similar schemes, we are extending them to give every business and job a fighting chance of survival.

A targeted rates waiver for the worst hit sectors will remain in place until the end of the year, freeing up cash flow for businesses not yet fully reopened. The Minister for Transport will bring forward a €126 million aviation package, with €36 million going to regional airports, including Cork and Shannon, to help rebuild our connectivity with the rest of the world. The Covid products scheme will continue to fund industrial projects related to the fight against Covid-19, to be administered by Enterprise Ireland and IDA Ireland. Extra funding will be made available to meet claims against the €2 billion Covid credit guarantee scheme to lend to businesses negatively affected by Covid.

The budget is also about preparing businesses for the challenges and opportunities of the future. We need to prepare for the twin challenges, digital and green, and adjust to new ways of working. A sum of €881m in core funding represents an increase of €103 million, or just over 13%, on the funding allocated to my Department in 2021. Budget 2022 will allow us to pursue a range of new measures to enhance our enterprise base and help businesses prepare for the future.

Yesterday, I brought a memorandum to Government confirming our intention to establish a new innovation equity fund. Traditionally, Ireland has lagged behind other countries in our ability to scale up our SMEs into large global companies. The well-documented shortcomings of our seed funding market for start-up companies has led to high potential businesses seeking investment from outside the jurisdiction, which, in turn, leads to a flight of technology and skills to other jurisdictions, especially the US. I want this to change. The new €90 million innovation equity fund will act as the cornerstone of a "fund of funds" that will "crowd in" private investment. The crowding-in effect from private sources should leverage that funding significantly and help talent and investment to stay and thrive in Ireland.

Coupled with the innovation equity fund, the changes to the employment and investment incentive scheme, EIIS, will help to attract early-stage funding into new and innovative businesses. Reform of the EIIS has been a priority of mine since becoming Minister and my officials have worked with the Department of Finance and its officials over the past year to identify how we can make the scheme more effective. Budget 2022 confirms that the scheme will be extended to 2024 and opened up to a wider range of investment funds. This will allow greater capacity for investors to redeem their capital without penalty – the so-called capital redemption window – and remove the rule that 30% of an investment in an EIIS company must be spent before the relief can be claimed. The Minister for Finance also announced yesterday that corporation relief for small start-up companies in their first three years of trading will be rolled over until 2026 and the qualification window extended to five years.

The extension of the microbreweries relief to craft brewers of fermented beverages such as apple ciders and perries is also a welcome development. The craft brewing sector is labour intensive and regionally diverse, and the success of the different craft beers countrywide highlights this. The extension of the relief in this year’s finance Bill will help to generate employment and the growth of businesses across the country.

First mentioned in last year’s budget, a new tax credit of 32% of eligible expenditure will be available to companies engaged in the design, production and testing of digital gaming. Confirmation of this tax credit is a big boost to the domestic digital games industry and will help us to compete internationally. It should be noted that this will not apply to digital gambling and the two should not be conflated.

Budget 2022 increases my Department’s current expenditure ceiling by €12 million to €358 million for next year. The extra funding will enable us to fund our agencies, including the establishment of the new corporate enforcement agency. The Ministers of State, Deputies English and Troy, will go into more detail about this in their contributions.

On capital expenditure, the allocation of €523 million of core funding will allow us to progress specific investment priorities included in the new national development plan, NDP. This is an increase of €91 million, or 21%, on our core capital allocation for 2021.

As we stated in our economic recovery plan, the jobs of the future will be rooted in a greener and more digital economy and investing in our people, their talents and skills, will have to be central to our work. Under the NDP, investment in further and higher education, research, innovation and science will increase by 30% between 2021 and 2025. Our new €10 million enterprise green transition fund will help companies invest in technologies to achieve carbon abatement. The new €10 million digital transition fund will drive the digitalisation of businesses, particularly SMEs, including through maximising the development and adoption of data analytics and artificial intelligence. An extra €2 million for local enterprise offices will help them provide training and other supports to assist SMEs in adapting to climate change and digitalisation.

In total, Enterprise Ireland is receiving an increase in its core allocation of €40 million, bringing its total spend to more than €325 million. This demonstrates our commitment to supporting indigenous enterprise and helping SMEs to scale. Enterprise Ireland’s regional enterprise development fund, REDF, will be funded to meet commitments under existing calls and there will be a launch a further call next year. The REDF facilitates collaboration among stakeholders to focus on enterprise development in their regions and back up our regional enterprise plans, which should be launched before year end.

We are also allocating €3 million to establish European digital innovation hubs in 2022 and facilitate the wide deployment of digital technologies. The hubs will play a critical role in facilitating the digitalisation of Irish companies across industries and regions and will be a first line local access point to drive the adoption of the latest advances in cybersecurity, artificial intelligence and high-performance computing.

The disruptive technologies innovation fund, DTIF, supports significant business transformation across a broad range of sectors of the economy. Since its launch in 2018, in excess of 70 collaborative disruptive innovation projects have been approved. The €67 million being provided to the fund in 2022, which is double the 2021 allocation, will allow commitments under previous calls to be met and further calls to be launched.

IDA Ireland will receive a capital funding boost of €26.5 million on top of an additional €1.5 million in current spending to enhance its promotional activity. This brings the IDA's proposed total budget to approximately €220 million. An additional €10 million will be provided to the IDA's regional property programme, which provides advanced technology and office buildings throughout the country. This has proven to be one of the most effective ways to secure FDI investments beyond the major cities. This increase will ensure that a record number of buildings will be commenced and advanced in 2022. Specifically, buildings are due to be commence in Dundalk, Waterford, Mullingar, Tralee, Letterkenny and Drogheda. Others will be completed, including in Sligo.

The IDA will receive an increase of €7 million in funding for the National Institute for Bioprocessing Research and Training, NIBRT, which will allow it to scale up its research and training capacity in areas such as cell and gene therapy as set out in the NDP.

Some €4 million will be allocated to the advanced manufacturing centre in Limerick, which provides an important collaborative environment for immersion in new technologies and digital training and upskilling to support future needs in manufacturing. The IDA's capital grants will also be increased by €5.5 million to strengthen its ability to attract new investment to Ireland, particularly to regional locations.

In the context of Brexit, which continues to unfold, €5 million is being provided for a competitive call for applications under the food transformation fund, which I launched with the Minister for Agriculture, Food and the Marine at the start of this year. The UK's departure from the EU continues to have serious implications for many sectors of the economy, and this fund is designed to strengthen and improve resilience of primary food processing companies through long-term transformative capital investment projects. As one of the countries most affected by Brexit, we expect to receive one fifth of the €5 billion Brexit Adjustment Reserve fund. My officials will liaise with the Department of Public Expenditure and Reform over the coming months to secure an appropriate share for Irish businesses.

I have spoken previously about how I want to make sure that the past 18 months have not been in vain and that we secure a pandemic dividend for workers. We want to build a new economy that is more inclusive and more secure and a more just society with a move to a living wage, statutory sick pay, occupational pensions for all workers, flexibility in the workplace, remote working, more opportunities for promotion, training, education and research, and greater gender equality in the workplace. Yesterday, I brought forward a recommendation of the Low Pay Commission to Cabinet. From 1 January 2022 the minimum wage will increase by 30 cent to €10.50 an hour. That is an increase of €1.85, or 17.6%, since 2015, running well ahead of the consumer price index, CPI, rate of inflation, which was 3.6% between August 2015 and August 2021. In cash terms, our minimum wage is now one of the highest in the world and the second highest in the EU. However, it needs to be, due to the high cost of living in Ireland and the absence of universal healthcare and affordable childcare, which puts us in sixth place in the EU when adjusted for purchasing power. Our experience of the minimum wage to date indicates that we can increase wages, keep our competitiveness and grow employment. I believe we can do so with the introduction of a living wage as well. Conscious of the difficult period businesses are still going through, I intend to sequence these reforms appropriately over the next few years. It is important that we do not load too many additional costs on employers too quickly and that we seek to reduce other costs, for example, insurance. I will start with statutory sick pay next year, and I hope to introduce the living wage on a phased basis from the end of 2022 or early 2023.

One of my priorities in this year's budget was to follow through on a commitment to review the tax treatment of remote working. The budget provides for increased tax relief for electricity and heat when working from home. This measure could benefit up to 400,000 people. Tax relief for broadband remains unchanged at 30%. The world of work will continue to evolve over the coming months and years. We will introduce new legislation giving workers the right to request remote working on top of the code of conduct on the right to disconnect, which I signed earlier this year.

The Government will demonstrate fiscal discipline throughout its term. We are ambitious in our plans for the next few years but we will do only what we can afford and sustain. We are already ahead of schedule in our plan to restore the public finances to good order. The overriding objective is to eliminate borrowing for anything other than capital investment. We will do that next year, a year earlier than we had planned and well ahead of peer countries. Spending will increase by 5.5%, but that is at a rate slower than the economy is expanding. As we emerge from the pandemic and enter a second century of statehood, it is right that we should ask ourselves what we want to achieve. I firmly believe it is possible to build a just society providing affordable healthcare, education and childcare for all and higher levels of homeownership while still balancing the books. The key to doing so is an enterprise economy that rewards work, backs business, builds skills, promotes trade and can generate the jobs and revenue to make this possible.

This budget's pension, welfare and tax package is the right thing to do. For families, the tax package will help with the cost of living, with single-income families on average full-time wages benefiting by approximately €400 a year. Reducing hospital charges for children under 18 will be a welcome boost to families in addition to the extension of free GP care to six- and seven-year-olds. Other measures, including the reduction in the drugs payment scheme threshold to €100 a month per household will also help families with their medical bills. An extension of universal childcare subsidies will also help families from next September. Childcare costs in Ireland are very high and represent a barrier to re-entry into the workforce for many. This is something we will come back to in future budgets. I believe the changes in the cost of healthcare and funding to reduce waiting lists is further evidence of our practical commitment to Sláintecare and to universal healthcare in Ireland. Families will also benefit from the remote working tax relief and the extension of the help-to-buy scheme.

Younger workers will benefit most from the 30 cent increase to the minimum wage and the USC band widening to ensure that a full-time worker on the minimum wage remains outside the 4.5% rate of USC. Students will benefit from a €200 increase in the SUSI grant, the first in 11 years. The income threshold for student grants will increase by €1,000 and the distance for the higher non-adjacent grant will be reduced from 45 km to 30 km, meaning more students who are living away from home or travelling to college will qualify. Public transport fares for young adults aged 19 to 23 will be halved. The budget will also help workers aged 25 to 28 to access the treatment benefit scheme, in particular dental benefit and the free scale and polish and eye tests.

Covid-19 has been a particularly difficult time for older people, often cut off from family and friends for protracted periods. The budget provides for a €5 a week increase to the State pension, an €8 week increase for pensioners living alone and an increase of up to €10 a week for a pensioner couple. Poorer pensioners and welfare recipients will also receive a €5 a week increase in the fuel allowance starting immediately. For me, having a tax and welfare package in each budget is a question of fairness. As we see the return of inflation and a rise in the cost of living, we need to protect people's standard of living. Pay increases, tax reform, welfare and pension increases, reduced childcare and healthcare costs and increased student grants are all part of that mix.

I wish to mention Sinn Féin. Yet again it has gone for the populist options in its alternative budget, such as opposing the carbon tax, which is an essential part of climate action in the view of scientists and experts, including the Climate Change Advisory Council. Sinn Féin is rapidly becoming Ireland's climate sceptic party, at least when it comes to doing anything difficult or unpopular for the benefit of our planet. In its alternative budget, Sinn Féin proposes 14 tax increases but there is a 15th one it was hoping people would not notice. Unlike the Government, Sinn Féin would not increase or index-link tax credits and bands, meaning people on average incomes would take home less pay. It is an income tax increase by stealth. Index-linking credits and bands can be difficult to explain but people understand it when they see it in their pay cheque - when they realise they have to pay tax for the first time or that they are paying the higher rate of income tax on every extra euro they earn. Indexation means that workers who do not get a pay increase from their employer in 2022 will at least get something and that those who do can keep most of it rather than losing it to the taxman. Over the course of a full term in government, indexation of tax credits and bands could mean as much as €2,400 a year for a two-income, middle-income household. That is how much a middle-income couple would be worse off each year after four years of Sinn Féin in government. This is true of renters too, although the figure would be a little lower. It is our ambition, over the term of this Government, to continue indexation and to get to the point where only income earners in excess of €40,000 a year are subject to the higher rate of income tax, or up to €80,000 a year for a two-income couple. Sinn Féin would also abolish the help-to-buy scheme, making it more difficult for average earners to buy their own home. To date, almost 30,000 individuals and couples have benefited from the scheme, helping them to raise a deposit for a new home, all first-time buyers. There are many more applications in the pipeline. Sinn Féin would shut them out. This would be particularly cruel to renters who are saving up to buy their first home and young people still living with parents trying to do the same. The few hundred euro Sinn Féin would give people in a rent tax credit would be taken back 20 times over by the removal of the help-to-buy scheme. Sinn Féin's alternative budget would be harmful to those who want to own their own home. Its alternative affordable housing scheme is a leasehold scheme, not a homeownership scheme. The evidence is mounting: Sinn Féin does not support higher levels of homeownership; its policy is the opposite. This will become clearer as time goes on.

To recap, this budget is another milestone in helping businesses to see out the pandemic, protecting jobs and helping businesses to survive and grow.

It is also a new chapter in our recovery, helping enterprise to move on from the pandemic and deal with both the challenges and opportunities ahead, especially in the digital and green areas. Most importantly, it will have a broadly positive impact on people's lives, helping them, in a small way, to deal with the cost of living as we emerge from this difficult time. I commend the budget to the House.

See this speech in context