Enda Kenny (Mayo, Fine Gael) | Oireachtas source

The main aim of the budget announced yesterday is to keep the recovery moving. It is not just a budget for 2016 but also another step in our plan to sustain the recovery in the years ahead. The past few years have been difficult for the people of Ireland, but their efforts have made it possible for the country to exit an international bailout, reduce our debts and safely progress into recovery.

There is no denying that the country still faces many challenges arising from the economic crash brought about by the previous Administration. In addressing these challenges the budget for 2016 mirrors the Government's goals for now and into the future: to make work pay and remove the barriers to work; to support more job creation and regional economic growth; and to rebuild a strong economy that can support better public services. Budget 2016 represents another affordable and sensible step in addressing many of these challenges. The Government I have the honour to lead will continue along the path laid out yesterday in order that we can keep the recovery going.

Our first priority is to continue to make work pay. While the Government has changed Fianna Fáil’s bailout agreement to avoid future increases in income tax, it was clear that the existing level of tax on work and jobs was a drag on our recovery. Since the introduction of the universal social charge - a brutal tax - by Fianna Fáil, Ireland’s taxation system has discouraged work and effort and is a barrier to economic recovery. It was wrong that the Government took more than half of every extra euro being earned by hundreds of thousands of low and middle-income families. Marginal tax rates on middle-income earners in Ireland are much higher than in the United Kingdom and other countries where many of our people have emigrated to and with which we are in competition for mobile talent and investment.

Making work pay more than welfare will also be an essential part of our plan to get Ireland working again. Today, there are too many families for wom work simply does not pay and it encourages an intergenerational cycle of joblessness and poverty.

We started the process of reducing the tax burden on work and jobs for low and middle-income earners in the last budget and have continued with that strategy. By reducing the universal social charge rates and bands we are reducing the marginal rate of tax to 49.5% for all earners earing under €70,000. This is a key milestone on the path to recovery. As the Minister for Finance indicated yesterday, it is the first time since April 2009 that the marginal rate has dropped below 50% for middle-income workers. While we continue to cap the benefit at €70,000, those workers earning more will benefit on the portion of their income below this level.

These tax changes are only a step in our plan to progressively abolish USC during the next term of office in order to secure full employment. If returned, the Government will take another step each year towards the abolition of USC by 2020.

The Government is also determined to make work pay more than welfare. We established the Low Pay Commission this year to make annual recommendations on the level of the minimum wage. It recommended to the Government that a 50 cent increase was justified and yesterday the Government approved the increase to the new level of €9.15 an hour to support workers. This will have a positive impact for the 75,000 workers earning the minimum wage. The Government will continue to listen to the annual recommendations of the Low Pay Commission to ensure low-income workers will not be left behind as the economy recovers. A single person on the minimum wage will benefit by more than €700 arising from the budget.

The Government has also long signalled its desire to end the unfair tax treatment of self-employed workers. The Government supports those who created their own jobs and have created jobs for others. They are the shopkeepers, tradesmen and farmers who, in many cases, lead our recovery efforts in the domestic economy. As a first step to end their unfair tax treatment, the Government is introducing an earned-income tax credit to the value of €550. To support and reward their work and effort, we will complete the tax equalisation for the self-employed in the coming years, with other measures to support our job creators. This approach is in stark contrast to that of other parties in this House which want to tax job creators out the country.

The Government will also prioritise more supports that will encourage and support working families. Not having a job is the biggest source of inequality in our society. Jobless households with children are at the greatest risk of experiencing child poverty and perpetuating a cycle of joblessness and welfare dependency, as often articulated by the Tánaiste. It is clear that excessive child care costs have become a barrier to work for many families. For this reason, the Government is making another first step in the budget to overhaul child care supports.

We will now offer every child from the age of three a free preschool place until he or she begins primary school. In addition, the Minister for Children and Youth Affairs, Deputy Reilly, will extend the community child care subvention programme to help low income families remain in work and will also develop new after-school services.

I am particularly pleased the Government is introducing a suite of supports which will ensure children with a disability can meaningfully participate in, and fully reap the benefits of, preschool education. That is a most important step.

We have listened carefully to the concerns of parents and in conjunction with these new services we will also introduce a range of quality assurance measures for early education. Those will include audits, inspections and training. We will also extend free GP care to all primary school children of working families, subject to negotiations with the relevant organisations. Those are steps in the right direction, and in the years ahead, we will do more to support working families and their child care needs.

All the measures to make work pay are designed to help create more jobs and ensure that everyone has the opportunity to fill those jobs. Since entering office we have prioritised measures to create new jobs so that people can get their lives back on track. Since we launched the Action Plan for Jobs in 2012 we have seen the private sector add 125,000 new jobs in the economy. The recovery in jobs has accelerated in 2015 with more than 1,300 new jobs created each week. This budget will keep the jobs recovery moving in the right direction.

As part of the budget, we have published a capital plan to ensure all regions share in its benefits. This €27 billion investment plan for Ireland is essential to restore all the jobs lost in the recession by 2018 and to get unemployment rates down to 6% by 2020. It has been welcomed as an affordable and realistic plan that is also consistent with the Government plan to eliminate Government borrowing by 2018. The new investment planned in roads, public transport, education, health care, flood risk, enterprise and policing are all designed to alleviate growing pressures in the economy which could hold back recovery. However, the recovery is not complete and we must continue to manage the national finances carefully or risk falling back. We cannot afford everything we want but this plan represents the best of what can be delivered with the available resources.

New jobs will also be created from new business ventures. As a Government, we need to support those who take the risk to start new business, create more jobs and export to more countries around the world. We are extending the three-year corporation tax relief for new startup companies. That is to be welcomed. For those who are successful in creating a new company and who wish to use their success to start another business we are reducing capital gains tax on a limited basis for those disposing of their interest in a business. The very successful home renovation scheme, which has supported thousands of construction-related jobs during very tough times, is being extended until the end of 2016. Our farming and food sector has been one of the main success stories of the recovery to date, but there are still many structural challenging facing the sector. To reflect that, we are extending the range of agri-tax reliefs until the end of 2018 and introducing a new succession partnership model to help pass knowledge and capital from one generation to another in an orderly fashion.

The tourism sector was in crisis when we entered Government in 2011. With the introduction of a number of measures to support its recovery, it has now reached new records levels. To keep the recovery going in the regions around the country, we will continue to maintain the 9% rate of VAT on tourism-related services.

In addition to supporting Irish business, we have also continued the strategy of attracting more foreign investment and jobs. In the first half of this year, IDA Ireland won 110 new investments and it expects to create 9,000 new jobs around the country by the end of this year. The continuation of our transparent and statute-based corporation tax regime remains an essential pillar of Ireland’s enterprise policy. We now compete with a low tax rate of 12.5% applied to a wide base. Our success to date has been due to offering a best-in-class corporation tax regime on which enterprise can rely. In continuing this strategy, we are halving the rate of corporation tax on qualifying innovative products and services developed in Ireland. To reflect Ireland’s positive international engagement with tax reform through the OECD, the knowledge development box will be the first OECD compliant offering in the world. It is set at 6.25%. That will offer more certainty and stability to business in the long term and make this country an even more attractive location for foreign direct investment.

The Government still needs to do far more to rebuild a sustainable economy with strong sectors that can support full employment. Our flagship in this regard has been the Action Plan for Jobs, designed to support enterprise achieve its goals in terms of jobs, exports and startups, access to finance, market penetration, innovation, access to talent and efficient public sector interaction. Its success can be seen in the jobs recovery to date which has been driven almost exclusively by increases in full-time positions. The jobs recovery is also broad based - with increases in 11 of the 14 sectors of the economy. To keep the recovery going, the Government is already drafting a new Action Plan for Jobs for 2016. We also need to take a longer term perspective to achieve our goals of replacing all the jobs lost by 2018 and to reduce unemployment to 6%. The Government has mandated the Minister for Jobs, Enterprise and Innovation, Deputy Richard Bruton, to bring forward a longer term enterprise strategy to Cabinet shortly. This new enterprise policy 2025 will set the strategic framework for a competitive, export-orientated economy that can support full employment.

The Government’s plan of tax cuts and enterprise supports will help to rebuild a strong and sustainable economy. Reducing the high tax burden on low and middle income families helps to create jobs, put Ireland back to work and generates the revenue needed to support vital public services. It is not a case of one or the other; one supports the other. In last year's budget we cut the universal social charge, USC, and income tax rates, but the yield from those taxes was still up 6% in the first eight months because those measures have helped support the recovery. As a result, we have been able to fund additional spending in health, transport and education. In that sense, our plan is to deliver a virtuous circle of tax cuts on work, more jobs, and to improve public finances and services.

As the economy recovers we are now investing more in vital public services. In our hospitals, 880,000 day cases will be carried out by the end of the year - an increase of nearly 20% in the past five years. The Government has also protected front-line staff numbers. Since the beginning of last year we have hired approximately 1,000 extra nurses and as the recovery continues, we will continue to support and expand our heath service where appropriate.

Next year we will recruit 2,260 additional teaching posts, including 600 new resource teachers. That will result in a reduction of the pupil-teacher ratio at primary level from 28:1 to 27:1, and at second level from 19:1 to 18.7:1. Next year we also plan to extend GP care without fees to all children under the age of 12, subject to negotiations.

In order to tackle crime we are continuing our recruitment strategy with 600 new gardaí next year in addition to the roll-out of vital crime fighting ICT equipment. We will continue to keep the Garda training college in Templemore open for the training of recruits.

All of those new investments are essential to keep the recovery going and to support economic growth and job creation. The budget is an affordable and sensible way to secure recovery. It signals an end to the boom and bust approach of previous Governments that put the economy at risk for electoral advantage. The Fianna Fáil Government increased gross spending by 139% between 2000 and 2008. In the run-up to the 2007 election, between 2005 and 2007, public spending was ramped up by more than 25%. By comparison, in 2016, public expenditure will be just 4% higher than in 2014. Over that time, tax revenues are forecast to increase by more than 14%, while the economy is set to grow by 18%. We are set to reduce the deficit to 2.1% in 2015, falling to 1.2% next year and to eliminate it entirely by 2018. In comparison, Opposition parties continue to make unfunded and reckless demands that would put the recovery at risk.

As we look forward and plan for 2016 and the years ahead, the opportunity now exists to secure the economic recovery and to build an enterprise economy and society that delivers secure and well-paid jobs, incomes and pensions, world class infrastructure, high quality public services and certainty and the opportunity for so many more people to move from the unemployment register into the world of work where work can be seen to pay.

As the end of this Dáil approaches, we are facing a fork in the road. One track points to continued stability and certainty about the future. The signposts along that way are now clear, namely, no booms, no busts but responsible increases in public spending within a reformed public service built on a solid platform of steady economic growth; the completion of tax equalisation for the self-employed and other measures to support job creators; more realistic and affordable increases in the minimum wage to make work pay; the progressive abolition of the universal social charge, USC, to reward work and effort and to make Ireland more attractive for mobile foreign investment and skills, including for returning emigrants; low interest rates for business and home owners, underpinned by further deficit and debt reduction and rising domestic and international confidence; and a robust defence of the 12.5% corporation tax as the linchpin of the Government's jobs policy.

As we face this division in the road, one surely can see that along the other track lies instability and chaos. The siren songs of ending austerity and fairer recovery will, in fact, mean the exact opposite. The stepping stones back towards the economic abyss are well laid out in alternative budgets published by the Opposition, namely, an Oireachtas unable to pass coherent budgets, sapping confidence and undermining economic discipline and job-killing tax increases on work and business to pay for reckless promises. In that context, I am surprised the Fianna Fáil Party has moved so far from where the late Seán Lemass had placed it as a low-tax party that was confident and competent based on competitiveness and exports. Instead, one is faced with job-killing tax increases on work and business to pay for reckless promises coming from Opposition parties, as well as the prospect of confidence-destroying confrontation with our international partners and higher interest rates. In recent months, all Members have seen how quickly fragile economic recoveries unravel in the face of political instability and reckless economic management. The Opposition wants the country to go backwards but the Government of Fine Gael and the Labour Party guarantees that stability and further progress in the interests of all the people. This budget brings the country forward and secures the economic recovery and I commend it to the House.

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