Bertie Ahern (Dublin Central, Fianna Fail)

I believe that the people deserve the best in terms of reliable and experienced leadership, capacity and hard work. In this budget, the Government has shown again why it merits the people's continuing confidence in its commitment and capacity to serve them.

In framing his budget, the Minister has been aiming for an outturn which would sustain the strong performance of the economy, continue on the path of fiscal sustainability and increase the impact of positive redistribution on those in need. The remarkably strong revenue performance in the current year has led some Members opposite to make extraordinary claims. On the one hand, they argued that our strong performance showed that taxes should be lower, that the Government did not need the money because public spending was high enough and could be funded through lower taxes, and on the other hand, they argue that there should be higher public spending because the resources are now available for an unlimited spending spree, except, of course, that it would be irresponsible of the Minister to embark on such a pre-election splurge. These contradictory statements are sometimes expressed back-to-back by the same Opposition politicians.

Some, who definitely know better, choose to ignore altogether the economic effects of fiscal policy on inflation and competitiveness as if the only issue that mattered was balancing the books by spending up to the limit. Happily, we have a Minister for Finance and a Government that have a fine record of delivering what the economy requires in the present and for the future.

A targeted general Government surplus of 1.2%, a forecast debt ratio of 23%, an increase in gross current spending of 11.5% and an increase of 13% in gross capital spending are budgetary parameters which are the envy of Europe and indeed further afield. They represent a fiscal path that will underpin the future strong performance of the economy and sustain progressive real improvements in incomes and living standards, which the Government is committed to achieve in its agreement with the social partners, Towards 2016.

The budget continues the strategy of investing approximately 5% of our GNP in developing and modernising our infrastructure. Since 1997, and by the end of this year, 400 kilometres of motorway and dual carriageway will have been completed and opened. Our public transport system is being transformed through investment in buses, rail and Luas. We are doing in half a generation what other societies implemented over decades. The national development plan, which the Government will publish in January, will chart the way to fulfil our ambition to have a world-class infrastructure appropriate to our needs, developed in a timely and cost-effective way.

This budget is not just concerned with building for the future through responsible fiscal policies and ambitious investment programmes, important as they are. On the contrary, it is equally concerned with our current needs. I want to stress four key features of the budget in that regard: it completes a transition to a more equitable tax and welfare system; it maintains and deepens our strategy to reward work and enterprise; it provides real support for families with particular needs at critical stages of the life-cycle; and it provides incentives to deepen our competitiveness on a sustainable basis.

I take particular satisfaction in knowing that the Government, in this budget, is achieving, and indeed exceeding in many cases, the targets which we set to attain, a better standard of adequacy in the social welfare payments for the most vulnerable people in our society. The full year cost of the measures announced yesterday is a record €1.4 billion, and is a demonstration of our commitment to the less well-off in our society. The Government had committed to increase the old age pension to at least €200 per week and, in this budget, it has more than delivered on that commitment. By increasing the non-contributory pension by €18 per week, we are doing this, not just for recipients of contributory old age pensions, who will now receive €209 per week, but also for non-contributory pensioners.

We also committed to increasing significantly the lower rates of social welfare and agreed with the social partners a target to be achieved by 2007. In this budget, we are completing the transition to this substantially better income support for the most vulnerable in our society by increasing these rates by an unprecedented €20 per week. This means that these lowest rates have increased by over €50 a week in the last three budgets.

A particularly important measure in promoting social and gender equity is the decision announced yesterday to achieve, over three budgets, the transformation of the current qualified adult allowance for the dependants of non-contributory old age pensioners into a full pension of equal value and paid in their own right. This new entitlement recognises in particular the role of those women who, because of social conditions in the past, did not have the opportunity to qualify for a social welfare pension in their own right, but who made a major contribution to their families and communities. This is proper recognition of the role and entitlements of a most deserving group in society.

The balanced nature of this budget package is also reflected in the tax provisions. Through the increases in personal tax credits of €130 for single people and twice that for married couples, and the increase of €270 in the employee tax credit, we are continuing to ensure that those earning at the increased minimum wage level remain completely outside the tax net. That means nearly 40% of earners are protected from having to pay tax, compared to 25% of earners in 1997.

This significant achievement, despite the further increases in the rate of the national minimum wage which was introduced by this Government, will cost €657 million in a full year. In addition, the entry point for payment of employee's PRSI is being increased, as is the threshold for payment of the health levy. These changes are evidence of our commitment to maintaining a very low tax environment for those on low earnings. It has long been acknowledged by the European Commission that we have the most favourable tax conditions for the low paid, which are incentives to take up work.

By increasing the standard rate income tax band by €2,000 per year for single workers and pro rata for married earners, the Government is ensuring that those earning the average industrial wage in 2007, estimated at just over €33,000, will not be liable to pay tax at the higher rate. Accordingly, 80% of income earners will continue to pay an effective tax rate of not more than 20%, in line with our commitments to social partnership and our programme for Government.

In reducing the higher rate of tax by 1%, but increasing the health levy by half of 1% for those earning in excess of €100,000 per annum, the Government is honouring its commitments in the context of strong economic performance and recognising the importance of those who can do so making an appropriate contribution to the cost of caring for our older citizens and others in need of our support. It contributes to the balanced and well judged character of the budget in achieving equitable and sustainable outcomes.

Turning to our strategy to reward work and enterprise, I again highlight the critical importance of maintaining tax and welfare systems which reward effort and enterprise. This is particularly important when we have made such progress in achieving our goals of improved adequacy of income support for those not currently in employment. Such incentives must be substantially overhauled if higher income supports are not to turn into a poverty trap.

The substantial resources applied to exempting those on the minimum wage from the tax net and ensuring that those on average earnings do not face the higher rate of tax are very effective in achieving precisely this result. The strong employment performance reflected in last week's household survey figures, showing employment growing here at twice the rate in the rest of Europe and especially strongly for women, provides clear evidence of the continuing success of the Government's strategy in that regard.

I particularly wish to refer to one aspect of the social welfare package, namely, the decision to abolish the waiting time for the back to education allowance in the case of workers made redundant who qualify for statutory redundancy and social welfare payments. This may not impact on many individuals, but for those who face the very difficult experience of being made redundant, in this measure we are providing a direct support for the acquisition of new skills and knowledge. It is right that we should support individuals who make the effort to improve their own employability in the face of difficult employment experiences.

By increasing the incentives for investment in seed capital and venture capital targeted at small business, the Government is also increasing the availability of finance to those who take the initiative to establish their own business. The dynamism of the small business sector and especially the willingness of people to establish new ventures is a critical test of the strength of any economy. We are fortunate in having many who are willing to invest their time, talent and energy and, above all, to take risks in putting their ideas into practice in the market.

The budget shows real flair and commitment in regard to support for families at critical stages of the life cycle. This budget is good for all families. For those with child-rearing responsibilities, the further increase in child benefit of €10 per month, the significant increase in child dependant allowance for families in receipt of social welfare payments and the doubling of the back to school allowance represent important practical support for the costs of child rearing. The increase in the rate of maternity benefit in the reckonable earnings threshold for payment of that benefit and the increase in the duration of paid and unpaid maternity leave by four weeks each represent significant improvements for women at a particularly challenging time in the balancing of work and family commitments and important social progress for society as a whole.

I am particularly proud of the improvements which are being made in the supports available to those with caring responsibilities within families. In addition to increases in the level of payment of the carer's allowance and the increase in the respite care grant, the Minister for Social and Family Affairs is introducing an entitlement for recipients of other social welfare payments to be paid a half rate carer's allowance in appropriate caring circumstances. This is a major innovation which will redress what many had come to see as a serious anomaly. It will recognise and support the invaluable work done by many people around the country who have assumed great burdens in enabling older people and people with severe disabilities to remain in their own home and community, and it will be rightly welcomed for that reason.

Another critically important issue facing many families is the need to care for those with disabilities. Last month, the Minister for Finance provided an increase of 10% in planned spending on disability-related services in 2007. This has been increased in the budget by a further €100 million in support of residential, respite and day places, as well as the centrepiece of our new national disability strategy, the independent assessment of need and the provision of service statements, commencing with children under five from 1 June next. It also enables substantial progress to be made in implementing our commitment to improved mental health services, set out in A Vision for Change.

For those families with caring responsibilities in respect of older persons, there is the important provision of €255 million in full year terms to enable a total of over 5,000 comprehensive home care packages to be offered to older people and their carers to enable them to stay in their own homes. There will be increased provision of residential care places and improvements in the nursing home subvention scheme, which the Minister for Health and Children will announce next week. We will provide assurance to older people and their families about the availability of care, the standard of care and the cost of care. With a further €40 million provided in the budget for improved health and personal social services, total spending on health will reach almost €15 billion next year and provide real supports for families and individuals across the whole spectrum of need for health and social care. In that context, the increase in charges for private beds in public teaching hospitals and the small increase in excise duty on cigarettes are entirely reasonable provisions.

On the needs of families at different stages of the life cycle, I wish to refer to the very important support now being given to first-time buyers. The doubling of mortgage interest relief provides real and valuable support for those who are facing the financial pressure of mortgages taken out on first homes over the past seven years, as well as those who are about to take on that responsibility. The Government is entirely right to provide support for all those who are facing this financial pressure and not just those signing a contract after the date of the budget. Furthermore, by providing support in this way, the Minister is seeking to ensure that it benefits the purchaser and is not taken by the seller in the form of higher house prices. Taken together with the substantial provision in the Book of Estimates for social housing and the continuing strategy to increase the volume and accessibility of affordable housing, the Government is showing its determination to continue the extraordinary record of achievement in housing output and increasing the capacity of young people to buy their own homes.

Our capacity to continue to improve the quality and range of our public services depends on the strength and performance of the economy. The budget recognises that a supportive environment is critical if we are to meet that challenge. Through the significantly improved regime to support investment in research and development through the tax system, through support for investment in energy efficiency on the part of business and through the very significant improvements in administrative arrangements and in increased VAT thresholds for small business, in particular, the Minister has acted to address issues which are of concern to Irish firms of all sizes in all sectors, such as the reduction in the regulatory burden. The improved conditions applying to the BES will be particularly welcome.

In addition, through the budget's support on a joined-up basis for the development of renewable energy systems, it is providing support not only for more secure and cost effective energy supplies, but for greater environmental sustainability at this time of heightened awareness of the importance of addressing the problems of climate change. Keeping Ireland green is an ambition common to all of us, but it needs to be done in a way that enhances living standards and quality of life.

In addition to these improvements in the tax environment for all businesses, I wish to mention briefly a couple of specific initiatives, which, I know, will be widely welcome in the sectors concerned. First, the decision to allow deductibility of accommodation services for conferences is a major boost for this important and growing segment of the tourism market. This will give a major boost to a segment of activity with great potential to support employment and income in the tourism sector. The dynamism of the tourism sector, which has seen visitor numbers comfortably exceed the 7 million target this year, gives the lie to the prophets of doom. We are not losing competitiveness and market share and the economy is firing on all cylinders, not just the construction industry. Government has got definite value for money from its expenditure on market promotion in the tourism sector.

The package of measures to support developments in farming will be rightly seen as important for those facing the challenge of adaptation to the new agricultural environment. The continuation of stock relief, improvements in the conditions applying to long-term leases of farm land and new arrangements for the purchase of formerly leased land will facilitate the necessary restructuring in farming. The increase in the farmer's flat rate refund of VAT to 5.2% will benefit all farmers. These measures complement the very substantial provisions agreed with the farm bodies in the context of Towards 2016, which provide a firm basis for rural and farming development in the period ahead. Additional support for the establishment of bio-fuel crops is a welcome boost to necessary diversification at farm level. Today, the spending that supports farm income comes as much from Government as the European Union.

The various measures which I have briefly summarised represent the transition to a more equitable and sustainable tax and welfare regime. Having achieved our targets, we approach the future from a position of strength and can judge the appropriate allocation of future resources to an appropriate mix of reductions in tax burdens, where surplus to requirements, and sustainable improvements in public services. Our choices will continue to be informed by responsible fiscal policy underpinned by the competitive success which generates the resources for allocation in future budgets. The measures announced yesterday provided clear assurance that competitive success can continue as investors at home and abroad respond to the supportive conditions created by the policies of the Government.

I am proud that the Government has committed well over €5 billion to increased social welfare expenditure since 2002. In the period, real social welfare rates to those on the lowest levels of benefit have increased by approximately 25%. Payments to those in receipt of contributory old age pensions have increased by €62 and by €66 in the case of non-contributory pensions, bringing them to €103 and €110 respectively in the case of pensioner couples. Having met our benchmarks, we can commit to maintain at least these real improvements in the years ahead and have the resources to address other priorities in the social welfare area at the same time.

We will commit resources year by year to the improved infrastructure and support services which our economy and society require in line with the priorities of the national development plan to be published in January. We are focused clearly and effectively on the goals for the long-term future of society which we set out with the social partners in Towards 2016. I am confident the continued pursuit of the strategy set out in this year's budget and the qualities of leadership and effective management which the Government has displayed will ensure that together we build a society, every aspect of which we can be proud. It will be a fairer, stronger Ireland. It is possible that by the time we reach the historically resonant date of 2016, the vision and aspirations of the founders of the State will be capable of realisation. I commend the budget to the House.

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