Brian Cowen (Laois-Offaly, Fianna Fail)

The Government is committed to making progress in this area as soon as that review is completed.

Drugs

Since the pre-budget outlook I have added €12.5 million to fund the implementation of the recommendations of the national drug strategy's rehabilitation report. This additional funding will allow for the development and strengthening of local drugs task forces and the roll-out of services to new commuter-belt towns. That is a priority in light of recent events.

Increased Duty on Tobacco

From midnight tonight, I am raising the excise duty on cigarettes by 30 cent per packet of 20, inclusive of VAT, with pro rata increases on other tobacco products. This increase serves to underline the desire of us all to curtail the consumption of tobacco in the interests of improved public health. I believe this measure should be welcomed generally.

It has also been suggested to me that there might be public health benefits arising from a switch to lower alcohol beverages. This will require some study and, indeed, some adjustments by industry. I am giving notice now that I intend to bring forward measures in this area in my next budget.

Development Aid

In addition to our commitments to the vulnerable here in Ireland, the Government recognises our responsibilities as a rich country to the poorest of the poor in developing countries. I am providing for an additional €84 million in the Vote for international co-operation in 2008. This will bring our total ODA allocation for next year to €914 million, up to 0.54% of GNP. This amount is three times that spent in 2000.

SCIENCE, TECHNOLOGY AND

INNOVATION

Significant and sustained investment in science, technology and innovation is an essential part of the drive to make Ireland a more knowledge-driven economy. Ireland must be at the forefront in generating and using new technology. This requires us to strengthen the national innovation system, in particular by focused interventions to support the development of our research and development base. This base has grown significantly over the past few years, with total gross expenditure on research and development growing from just over €800 million in 2000 to an estimated €2.3 billion in 2006. While the Government has contributed significantly to this increase, I am pleased to note that private sector investment has also grown from under €500 million in 2000 to over €1.6 billion in 2006. This investment, both by Government and private companies, will help secure the economic future of the country.

In 2008, I am increasing the capital provision by €36.5 million to a total of almost €300 million for continued investment in basic research in centres for science, technology and engineering and in strategic research clusters. Research and development activity, innovation management and collaborative effort between industry and the third level sector will attract significant support next year. This will be matched on the current side by an additional €12 million for higher education research, bringing the total STI expenditure on the current side to €133 million nextyear.

Research and Development Tax Credit

Ireland is now viewed by multinational companies as a location for research and development activity and the changes I will announce today to the research and development tax credit scheme will help to further embed these companies in Ireland around such high value-added activities.

I propose to enhance the research and development tax credit scheme. The base year for expenditure used to calculate expenditure on research and development is being fixed at 2003 for a further four years to 2013. The change will provide an additional incentive for increased expenditure on research and development in future years and will offer more certainty to industry concerning the tax credit scheme. This improvement will cost €60 million in a full year and is an essential complementary measure to Government spending on STI.

REWARDING WORK

Income Tax

I now wish to turn to the income tax code. In the last decade, the income tax system has been made fairer, friendlier, more progressive and more rewarding for working people. The express purpose of the programme for Government is to build on and further progress that tax agenda over the next five years. Today, I will take a positive step down that road by presenting to the House the first of five instalments in our income tax agenda. The various measures proposed constitute a well targeted income tax package that protects and enhances the income position of those in employment and supports those who find themselves in difficult circumstances or on fixed incomes. It will meet the Government's priority to use tax credits and bands to keep low income earners out of the standard rate band and average earners out of the higher band. The protection of more vulnerable groups must remain my priority in addressing income tax decisions and that is what I am doing.

I am increasing the personal tax credit by €70 for a single person and €140 for a married couple, while the employee tax credit will also be increased by €70 per annum. This will keep 32,600 income earners out of the tax net. For a single person on PAYE it will move the entry point to the income tax system from €17,600 to €18,300 per annum. The employee PRSI and health levy entry points are also being increased in line with these changes.

The 20% standard income tax band is being widened by €1,400 per annum to €35,400 for a single person and €44,400 for a married one-earner, while the band for married two-earner couples will be €70,800. With the projected average industrial wage for 2008 being about €34,000, it means that we will protect people on average earnings from liability to tax at the higher rate.

Other Tax Credits

With the needs of certain more vulnerable groups in society in mind, I propose to provide further increases in the value of a number of other personal tax credits. The tax credit for an incapacitated child will be raised by 22%, or €660 per year, to €3,660. The level of the married personal credit and the home carer tax credit is being increased by almost 17% to €900 per year.

The age credit will be increased by €50 to €325 for a single person and by €100 to €650 for a married couple, with the age exemption limits also being increased by €1,000 and €2,000 to €20,000 and €40,000 respectively. I am also providing for significant real increases in the credits for widowed persons and widowed parents. These are targeted and concrete measures that underline the Government's resolve to look after the needs and welfare of those most deserving of our support. I also intend to increase the allowance for trade union subscriptions from €300 to €350 per annum.

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