Brian Cowen (Laois-Offaly, Fianna Fail)

Through a combination of Exchequer and local government funding, more than €600 million will be provided for regional and local roads. This will continue the commitment which the Government has shown over the past decade to the renewal of this vital network.

I am also investing almost €1 billion in our public transport system next year. This significant level of investment means that right across the country we will continue to make real improvements. Key projects such as the Cork to Midleton commuter rail line and phase one of the western rail corridor, which will link Ennis to Athenry, are through planning and the year ahead will see them readied for service in 2009. Construction is also due to begin on phase 1 of the Navan rail line, linking Dublin to Dunboyne. Irish Rail will also continue to introduce its fleet of 183 rail cars into service across the intercity network.

In Dublin, too, we will build on the great success of the Luas by adding much needed additional capacity on existing lines. By the summer, the capacity on the Tallaght line will have increased by 40% and construction work will continue on the line extensions to the Docklands and Cherrywood in south Dublin.

Water Services Infrastructure

Huge effort and resources have been devoted in recent years to the upgrading of our water services infrastructure. The €4.7 billion for water services in the national development plan, of which more than €471 million is allocated for 2008, is an unprecedented commitment to the provision of the infrastructure needed to support development and economic growth while, at the same time, ensuring environmental sustainability.

We have made huge strides over the past few years in expanding the scale and coverage of water and sanitary services infrastructure across the country. Virtually all major cities and towns now have modern wastewater infrastructure in place and we are pushing ahead with the remaining schemes at top speed. In national terms, some of the more significant achievements include increased compliance with the requirements of the EU urban wastewater treatment directive from 25% in 2000 to some 92% at present; and the completion of more than 350 schemes, including exceptionally large wastewater projects in Dublin, Cork, Limerick, Wexford, Galway, Drogheda and Dundalk. Other large water projects in the 2008 programme of works include those at Ballymore Eustace, Limerick city, Donegal Bay, lower Liffey Valley, Portlaoise, Waterford and Dungarvan, Castlebar and Roscommon.

Education Infrastructure

Total expenditure on education in 2008 will be €9.3 billion including €828 million for capital investment. Over the last three years alone, more than €2 billion has been invested in educational infrastructure. With this funding we have delivered 28 new schools, with construction underway at a further 16 new schools. We have delivered 77 largescale refurbishments or extensions of existing schools, with construction in progress at a further 44 schools. This is in addition to over 1,300 small scale projects delivered in 2006 and over 1,500 in 2007. Construction work this year alone will deliver over 700 classrooms to provide permanent accommodation for over 17,500 pupils. Given that there are 4,000 schools and that 9,000 building projects have been funded in these schools since the beginning of this decade, the Government is proud that the existing building stock has been substantially renewed.

However, the next challenge, and I believe the first priority for educational expenditure in 2008, must be to provide additional new accommodation to cater for the 13,000 additional children who will be seeking school places next year. This rate of increase in enrolments poses a major challenge for the education system. Accordingly, I am allocating an additional €95 million in capital funding for the primary school building programme in 2008. This will bring to €594 million the total budget that will be available for infrastructural investment in schools in 2008.

Other capital funding for education includes €184 million for infrastructural investment at third level and €50 million for various smaller programmes.

Housing

The Government is firmly committed to addressing housing needs and through targeted measures, providing an appropriate accommodation solution for lower income groups and people with special housing needs. I am making available a total housing package of some €1.7 billion in Exchequer resources, which together with non-Exchequer financing will bring the total overall housing package to some €2.5 billion. This will support the delivery of the ambitious Towards 2016 commitments entered into with the social partners, with some 9,000 new social housing units to be commenced or acquired in 2008 and the provision of 5,500 new affordable homes. Further households will be assisted through the continued roll-out of the rental accommodation scheme and support for homeless services. All in all, our aim is to address the housing needs of some 20,000 households in 2008.

The funding being provided for housing will support the important quality improvements in social housing, particularly through regeneration programmes successfully under way for example in Ballymun and Fatima Mansions and now being developed in other urban centres. I am particularly impressed by the work of John Fitzgerald and the Limerick regeneration agencies and I am pleased that today's package will support their initial work in developing a new vision for the socially disadvantaged areas of Limerick.

CLIMATE CHANGE AND ENVIRONMENTAL MATTERS

Carbon Report

There is growing and incontrovertible evidence of the challenge to us all posed by global warming. The Stern Review together with the recent reports from the UN's Inter-Governmental Panel on Climate Change illustrate the seriousness of the issue if things do not change. That is why we must act now. That action will require changes in the lifestyles we all lead and the choices we make on whether to consume or conserve resources. This should not be seen as a defensive strategy but as a forward looking, proactive response to this challenge.

The programme for Government undertook that I would give a carbon report in this budget. This is the first such report. Our current greenhouse gas emissions amount to some 70 million tonnes based on latest data. We will have to reduce that over the period 2008 to 2012 to an annual average of 63 million tonnes to meet our Kyoto commitments. An even greater effort will be needed to achieve up to a 30% cut envisaged by the EU for 2020.

All sections of the economy contribute to carbon emissions. Transport, for example, represents about 20% of emissions. This has been growing quickly due to increasing car use. Energy accounts for 22%, industry around 17% and agriculture 28%. Every element in our nation has a part to play. Some have already made significant strides and some are in a position to take more effective action than others. All must contribute as best they can to the necessary reductions.

The programme for Government also states that the Minister for the Environment, Heritage and Local Government will follow the carbon report in the budget with a report providing more detail on the progress being made towards meeting our targets for emission reductions. The Minister, Deputy Gormley, will give further information about this report tomorrow.

The programme for Government commits the Government to seek an all-party approach on climate change targets but in advance of such agreement to target a reduction of 3% per year on average in our greenhouse gas emissions. The target requires everybody to play a part.

The Government too has a role to play. We have put climate change at the heart of decision making by setting up the Cabinet committee on climate change and energy security. In previous years I announced tax and spending changes in this area. For example, in 2006 I introduced the favourable tax treatment of bio-fuels. Last year I provided for new grants for growing and harvesting bio-fuel crops and increased funding for an expanded range of energy conservation grants.

This year I am announcing a number of additional spending and tax measures to continue to support the Government's efforts to meet our greenhouse gas emissions targets.

Environmental Taxation — VRT

As I announced in last year's Budget Statement, a public consultation process was carried out by my Department in relation to rebalancing vehicle registration tax to take greater account of CO2 emission levels. There has been broad support for a fundamental reorientation and rebalancing of that tax. I am bringing forward today a series of changes that constitute the most fundamental reform of VRT since its inception in 1993.

The revised VRT system will be enacted in the Finance Bill and will be introduced with effect from 1 July 2008. The main features of the new scheme are: the VRT rate applicable to cars registered on or after 1 July 2008 will be determined by the CO2 emission rating of the car and will no longer be related to engine size; a seven band CO2 emissions system — A to G — will apply. It will be underpinned by a new CO2 emissions labelling system for cars, on the lines of the energy efficiency labels for white goods, to be introduced by the Department of the Environment, Heritage and Local Government and seven VRT rates, ranging from 14% to 36%, depending on the car's CO2 emission level, will continue to be applied to the open market selling price of the car.

Let me be clear that this measure is not about penalising people for their reasonable lifestyle choices. It is about providing them with opportunities and incentives. By explicitly linking VRT rates to carbon emissions on the basis of a new and highly transparent labelling system, we are providing individuals and families with the opportunity to make choices to help the environment and with financial incentives to do so. Of course, the higher emitting cars will pay more, but by making sensible and informed decisions, many families could see their VRT bills reduced.

Since this measure is not aimed at raising money but rather to assist the environment, the intention is that it will be broadly revenue neutral. I will continue to give recognition to the efforts of vehicle manufacturers to promote new technologies. Existing incentives for certain hybrid electric and flexible fuel cars are being extended to 1 July 2008. Thereafter and in addition to the benefit of the new CO2-based VRT system, I will be providing for a further top-up relief up to €2,500 on the VRT payable on such cars.

In an effort to foster the use of electric cars and electric mopeds I am also introducing an exemption from VRT. This exemption will apply from 1 January 2008. Further information on the new VRT system and related changes to the car capital allowances scheme are set out in the summary of budget measures and in annex D.

Motor Tax

Motor tax is an essential contributor to local government funding. Motor tax has not been changed since 2004. Since then the CPI has risen by around 15%. It is proposed to increase the existing motor tax rates by 9.5% for cars below 2.5 litres and 11% for larger cars from 1 February 2008. Details are contained in the summary of budget measures.

To complement the changes in the VRT system, the Minister for the Environment, Heritage and Local Government also intends to bring forward proposals that will link motor tax to CO2 emissions for new cars from 1 July 2008. These measures will allow consumers to act in an environmentally responsible way.

Other Environmental Tax Measures

The programme for Government has as an objective the introduction of a carbon tax in the lifetime of this Government, on a revenue neutral basis. This will be part of the terms of reference of the forthcoming commission on taxation. I intend to establish the commission very shortly and it will begin its work early in the new year.

I also intend to reduce VAT on certain seeds and bulbs for bio-fuels, and to amend the business expansion scheme so that recycling companies can have easier access to that scheme. Details of these measures are set out in the summary of budget measures. In the context of the forthcoming Finance Bill, I will examine, with my colleague, the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan, the feasibility of providing businesses with targeted incentives to support the installation of certain energy efficient equipment also.

Increased Spending on Energy Conservation and Research

Our energy use has grown by 70% in the past 15 years and we are especially reliant on imported gas and oil to meet our energy needs. Energy security and climate change are challenges that face all countries and that shape our energy policies. It is important that we balance our objectives of keeping energy costs down, ensuring security of supply and keeping our greenhouse gas emissions to a minimum.

The White Paper, Delivering a Sustainable Energy Future for Ireland 2007 to 2020, which was published earlier this year, sets out the Government's strategy for achieving these aims. The Government, through the resources provided in the national development plan and the resources of the State's commercial energy companies, as well as through policy measures, is committed to meeting the strategy set out in the White Paper.

The key goals of the White Paper include energy security, energy diversity and energy reliability. To help achieve these goals, there will be expenditure of €8.5 billion in the energy programme of the national development plan. The State energy companies will invest over €7 billion of that amount, mainly in the electricity and gas transmission and distribution networks, in new and modernised power generation and in wind energy projects. Next year, these companies will invest approximately €1.7 billion in these areas.

The Government has created gas and electricity markets that are fully open to competition. From 1 November this year, there has been an all-island electricity market, facilitated by the North-South electricity interconnector and other existing and planned interconnectors.

Exchequer investment in energy has increased significantly in recent years — next year, at €86 million, it will be over twice the level it was in 2005. This reflects the increased importance the Government attaches to the energy sector.

The NDP provides almost €150 million for energy research. In this budget, I am allocating €13.2 million for that purpose, an increase of €7 million on last year. The additional allocation for 2008 will go in particular towards measures to develop renewable energy from ocean sources. It is an area where we as a country could make a very significant contribution if the research is successful. If the research looks promising, as I believe it will, I will consider making considerably more resources available in future years.

The best way to reduce our dependence on imported oil and gas is, of course, through energy conservation. In this budget, I am allocating an additional €13 million to energy conservation. Of this, €5 million will fund a pilot programme of home insulation. In addition, there will be funding for a variety of measures which include the building energy rating scheme and a variety of technologies whose application will ensure that we use energy more efficiently.

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