Bertie Ahern (Dublin Central, Fianna Fail)

This is the budget of a successful economy which continues to outperform practically all the other economies in the developed world. The budget is designed to enhance social solidarity and improve the quality of life for young families and older people. It is constructed in the spirit of social partnership that has served this country well for almost 20 years. It continues the ambitious programme of improvements across the board in the public services. The budget provides further compelling evidence of the consistently high quality of stewardship in the Government's management of the country's affairs. We will be glad to submit our record to the people for their judgment in 18 months when we seek a renewal of our mandate.

Governments in other countries, like previous Governments in this country, must grapple with lower growth than forecast, high unemployment and persistent overshoots in targeted borrowing. The current situation in this country is the opposite of that as we are looking forward to satisfactory growth of close to 5% for the third year in a row. A dynamic level of employment growth of almost 5% has involved the creation of an additional 96,000 jobs over the past 12 months. Some 2 million people will be employed by early in 2006, which will represent an increase of more than 500,000 people in employment since 1997. It is likely that by 2007, the number of people employed will have increased by 1 million since 1987.

Buoyant revenue growth, which can never be taken for granted, has meant that we have significantly undershot the modest level of borrowing that was projected in the 2005 budget. We will end up with a small general Government surplus, as we have done in all but one year since 1997. As a result, substantial resources are available to the Government to relieve the tax burden on the low paid and hard-pressed working families; to increase the volume of spending on social services, focusing on greatest need; and to invest in infrastructural improvements which we could not afford in the past and which many other jurisdictions cannot afford today. It is forecast that inflation will remain in historically low single figures next year. We now obtain much better value from capital spending. The overall level of expenditure remains at a constant 33% of gross domestic product. Gross current spending has been increasing at roughly the same level — approximately 10% — each year since 2002. We must guard against overheating an economy at full throttle or causing sudden jolts when things are going so well.

Ireland has the most impressive and sustained growth record of all of the countries surveyed by the National Competitiveness Council in its recent report. Our rate of unemployment is half the European average, pro rata. Our labour force is growing at record rates as a result of inward migration and a higher rate of participation by our own people. The level of infrastructural development through investment is more than twice the European average. The Government has provided for continuing developments in the quality and extent of our social services. For example, there have been substantial increases in the real incomes of those who depend on social welfare. Such statistics represent an exceptionally positive balance sheet for the Government. The aim of the 2006 budget is to underpin the strong confidence that has been a marked feature of the economy in recent years so that we can continue to make dynamic progress of a kind that has never been sustained before in our history.

In keeping with the Government's progressive social philosophy of democratic republicanism, another of its priorities is to ensure that there is justice and fairness in the tax system. The Exchequer should not continue to offer unlimited incentives to the wealthiest tax residents in society at the expense of the general taxpayer. It is not right that a few of them would contribute nothing by way of income tax directly to the State or that we would publicly assist further accumulation of very substantial pension funds without any limit. People in that fortunate situation are well able beyond a certain point to look after themselves. To be fair, most of them are contributing heavily in more ways than one to the running costs of this society. Those few affected by these changes will still enjoy a very favourable tax environment compared to most other countries. It should also be stressed that the top 4% of income earners pay 40% of the total take from income tax.

A whole array of construction incentives, which were always meant to be finite, have served their purpose. With some exceptions, such as park and ride, which is obviously relevant to the roll-out of Transport 21, and private health care provision, they should no longer be needed to stimulate activity. The provision of student accommodation, thanks to an incentive introduced in 1998, for instance, has been very successful, but has now served its purpose.

Writers and artists will still have exemption on annual income up to €250,000. The vast majority of artists fall well below this threshold. Before the stallion fee exemption runs out at a time when all the other relevant reliefs end, we will consult closely with the industry and the European Commission to come up with an effective alternative that takes account of the importance of the success of this industry not only to Ireland but also to Europe.

Our reforming approach to the tax system has been designed to underpin a more enterprising and fairer society, through a pragmatic approach to the various components of the tax system. Fundamentally, our objective has to be to generate the maximum resources available for redistribution consistent with fostering a dynamic and sustainable enterprise sector. Our commitment is to a clear and transparent corporate tax regime, which, with many other highly attractive features of Ireland as a business location, has brought about substantial investment, and increased activity, employment and, crucially, tax revenue.

This budget, like last year's, is once again characterised by no increases in direct or indirect taxes, thus helping to keep down inflation, and ensuring that the budget does not put pressure on prices in the family shopping basket. We have reduced excise on certain heating oils, which will be of benefit particularly to older people and which over the years will eliminate a North-South difference that provides an incentive for irregular trade. The phased-in removal or capping of incentives will broaden the tax base and have positive revenue flow implications in the years ahead.

We have developed a structure of taxation, which provides incentives for those who wish to work and employ others, and which distributes the burden of income tax fairly among those best able to meet it. The exemption of those on the current minimum wage from the tax net — despite our minimum wage rate being one of the most attractive in Europe — combined with our low rate of taxation on those on approximately average earnings, have produced a highly equitable and progressive income tax system. It will be a constant task in every budget to make sure that those working full-time on the minimum wage, which is likely to rise each year, stay out of the tax net.

The total full-year cost of income tax relief goes up from €682 million in 2005 to €900 million in next year's budget. Once again, it is concentrated on low to middle-income groups. Some 36% of all income taxpayers will pay no tax. The rest will be equally distributed between the standard and higher tax bands. The standard tax band is being increased by €2,600, or nearly 9%, compared with €1,400, or 5%, last year. The standard income tax band has now been effectively protected in real terms since 2002.

The primary objective must be to ensure that we keep those on the average industrial wage out of the tax net, which we have done, unlike our predecessors. Wise governments avoid automatic and unthinking index linking by sometimes doing more and sometimes less to retain necessary flexibility to manage the economy and the public finances, and inject resources into what may have become new priority areas. I doubt if many people would wish us to index-link excise duties by reference to an automatic scale. They had to abandon such linkages in other EU member states when economic priorities changed.

As has been the case in all budgets since 2002, a study of the tables showing who benefits presents a picture of progressive tax changes, with the proportional benefit concentrated on the middle to lower end. Tax equity has been our priority. By preserving incentives, especially at lower income levels, and by keeping the tax wedge at a generally low level, we have produced an environment in which almost 2 million of our people are at work and unemployment, especially long-term unemployment that was once chronic, is at historically low levels.

Another feature of the budget is the support it gives to small business by relieving their tax and administrative burden. Targeted special reliefs will enhance protection of our environment and heritage, helping to implement our Kyoto commitments and establishing the heritage trust which I proposed in the early autumn.

I turn to the purposes for which the revenue raised through our equitable and balanced taxation system will be applied. The major initiative of this budget is to make inroads into the problem of the cost and supply of child care. There has been much public debate about whether the European model of society can continue and whether the welfare state has had its day. Trading labels of that kind is not always particularly helpful. However, if we must have a label, I believe our policies are designed to build up what the NESC in a recent report called the "Developmental Welfare State". This involves combining income supports, well targeted services and appropriately innovative measures to help individuals, families and communities not only to access quality services, but also to achieve their full potential and, in particular, to maximise their independence, autonomy and contribution to society.

These are the principles which were already expressed in our national anti-poverty strategy, our national children's strategy and the national disability strategy, which was published earlier this year. What these different approaches have in common is that they set out the standard of services which we aim to provide as a recognition of the rights of our citizens, improved arrangements to develop a joined-up approach on the part of Government to developing policy and a greater degree of integration at a local level in delivering services and supports which reflect the needs of people. In doing this, we have recognised the particular milestones in people's lives, where particular types of support and encouragement are required, be it in respect of children, young adults at the stage of establishing a family, independent adults in the workforce, older people or those with disabilities or other restrictions on their autonomy.

This is the context within which the Government's policy on child care has been developed, through a careful combination of measures to stimulate the availability and supply of child care and measures to support those in need of child care services. We have taken this balanced approach, and set out how we propose to develop it over a number of years, in response to the obvious facts about child care. In particular, we know that if we relied only on putting more money into the purchasing of child care services without increasing its supply, the likelihood is that prices would soon rise. We also recognise that parents have, legitimately, differing views about the best type of child care for their children. Some people will wish to provide care in the home themselves, either for a period after the birth of a child or for the pre-school years. Others will wish to use part-time nurseries and crèches, while working in the home. Many will wish to place children in a family home setting, using the services of family members or neighbours. Others will wish to have the benefits of structured child care programmes in well-run and regulated centres.

The package of measures announced by the Minister for Finance provides recognition and support for that full range of choice. They also provide a particular focus on the needs of families and communities with the greatest needs and under the greatest pressures. The package also recognises the importance of the development of the child as a specific objective in its own right, within the broader child care needs of the family. The extension of paid and unpaid maternity leave will be widely welcomed.

Supply is vitally important. I have had pleasure in opening publicly funded as well as voluntarily organised family resource centres in different parts of the country. The €10,000 income tax and PRSI disregard for those who look after up to three children, who are not their own, in the minder's home will also have a measurable impact on increased supply and help to keep down costs. This is certainly one instance where we are better off regularising the informal economy. Child benefit has been transformed and is now four to five times its value in 1997. The new child care payment of €1,000 per year extra in cash for children under six is the equivalent of a €5,000 tax allowance at the standard rate per child.

The multi-annual strategy for child care announced by the Minister for Finance requires an equally ambitious strategy to improve the arrangements for developing and implementing our policies on child care. Excellent work has been carried out by the Minister for Justice, Equality and Law Reform and his Department in developing the equal opportunities child care programme. However, at present, that responsibility is separated from policy in respect of standards, registration and inspection of child care facilities in the Department of Health and Children, while education in early years is the responsibility of the Department of Education and Science. To bring greater coherence to the sector, the Government has decided that responsibility for the child care programme will transfer from the Department of Justice, Equality and Law Reform to the Department of Health and Children and, as is normal in these situations, the relevant staff will also transfer. Therefore, the expertise and network of contacts which have developed will continue to be available to the child care area.

Responsibility for child care, together with other aspects of policy for children generally, is delegated to the Minister of State, with responsibility for children, Deputy Brian Lenihan. The Government has decided to take this opportunity to bring greater coherence to this important area of public policy. Accordingly, the office of the Minister of State with responsibility for children will have responsibility not only for child care, but for child protection and welfare, for juvenile justice and for early years education, reflecting the Minister's responsibilities in the Departments of Health and Children, Justice, Equality and Law Reform and Education and Science, respectively. To the greatest extent possible, all of the staff involved will be brought together in this office. There will be an overall head of office in the Department of Health and Children, reporting to the Minister of State, Deputy Brian Lenihan. The Minister of State will attend Cabinet regularly in furtherance of his responsibilities for children. Further details of these arrangements will be announced by Deputy Lenihan, following consultation with the relevant staff interests.

This budget represents a major step forward for children and families not only in terms of the resources provided, but in terms of a more effective and joined-up approach to this critical area of public policy. An equally important aspect of our budget strategy is the strong commitment to share the current prosperity of our society with those who are retired as well as the less fortunate. We are honouring our commitments to our older citizens who have served this country in their families, communities and workplaces over the years.

We are meeting our commitments to provide more realistic incomes for those dependent on the old age pension, which is within easy striking distance of €200 per week. We are also honouring our commitments in respect of the most vulnerable, those in receipt of the lowest rates of social welfare payment, including those in receipt of unemployment assistance and supplementary welfare, who receive an increase of €17 per week or 11%. This is far in excess of the 2.5%, 3% or 4% budgetary increases that were for a long time the norm under previous regimes.

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