Enda Kenny (Mayo, Fine Gael) | Oireachtas source

Yesterday the Government delivered its fourth budget to the House. This is a budget to secure our recovery and get Ireland working again. It is a recovery that many in this House said was impossible. When the Government was elected into office, the outlook was very uncertain. Unemployment was rising rapidly, the deficit was out of control and the financial system remained at risk. In response, the Government laid out its clear plan to rebuild our economy, create jobs and get our national finances under control. The budgets introduced in the interim were all stepping stones on this path to recovery. The sacrifice and understanding of the Irish people has been essential as we grappled with the serious challenges facing the country. I understand that for many people that these times are, and for some remain, tough. Many people lost their jobs. Some sectors of the domestic economy were devastated by the economic mismanagement of the previous Administration. Others who were lucky enough to keep their jobs saw their efforts being taxed at very high levels.

After seven long years of economic crisis for this country, we can now say with a measure of confidence that Ireland is in recovery mode. This time last year we were still in an EU-IMF bailout. While fragilities still exist, we are now in a very different and much better place. We fulfilled our commitment to the people of Ireland to successfully exit the bailout last December. Confidence - both home and abroad - has returned. In addition, we have cemented our return to the international markets. Just last week the NTMA auctioned a further benchmark ten-year Irish Government bond at a record yield of just 1.63% and has raised a total of €8 billion this year. In recent weeks the Minister for Finance, Deputy Noonan, secured agreement on the early repayment of a portion of our IMF loans. Recent figures show that economic growth is strengthening, and we project 4.7% growth for 2014. Having hauled the country back from the edge, we now face a choice on how we shape the recovery. I want to make it very clear that the decisions we made in this budget will secure and embed that recovery. Like all of those we have taken to date and that we will take in the future, those decisions will not threaten our recovery.

We have introduced targeted tax and welfare reforms that will help create new jobs. We are using the welcome flexibility available to us to incentivise work and our workers. We want to change things so that work, not welfare, will always be the attractive and viable option. I am of the view that the 52% tax rate relating to low and middle incomes, which was introduced by the previous Government, is anti-employment, anti-enterprise and dangerously out of line with the marginal tax rates that apply in respect of middle income workers in countries with which we compete for investment and talent. It undermines the incentive to work, do overtime or start a business. It also makes it more difficult to attract home the 350,000 people who have left our shores as a result of the recession.

In the Statement of Government Priorities 2014-2016, which was published in July, the Government committed to delivering better living and working standards to our people. Among other measures, we also committed to developing a considered and focused tax reform plan that will reduce the 52% marginal tax rate for low and middle income earners in a manner that maintains the highly progressive nature of the Irish tax system. This will be delivered over a number of budgets. This budget is the first step in a multi-annual process to reduce the 52% rate on low and middle incomes. It will improve the competitiveness of our tax regime in a way that strengthens the economic recovery. Delivery on that commitment began yesterday when the Minister for Finance, Deputy Noonan, announced a 1% cut in the 52% rate of tax for the 635,000 middle income earners earning between €33,800 and €70,000. This cut will take effect on 1 January 2015.

For a working family of two middle-income public servants, such as a garda and a nurse, each earning approximately €50,000, these changes will result in an extra €100 per month. The Minister for Finance has confirmed that this is the first instalment of a plan to progressively reduce the tax rate on low and middle-income earners. We now have a formula for targeting tax rate reductions at low and middle-income earners without giving disproportionate benefits to those on highest incomes. The tax rate on middle-income families will be lowered further in budget 2016 to at most 50% while ensuring those on higher incomes continue to pay their fair share. If the Government is re-elected we will deliver a further rate reduction in the 2017 budget.

All taxpayers will be better off after this budget. The reductions we have delivered to the universal social charge are designed to ensure that work pays for those on lower income. The increase in the threshold at which the USC becomes payable to €12,000 will take a further 80,000 out of the charge altogether, on top of the 330,000 who were removed by this Government in 2012. That amounts to 410,000 people on low incomes whose earnings are now better off under this Government than the last. It is estimated that the extension to the income tax standard rate band will remove approximately 33,000 taxpayers from liability to the higher rate of income tax altogether. The Department of Finance has estimated that a series of reforms along the lines introduced yesterday and delivered over the next three-year period will boost employment levels by as much as 15,000 extra jobs, over and above existing projections, when the full impact of the changes have taken place in the economy.

The taxation changes are designed to incentivise work and help create jobs. The reforms are matched by further changes to our welfare system to ensure those who are currently unemployed can get back to work and start enjoying the kind of fulfilling life that having a job allows. We cannot and will not rely on economic growth alone to reduce the dole queues, as was, perhaps, habitually and historically the case. Why? We regard the psychological and social exclusion that comes from not having a job or decent work to go to as intolerable to the human and social experience in our country. That is why we published Pathways to Work. Since its launch in 2012 the strategy has seen the roll-out of 44 Intreo one-stop-shop centres. The roll-out is to be completed with the opening of a further 16 centres by the end of this year. The biggest change has seen the introduction of a new case management approach to helping jobseekers return to work, whereby jobseekers receive scheduled one-to-one interviews and assistance with case officers based on their individual profiles. Budget 2015 provides funding to decrease the jobseeker to caseworker ratio to 200:1, more in line with international norms than the current 500:1, which is not satisfactory. With these new services in place we are targeting the roll-out of this case management approach to 100,000 long-term unemployed by the end of next year.

Changes are also being introduced to help families return to work. Analysis by the ESRI suggests that 60% of unemployed men and women with children face significant financial disincentives to return to work and that some are actually better off staying on the dole. How soul-destroying this is for the men and women involved, mothers and fathers who are keen to rear their children by their example. To help them get off welfare and back to work we are introducing a new back-to-work family bonus. This will allow families to retain the full qualified child increase of €29.80 per week per child for 12 months after their return to work and 50% of the payment in the second year by way of incentive. To replace another welfare trap caused by rent supplement we are now rolling out the housing assistance payment after a successful pilot scheme in Limerick. The recently introduced scheme, JobsPlus, which is designed to incentivise employers to hire long-term jobseekers has helped to change the lives of up to 3,000 people already. I am pleased indeed that funding has been set aside to double the number of places to 6,000 and we are working to reduce the number of long-term unemployed as quickly as possible.

Last week, the Tánaiste and I launched the Pathways to Work 2015 programme. This builds on the progress made in recent years. More than 50,000 people who were long-term unemployed at the start of 2012 have found work since the strategy was launched and we will exceed the 75,000 target we originally set. Furthermore, we have launched an employment and youth activation charter. Employers who sign this charter will commit that at least 50% of candidates considered for interview will be taken from the live register. It is a real incentive for people on the live register to attend for interview and have the opportunity to get a real job. We will continue the roll-out of youth guarantee initiatives to support young jobseekers as well. We acknowledge that we still have major challenges ahead and our plan for 2015 specifically addresses long-term and youth unemployment. We have set aside more than 60,000 places in the education and training system especially for the long-term unemployed on the live register.

To reduce unemployment further we must create more jobs. As a result of the success of previous policies, like the reduction of VAT for tourism services, we have seen the creation of 70,000 additional jobs since early 2012. Building on this progress, budget 2015 has introduced a number of new measures to accelerate job creation. The Strategic Banking Corporation of Ireland, which is expected to be launched formally by Minister for Finance, Deputy Noonan, shortly, will increase the availability of loans of longer duration coupled with more flexible conditions and potentially at a lower cost. Changes to be introduced will also see the amount of finance that can be raised by a company under the employment and investment incentive to €5 million annually subject to a lifetime maximum of €15 million. Jobs are being created in most sectors of our economy not only the so-called high-tech sectors. Exports are continuing to perform strongly for indigenous and multinational companies. Through Enterprise Ireland we have a range of supports to help our indigenous businesses target export growth. Next year, the Government will roll out an integrated export finance strategy. To help Irish businesses win more business abroad the foreign earnings scheme will also be improved. Furthermore, we have allowed for an extension of three year corporation tax relief for new start-ups in line with our recently launched national entrepreneurship policy. In addition, given the importance of the agrifood industry to the rural economy the Government has decided to introduce a range of measures to incentivise the transfer of additional land available to young and active farmers in advance of the abolition of milk quotas. This will bring considerable further potential for the agri-sector.

The contribution of foreign direct investment has been essential to our efforts for job creation. Since entering office we have defended strongly our transparent 12.5% corporation tax rate, which will continue to remain a cornerstone of industrial policy. The Government believes international reform in this area offers more opportunities to Ireland than it does risks. At 12.5%, Ireland has the lowest general corporate tax rate in the OECD and this Government, and I, as Taoiseach, are committed to maintaining that. As international tax loopholes progressively get closed down our low general corporation tax rate will become even more attractive to business. Ireland's package of tax, skills and the reputation of our business-friendly location is a major advantage that other countries will struggle to match.

Yesterday, we outlined a roadmap to secure Ireland's place as the destination for the best and most successful companies in the world. The roadmap responds to changing international environments and ensures that we continue to attract and retain companies of real substance offering real jobs. The Minister for Finance, Deputy Noonan, has outlined how we intend to improve the research and development regime to enhance Ireland's existing intangible asset tax provisions to develop more intellectual property, as well as changes to the special assignee relief programme to attract more senior talent. Given these positive changes coupled with the phased ending of the double Irish regime I note the welcome of the Government's announcement by American Chamber of Commerce Ireland, the Irish Tax Institute, IBEC and companies such as Google and others.

I note that Fianna Fáil, the party which dreamt up the disastrous decentralisation programme, the promissory notes and the bail-out for Anglo Irish Bank that led our economy off a cliff, questions the prudence of our plans to secure the recovery. There seems to be an innate fear for the future. There will be no repetition of the mistakes of that Administration. This Government will not let our country slip back.

While conscious of the challenges ahead, I am optimistic about our country's future and am confident that the policies announced in this budget will serve to reinforce and secure the recovery that we are now witnessing.

Exchequer borrowing will fall by €1.45 billion in 2015 compared with 2014, reflecting tight control of spending and economic growth. There is almost no spending growth projected next year as compared with the likely outturn this year. The Government is targeting a deficit of 2.7% of GDP in 2015 - below the 2.9% ceiling under the EU Stability and Growth Pact - to act as a buffer to allow for any unexpected developments. One never knows what might happen internationally. The Government is also forecasting that our gross debt ratio will drop below 100% of GDP in 2018, which is also ahead of the reduction required by the EU Stability and Growth Pact.

This country is now emerging from a torrid seven years. While we have made much progress, too many people do not have jobs and too many men and women are struggling to make ends meet. In framing this budget our goal is to copperfasten the recovery and to ensure that people see the recovery, not in the headlines but in their daily lives. Our goal is to fix the economy, help to create more jobs, make work pay and to let it be seen to pay.

We are not blind to the serious risks we face as a country. Progress is hard won and can be easily lost. However, just as we mind our progress, we must also mind our people and our society. The economic recovery, no matter how essential it was, can never be an end in itself. There are times when many of our people, particularly those who are fragile and who live on the edge, must wonder if recovery will ever come to their personal lives. I assure them that the recovery we and they have worked so hard to achieve is about giving them the type of life they deserve as citizens of a still young republic. Recovery from the economic crisis means we can look further than the existential and start to examine the type of Ireland we want to build and be part of in our recovery. Today, as part of our national journey, I commend this budget to the House.

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