Enda Kenny (Mayo, Fine Gael) | Oireachtas source

Yesterday the Ministers, Deputies Noonan and Howlin, delivered the Government's second budget. This is not an easy budget for the people of Ireland nor could it have been, but it is a necessary step as part of our long-term plan for economic renewal. This budget is about supporting jobs, and about ensuring that the burden of the adjustment is fair. To fulfil our potential as an economy and as a country, we have to restore the public finances to a healthy condition. That is our real challenge as a country.

The budget will deliver the necessary fiscal adjustment, but it will also provide extra support for job creation and for small Irish businesses. Our role is to build the supportive environment so that the private sector can deliver the jobs that our people and our economy need.

I do not accept that we must be saddled indefinitely with current high rates of unemployment, slow growth and a squeeze on disposable incomes. These are neither inevitable nor tolerable. Our ambition is to move beyond the progress achieved to date, and to tackle these key issues head on.

Without the difficult action taken by the Government, the economy would not be on a solid pathway towards recovery and growth once again. Since taking office less than two years ago, the Government has worked to address the economic crisis we inherited from the previous Administration.

Some commentators attribute all of our economic difficulties to the banks and the enormous bailouts given to them by the previous Government. The reckless behaviour of banks and the equally reckless bank bailouts of the previous Government remain a major burden on the Irish people, and one which our European partners have now promised to reduce through renegotiation of the bailout deal, but reducing the burden of the bank bailouts will not, by itself, keep our economy on a sustainable path back to prosperity and full employment. This requires that we tackle with equal determination the two other economic legacies of recent Fianna Fáil-led Governments - the damage done to our export and foreign direct investment-led economic model during the credit-fuelled property boom and the massive underlying deficit we inherited in the public finances.

Even if the State had no banking-related debts whatsoever, we would still be dealing with an unprecedented gap between Government revenues and spending - the legacy of the reckless unfunded spending commitments of the previous Government and its "when we have it we spend it" philosophy. Even if the State had no banking-related debts whatsoever, we would still be dealing with the massive job-destruction legacy of the property and construction crash - the legacy of what one might call the "Galway tent" school of economics that left hundreds of thousands of our people without work and in need of re-skilling for the more sustainable, enterprise-led economy that we are trying to recreate.

Since taking office less than two years ago, the Government has worked hard to address the economic difficulties we inherited. We have prioritised fixing the public finances, restoring the banking system to some sense of normality, and supporting job creation and economic growth. Our economy finally returned to growth last year with GDP increasing by 1.4%, the first annual increase in GDP since 2007. We anticipate further modest growth this year. It proves that the Irish economy can grow even during a period of necessary and difficult budgetary consolidation and in a very challenging international environment.

The labour market has shown encouraging signs of stabilisation in recent months. While unemployment is still unacceptably high and its effects are felt far too wide, the most recent quarterly figures show that the employment situation has stabilised. The pro-job measures in the budget aim to build on these tentative steps to encourage greater job creation and investment.

Over the past year 20,000 new private sector jobs have been created following the loss of over 250,000 jobs in the private sector during the previous three years. The package of measures in the budget announced yesterday aimed at the small business sector will encourage businesses throughout the country to start expanding and hiring again. They will restore a much needed measure of confidence to the job creation sector.

The budget is a building block in the transition from the old failed economic plan based on property speculation and debt to a new competitive Irish economy based on enterprise, exports and innovation. That competitiveness is crucial for continued investment so that jobs can be created.

We have also seen signs of stabilisation in other parts of the economy, such as the property market. Residential property prices show a modest increase over the most recent three-month period, and the pace of annual decline is at its slowest since September 2008. While there is some way to go before the market returns to more normal levels, the latest surveys show the past quarter having the largest volume of mortgage loans issued since the end of 2010 - 3,983 for the third quarter of the year.

Budget 2013 also sees Ireland continue to face up to its economic challenges. Ireland and its people are recognised internationally for its sensible and pragmatic approach in dealing with our financial difficulties. This has greatly helped the Government in its important work of restoring Ireland's international reputation, which, as the House will be aware, had been badly damaged under the previous Administration. We continue to make very significant progress and there are many clear signs that Ireland's reputation has steadily improved.

In recent months the country has taken it first steps to restoring its economic independence by returning to the international markets for funding. Both pillar banks have raised money in the markets without State guarantee. Last year saw exports reach new heights of a record €173 billion - some 10% higher than in 2007, the highest pre-crisis figure. A good export performance is expected again this year. Nobody can deny the importance of that.

Budget 2013 will build on this progress by reducing the transport and export costs of small and medium sized businesses. Export transport is provided by hauliers, the majority of whom themselves are small businesses. I am pleased to note the introduction of a rebate on diesel with effect from the middle of next year.

This will also benefit the export orientated foreign multinational sector. Over the past year we have seen a strong line of investment decisions from new and existing multinationals creating thousands of new jobs.

Important job announcements from both indigenous and foreign companies include the Kerry Group, Voxpro, Paddy Power, EA Games and Arvato Finance, to name but a few. These are all strong signs of confidence in Ireland and show that our considerable efforts to rebuild our reputation are bearing fruit. A significant amount of work remains to be done and the challenges before us are great.

We will continue to work to enhance our international reputation. Our EU Presidency, starting in January, will give us another opportunity to demonstrate our strengths as a nation. The one thing that no money can buy, however, is a reputation for hard work, creativity, skill and strength of character. The Government is not complacent about the challenge ahead. We acknowledge and fully understand the hard work of the Irish people to get us to this position. They know that there are no easy answers to restoring this country’s prosperity and future progress. I thank them for their indulgence, understanding and patience.

Despite the many changes made as a country, we continue to spend more than we collect in revenue. This has to be addressed. Fixing our national finances and putting them back on a sound footing is an absolute prerequisite for job creation and economic growth. It is absolutely necessary for confidence and certainty in our economy. To this end, the Government remains fully committed to the 2013 deficit ceiling of 7.5% of GDP and to reducing our deficit to below 3% of GDP by 2015. For 2012, we will be well within our deficit target agreed with the troika.

In May, the Irish people voted overwhelmingly to ratify the fiscal stability treaty. This much needed reform will ensure that governments now and in the future will manage the public finances appropriately and sustainably, so that what happened in the past will never recur. In recognition of mistakes made by previous governments, this budget has broadened the tax base. For too long, successive governments have relied on a very narrow source of revenues. The introduction of a fair, progressive and proportionate property tax will help us to address the budget deficit and will help to avoid additional taxes on income. Increasing income taxes at this time would only serve to destroy jobs, hit working families and affect our competitiveness. These families and their futures are the central focus of this budget.

As the Minister for Finance reiterated in his speech, in order to underpin the high levels of foreign direct investment and sustain indigenous enterprise and job creation, we will maintain Ireland’s 12.5% rate of corporation tax, which is a long-standing and core element of our enterprise strategy. Ireland’s corporation tax regime is transparent, easy to navigate and very close to the effective rate of 11.9%. This is to provide certainty to Irish businesses so that they can plan for the future with clarity and confidence, and thereby create more jobs.

Obviously, the Government is not satisfied with the high level of unemployment throughout the country. For this reason we have deliberately focussed on job creation and are committed to ensuring that our policies support strong and sustainable employment growth. We are committed to adding 100,000 jobs to the economy by 2016 and to have 2 million people in employment by 2020. To achieve this, as I have said on many occasions, I want Ireland to be recognised as the best small country in the world in which to do business by 2016.

Earlier this year we launched a comprehensive and detailed action plan on jobs. That action plan is about taking incremental and necessary steps right across Government to support enterprises to grow, create and retain jobs - quarter by quarter, reform by reform and step by step. In tandem with our action plan, we launched Pathways to Work, which is a fundamental reform of the way we support, engage with and treat jobseekers. The recently launched new, integrated service Intreo transforms the way we support jobseekers back into jobs, treating people looking for work as real contributors to our society and not as mere statistics. This new service is already working well, offering new hope and new opportunities for the future.

We have sought to maximise private investment in much needed infrastructure. Last year, we announced the establishment of NewERA and the Strategic Investment Fund. NewERA is a key commitment in the programme for Government and is central to the Government’s plans for job creation, investment and reforming how the Government manages its semi-State companies. In August, the Minister for Communications, Energy and Natural Resources, Deputy Rabbitte, published a national broadband plan which sets ambitious targets for the roll-out of high-speed broadband throughout the entire country. Some 200 secondary schools are currently being connected throughout the country as part of that plan, thus giving young people the opportunity to connect with the world.

To improve the availability of credit for business, the credit guarantee scheme commenced in October of this year. Initially, the scheme will facilitate up to €150 million of additional lending per annum to small and medium enterprises, in addition to the lending targets set for the pillar banks. It will provide a 75% State guarantee to banks against losses on qualifying loans to firms with growth and job creation potential. A microfinance scheme also opened for business in October. This will provide loans on a commercial basis for start-up businesses and micro-enterprises, which are very important for communities all over the country. Over a ten year period, it is expected that over €90 million in additional lending will be provided to 5,500 micro-enterprises with the potential to support the creation of an anticipated new 7,700 jobs. This drive is being led by the Minister of State at the Department of Jobs, Enterprise and Innovation, Deputy Perry.

This budget is about building on the progress of the past 18 months to create more jobs and support small Irish businesses. It introduces further measures to support Irish business and sustain our economic recovery. As in our first budget, we have not raised income tax. We want to make work pay for families. We do not want to add extra taxes onto jobs and investment, which would be a step back on our path of national recovery.

Supporting small and medium-sized Irish businesses, which have a presence in every townland across the country, is absolutely essential if we are to get our country working again. Therein lies the key to Ireland’s future prosperity. The ten-point tax plan for small business is therefore a central feature of this year’s budget. The plan includes a series of measures that, taken together, will make a real difference to small and medium enterprises. New measures in that plan include, first, a 25% increase in the threshold for VAT cash receipts basis accounting, to improve cashflow for small and medium enterprises, which is so important and so often raised with us. The threshold will be increased from €1 million to €1.25 million. Second, a doubling of the amount of expenditure on research and development by small and medium enterprises eligible for tax credit, to support more innovation by businesses. The threshold has been increased from €100,000 to €200,000. I see evidence of this all over the country when I visit these small and medium enterprises. This issue means real progress for many such SMEs. Third, extending the employment investment and incentive scheme, which was due to run out in 2013, to 2020. This supports investment in businesses by providing tax relief of up to 41% on investments up to €10 million in companies. This extension gives clarity and definition to the horizon for planning and investment by these companies. Fourth, measures to reduce the burden of tax compliance for start-ups and small businesses, including an extension of the three-year corporation tax relief scheme and moves to look at ways of reducing costs of compliance for micro businesses. As Ministers are aware after engaging with so many businesses around the country, this is an issue that has been raised on many occasions. Fifth, an extension of the foreign earnings deduction scheme, to support companies putting personnel abroad - or “boots on the ground”, as they say - in eight more countries, which will help our agricultural sector in particular to export more. I am always enthused by the energy and ambition of so many young people to work abroad in promoting Ireland and selling the country's brand products. This extension of the foreign earnings deduction scheme to eight new countries offers opportunities for further trade, exports and therefore more jobs all over the country here in Ireland.

As we know, credit is the lifeblood of business and this is recognised in the budget.

The Government has provided for the delivery of a range of new and improved supports for companies in need of credit and is using resources to leverage funding from the private sector to provide credit for all business sectors. Among the new initiatives in this regard is a €700 million seed and venture capital scheme in which €175 million in Exchequer funding is expected to leverage a further €525 million in private sector funding. I strongly support this and expect that more than 100 innovative Irish companies will benefit with the potential for the creation of thousands of jobs and hundreds of millions of euro in additional exports expected as a consequence. An additional Exchequer allocation of €25 million under the development capital scheme will now provide a total of €225 million in funding to mid-sized indigenous firms to target the development of a really strong indigenous sector comprised of strong indigenous companies. The National Pensions Reserve Fund is also developing a range of support funds for the small and medium enterprise sector, initially ranging in size from €100 million to €400 million, to provide equity, credit and recovery investment.

Another area in which I perceive great potential for Irish business and especially the tourism sector is the extension and reform of the Irish film relief scheme. The decision to extend the film tax relief scheme to 2020 will put Ireland on the map and make us even more attractive for foreign film and television productions. This is an area the Government intends to pursue strongly in the new year and I note the hospitality sector also will gain from the retention of the lower level of VAT. I want Irish agencies to promote Ireland proactively in major production centres around the world. We have the talent and support services, as well as a land and cityscape, that should be attracting new business and productions.

The budget is fair because at its heart is a plan to create new opportunities for jobs and income growth for struggling low and middle-income families. There is no doubt that this is a difficult budget and it will have an impact on families across Ireland. However, it is as fair and equitable as possible. The Government has ensured that those who can afford to contribute most will do so. Primarily, it is supporting hard-working families struggling to make ends meet by not increasing income taxes. Moreover, it is providing an additional 6,000 after-school child care places to help hard-pressed working families balance working and family life. It is ensuring that everyone makes a contribution to the national effort by widening the tax base and introducing a property tax, including a higher rate for those who have houses worth more than €1 million.

While it is true that the Government wants to encourage those on average incomes to save for pensions, it can no longer allow pensions of the scale previously accepted to be accumulated at the expense of taxpayers. In this regard, tax relief on pension contributions will only serve to subsidise pension schemes that deliver incomes of up to €60,000 per annum. Tax relief on pension contributions will continue at the marginal rate of tax and the pension levy announced as part of the jobs initiative will not be renewed after 2014. In addition, while it will only contribute a modest amount to the total fiscal adjustment, the Government has introduced new reforms to political pay, expenses and allowances. It was an overdue step to introduce vouched expenses for politicians. It has also ended the practice of severance payments for officeholders and has introduced proper auditing of the leader's allowance following a cut of 10%. In the new year, I expect to appoint a referendum commission on a permanent basis. Next autumn will see the people decide on the future of Seanad Éireann by referendum and consideration will also being given to recommendations put forward by the Constitutional Convention.

This budget is a building block in the transition to a new enterprise-focused economy. It will ensure we reduce our deficit towards a more sustainable level. It has introduced a number of targeted measures to support business, job creation and growth across all sectors. The Government will do everything it can in 2013 to make sure its policies support job creation and growth. The measures announced in this budget are only the first steps in this effort. Work is well advanced on our action plan for jobs report for 2013, which will be published early in the new year. The Government will continue to work with our European partners to address banking debt issues, which are of such importance to us and I note Ireland's Presidency of the Council of the European Union commences formally in January.

A Cheann Comhairle, I wish to acknowledge the severe and damaging impact on Ireland as a result of the economic crisis of recent years. The scale of the cumulative budgetary adjustments to date, though necessary, has been painful and challenging and is very difficult. Every day, I speak to people who share their experiences of hardship, whether through losing a job or as a result of the impact of changes to valued public services. The Government is committed to making sure it does everything in its power to restore this country’s economic prosperity in everyone's interests. Just as I expect our country to emerge from the troika programme next year, so too do I intend to put an end to austerity budgets and while this will not be easy, it is achievable. One must not forget or neglect the many strengths of this country. We have faced a very serious and destabilising economic crash, unprecedented in its scale and have done what has been necessary.

I see a bright future ahead for our people. We have already seen many positive signs including renewed private sector job creation, sustained and significant foreign investment, strong exports and restored access to international funding markets. I acknowledge these developments may not yet translate into visible improvements at the local and community level. We are on a difficult journey but we are travelling with a sense of purpose, a clear objective and a clear goal. My vision of Ireland is one where those who are unemployed can find jobs, where rising incomes reward hard work, where the most vulnerable in our society are supported by reformed and reinvigorated public services and where we can grow old with a sense of dignity. This is a fair, equitable, and pro-jobs budget. The Government has set the country on the path to recovery and will get Ireland working again. I commend the budget to the House.

See this speech in context