Michael McGrath (Cork South Central, Fianna Fail) | Oireachtas source

I will not even go into it. That is the alternative to the centre ground. Fianna Fáil's central point is that the annual national budget has to be more than the total of the sums contained within it. It is an opportunity to at least leave a fingerprint of a vision for the country. I will speak in a while about some of the long-term challenges our country faces. In the here and now, our absolute priority has to be to help people who are in a desperate way because of a terrible housing crisis, those who are stuck on endless hospital waiting lists, the elderly, people with disabilities and those who care for them, families of children with special needs and older people at home without adequate supports. That is what reshaping budgetary policy on a 3:1 basis actually means. It means we can do something tangible about all of those issues. That has been our objective in the course of this budgetary process. It is not ideological and is not about getting 2:1 or 3:1 for the sake of it but it is about doing something practical for the people we represent. As a party, we put in the hard yards. We negotiated after the election to ensure a Government was formed and we negotiated in recent weeks to get as many measures as possible into the budget. We did not get everything we wanted but we have definitely had an impact, which will be clear for all to see.

The budgetary process in Ireland is undoubtedly a relic of the past and we welcome the reforms which have started but much more needs to be done. The Committee on Budgetary Oversight has done a good job in a short space of time. We now need the independent budget office to be established without delay. Budgeting has to become a whole-of-year exercise and there should be no late surprises.  Take budget 2017, for example. Every Oireachtas Member and the public were repeatedly told there would be just less then €1 billion available in this budget for new measures. In the past week, this changed by 20% and now it is €1.2 billion. This makes a mockery of the budgetary reform process and places the Opposition at a distinct disadvantage to Government in the lead-up to the budget. This must change into the future.

This budget has been cast very much in the shadow of Brexit. The truth is that we do not yet know what it means for Ireland. Brexit is a leap into the unknown for Ireland and is set to become the dominant political and economic issue facing the island of Ireland, at least for the next few years. We have to accept a number of fundamental truths. Brexit is going to happen, perhaps as soon as in two or two and a half years' time. It may be a manageable, negotiated process or it may not. Competing interests in Europe will want to pull the process in different directions. We will be one of 27 countries on the EU side of the negotiating table, albeit the one with the most at stake. The fact that nobody wants a hard Border with the Six Counties does not mean it is not going to happen. The fact that the imposition of customs and tariffs would damage both the economies of the EU and the UK does not mean it could not happen, by accident or design. The fact that the common travel area we have with the UK pre-dates our membership of the EU does not guarantee it will survive post Brexit. We have to accept these realities and plan accordingly. The negotiations that will formally commence when British Prime Minister, Theresa May, triggers Article 50 by next March will be among the most important this country has participated in and we need to be fully prepared.

Much like in the case of the European Commission's Apple tax ruling, the Government here seemed ill-prepared for the Brexit vote. It is an open question as to whether this Government has the strength and capacity to meet the challenge of Brexit. Only time will tell but, on the evidence of today, it is not looking good. There are a few bits and bobs in the form of practical measures, in particular on the tax side, but the Minister has provided just €3 million extra for the Department of Jobs, Enterprise and Innovation to address the major challenges facing our enterprise agencies, such as Enterprise Ireland in its efforts to help Irish SMEs to develop new export markets and the IDA in its efforts to attract inward investment from the UK. It is absolutely pathetic. There is €1 million in the Department of the Taoiseach for new units to deal with Brexit, parliamentary liaison and programme for Government commitments. The lead Department, the Department of Foreign Affairs and Trade, will establish a Brexit team within existing budget and staffing envelopes. Throughout Europe all the main countries, which have a lot less at stake than we have in the Brexit process, are investing a lot more and are much better prepared for what is coming down the track. The package for this purpose is pathetic and will have to be addressed and changed very quickly.

For the past number of decades, we have been in the enviable position of benefitting from US foreign direct investment while enjoying a strong trading relationship with the UK and gaining all the benefits of European Union membership and access to the Single Market. We now need clear leadership to navigate the enormous challenges posed by Brexit, both the knowns and the unknowns. This means defining exactly what we want from the negotiations between the EU and the UK. It means having a plan in the first instance but, critically, a plan that is credible and deliverable. There are very current and practical initiatives we can undertake now in order to prepare ourselves for the fallout of Brexit. Prior to the referendum in June, sterling was trading at 77p to the euro. Simon McKeever of the Irish Exporters Association has said its research points to 85p as the pain point for a lot of exporting Irish companies. With sterling now trading at 90p to the euro, that means a lot of pain for Irish firms and jobs have already been lost. This is making Irish goods and services sold in the UK more expensive and us less competitive. Many SMEs operating to tight margins are unable to pass this cost onto their customers and must instead try to absorb it for as long as they possibly can.

Some of the statistics around our dependence on trade with the UK are startling. We import 85% of our energy from the UK. Ireland and the UK exchange €1.2 billion worth of goods and services weekly. Some 14% of Irish goods and services are exported to the UK but Irish-owned companies export 44% to the UK and 30% of all employment is in sectors which are heavily related to UK exports. The fall in sterling is only one example of the immediate pain small businesses are facing in a post-Brexit vote environment. Many commentators forecast a further depreciation of sterling which will pile yet more pressure on SMEs and other exporting companies.

We have to have a national hedging strategy and draw in the support and expertise of the NTMA to assist SMEs struggling to come to terms with the depreciation of the pound in the short term. We welcome the plans to reduce the capital gains tax regime for entrepreneurs.  The SME sector is one of the principal backbones of our economy and measures like these will be of some modest help to start-ups and will help to sustain and create jobs. We encourage the Government to provide more funding to Enterprise Ireland, the IDA and the LEOs on the ground assisting SMEs which export to the UK on a day-to-day basis.

The agrifood industry is particularly vulnerable to Brexit, with over 27% of exports to the UK being in food and live animals.

We encourage the Government to provide more funding for Enterprise Ireland, IDA Ireland and the local enterprise offices to assist small and medium enterprises which are exporting to the United Kingdom on a day-to-day basis. We all know that the agrifood sector, in particular, is extremely vulnerable to Brexit, with over 27% of exports to the United Kingdom being food products and live animals.  My colleague, Deputy Dara Calleary, will address this and other issues facing the farming community in the context of Brexit and commodity prices.

Tourism Ireland informs us that the United Kingdom is one of our top four markets, delivering some 4.5 million visitors in 2015. Not only do we face being less competitive in terms of prices but we also face a return to restricted travel and passport controls between Ireland and the United Kingdom. This will place even more pressure on the tourist industry and is likely to significantly hurt smaller providers. We welcome the retention of the 9% VAT rate for the tourism and hospitality sector. This is vital against the backdrop of Brexit.

Brexit has serious implications for the Border region and our general relations with Northern Ireland. Having hard border between the Republic and Northern Ireland would be a deeply regressive step, politically, economically and socially. Many businesses in the Border area rely on the free movement of goods and services and customers across the border in order to succeed. A hard border could potentially sound the death knell for many businesses, North and South. We have a unique perspective, this being the only country with a land border with the United Kingdom. We need to emphasise this at European level at every opportunity. We welcome some of the measures announced by the Minister, but he will have to be prepared to do more, including providing for the introduction of targeted measures to deal with the issue of employers' PRSI for SMEs which are particularly dependent on export markets because they simply will not survive if the current trend continues.

There are, undoubtedly, opportunities arising from Brexit, too, which need to be highlighted, particularly in the context of inward investment by multinationals that wish to retain a foothold in the European Union, as well as by financial services firms currently operating in the City of London. IDA Ireland is going about its work quietly but with purpose and we fully support its efforts to attract more investment to Ireland in the context of Brexit. There are, therefore, particular opportunities in the financial services sector. We need to ensure the regulatory system has the capacity to accommodate and respond to more international financial service providers in Ireland. We do not want brass plate operations; we want real operations with real jobs located in Ireland. For all of these reasons and more, we have called for - we reiterate that call today - the appointment as quickly as possible of a Minister with overall responsibility for Brexit.

The budget provides for modest reductions in the universal social charge. Fianna Fáil supports these measures. There are those who say there should be no tax cuts whatsoever provided for in the budget. We believe working people all over the country deserve to benefit from the economic recovery. After all, they are paying the taxes which make it possible to provide the public services we all want to see provided in society. We should also bear one key statistic in mind. Prior to Ireland’s economic crisis in 2008, less than 30% of all tax collected came from income tax. Last year workers paid over 40% of all tax collected by way of income tax. The reductions announced today will not make an enormous difference to anyone, but people will take some comfort from seeing the USC moving in the right direction. Equally, it is important to be straight with people. Fianna Fáil does not believe it is either possible or desirable to abolish the USC during this Dáil term. It will not happen. To do so would be to put vital public services at risk. However, should the economy continue to recover, there will be scope in the years ahead to continue to ease the burden imposed by the USC. We also repeat our view that there is a need for a plan to reform and simplify the income tax system. Over time, we will have to deal with the issue of the entry point to the higher rate of tax - currently €33,800.

In Ireland we effectively have three tax charges on income, each with a different entry point and a total of ten rates, 15 bands and 22 personal tax credits. Fianna Fáil pressed for a reduction in DIRT in this budget. Savers have been hit incredibly hard in recent times. The Minister has announced a 2% cut for 2017 and further cuts in future years. I would like to have seen a greater cut, but the cut announced today is at least a start. Since 2008 the rate of DIRT has increased from 20% to 41%, with an additional 4% in PRSI for those with a certain level of unearned income. This has come at a time when interest rates and returns generally are at rock bottom. There are people who depend on interest income and they have suffered a double whammy in recent times in the hikes in DIRT and the collapse in returns. Today's announcement on DIRT is a modest step in the right direction.

It is every person’s wish to provide financial security for family members and people close to them. People will naturally want to be able to pass on the benefits of their lifetime’s work to their children, grandchildren and other family members, depending on their particular circumstances. Many will argue that this is not a priority issue at this time. On inheritance tax, we strongly felt the programme for Government commitment to only increase the group A threshold was very unfair and I made this point to the Minister in recent weeks. The yield from capital acquisitions tax has increased by over 65% since 2011. In 2015, the largest category of inheritance tax cases, at 33%, was nieces and nephews, followed by gifts-inheritances involving what is known as "strangers in blood", at 23%. A total of 21% of cases in which a liability arose concerned a sibling, with only 18% of cases involving group A recipients. The programme for Government commitment to reduce the group A threshold to €500,000 but to leave the group B threshold unchanged has been departed from. It is welcome that there is an increase, albeit a modest one of 8%, for groups B and C.

It is also welcome that the home carer tax credit is being increased again in the budget. Many families are dependent on a single income and this will be a small help to them. However, in the context of the child care initiative announced today which is welcome, single income families, in respect of which one spouse or partner makes the decision to remain at home to care for their children, will feel very put out that child care support is to be paid to those who have to or choose to go out to work. This is an issue which will have to be taken into account. The increase in the home care tax credit, although modest, is welcome, but we would like to have seen more in this regard.

I welcome the Minister’s comments on Ireland’s 12.5% corporation tax rate, to which Fianna Fáil is unequivocally committed to defending. We are very sceptical of the European Commission’s plans for a common consolidated corporate tax base, CCCTB. On corporation tax receipts, we are undoubtedly building dependence on a small number of companies and this issue will need to be carefully monitored. We need to continue to play our part in the international efforts to tackle the way in which multinational profits can be shifted from one jurisdiction to another, while at the same time defending our vital national interest.

Fianna Fáil firmly believes home ownership is good for families and communities. Having a place to call one's own, build a vibrant family life and pass on to future generations is a pillar of a normal, civilised and prosperous society, yet this basic dream is slipping away from an entire generation, for whom the tax reductions announced today will simply disappear into the widening chasm of rent that is swallowing up more of their income. The question is whether the Government has got it right in the intervention it is making by way of the first-time buyer's tax rebate. We do not believe it has got it right. We believe this initiative-intervention risks making the position worse. We should learn from the lessons of the past. We want to know, for example, whether there has been a full impact assessment of this proposal. We also want to know what expert advice is available to the Government in support of this measure and what independent assessment of the likely impact on the market has been made. Our overriding concern is that this intervention will push up the price of new homes. We have been repeatedly told that the problem is on the supply side. The Minister has made the point that this initiative is effectively to stimulate supply, but it raises a number of issues of fundamental fairness. For example, a returning emigrant who has not paid taxes in Ireland in recent years will not be entitled to benefit from the scheme. A person who wants to remain in his or her local community but is forced to buy a second-hand home in another area because there happens to be no new housing in his or her area will also be denied the right to benefit from the scheme. A person on a modest income who has not paid that much income tax in the past few years and a person who owned a property in the past will also be denied the right to benefit fully from the scheme. Also, a person whose marriage has broken down is no longer to be considered a first-time buyer. If this is about stimulating new supply, why is this cohort being excluded from the scheme? Fianna Fáil, in its manifesto, proposed a help-to-buy scheme which would have been a much more gradual, moderate response which would have taken time to build. Deputy Barry Cowen is working on supply side initiatives which he will unveil in the coming weeks. We have been repeatedly told that the immediate problem is on the supply side.

We do not see how this will provide the boost to supply that is promised. The key issue seems to be that it is not viable to build in many parts of the country. An initiative based around a more aggressive plan to reduce development charges nationally could have made construction and new-home building more viable. The Central Bank submission on the review of the mortgage rules highlighted the need for tenants to be given some credit in the deposit calculation for the rent they paid. We have also argued that the deposit requirement for non-first-time buyers should be the same as that for first-time buyers.

We welcome the modest roll-out of further social protection benefits to the self-employed by way of dental, optical and invalidity pension payments and hope the process can be continued in the period ahead. We also welcome the further step made towards providing for equality of treatment in income tax and the equivalent of a PAYE tax credit for the self-employed. I hope it can be completed in the next year or so. When the dust settles on the budget, other issues which are key to household budgets will have to be dealt with. In the coming weeks at the Oireachtas finance committee we will push a Fianna Fáil Bill to tackle excessive standard variable interest rates. That issue has not gone away and not been properly tackled. The Minister told me that he intended to meet the banks again shortly. I hope he will press them forcefully on the issue. It has gone to the ECB for consultation and the Oireachtas finance committee will in the next week or two start to deliberate on the Bill. We look forward to this very much because it is not just an issue for mortgage holders but also for small businesses, farmers and community and sports groups all over the country which are paying way over the odds in the terms of the rates paid elsewhere in Europe. It is also welcome that the Minister has committed to providing that, at the end of next year, mortgage interest relief will be renewed for those currently receiving it. That will be of significant benefit to them.

Motor insurance costs are eating into household budgets. The entire gain from the USC reduction in the budget could be wiped out overnight by the policy premium renewals people are getting in the post. That issue is going to have to be dealt with. We are glad that the Government has established a task force. It must report as a matter of urgency and set out effective measures for implementation this side of Christmas to deal with the issue of unsustainable and spiralling spikes in insurance premiums. We look forward to that issue being tackled.

Deputy Dara Calleary will speak about the issue of flooding and our lack of preparedness and investment in flood defences. There is great concern in the areas which were affected by flooding last winter that the underlying causes have not been dealt with. People are very fearful of what is coming in the next couple of months.

Across a range of issues crying out for long-term action the Government has shown itself to be bereft of ideas. From pensions to infrastructure, energy security to research and development, the Government has foundered from the word go. Nearly 60% of private sector workers are not members of an occupational pension scheme. That is almost 1 million workers who will have to rely on the old-age pension. This is a particular problem as it will become increasingly common for people to pay rent in their older years rather than own a home outright, as was the norm. Among OECD countries, only Ireland and New Zealand do not provide for compulsory pension savings. This is one of the long-term strategic challenges facing the country which simply must be tackled. Another such issue is the State pension. We were pleased to fight hard and secure a €5 increase in that payment, but if further increases are to be guaranteed in the long term, we need a clear approach to planning for State pension payments, including public sector employee pensions. There are approximately 360,000 recipients of the contributory State pension and the number is increasing at an average rate of 5%. If one looks at demographic trends, there will be very significant changes in the balance between the numbers of people at work and pensioners. We must plan, not just in the short term but also in the medium and long terms for the challenges this creates.

I will leave the issue of capital investment and infrastructure to my colleague, Deputy Dara Calleary, to discuss, but I note that there has been a distinct lack of direction and imagination in this area, as there has been in the area of energy security. Energy security is a particular issue in the context of Brexit in that 85% to 90% of our energy supplies are imported from the United Kingdom. A hard exit could see energy import tariffs imposed in the United Kingdom and if they were to be passed on in turn in the Irish market, it would create fundamental difficulties for us. It is similarly the case in respect of multi-annual funding for science, research and technology, areas of vital importance to our long-term economic interests.

This is not the Government we wanted following the general election last February. On three occasions, we offered our party leader, Deputy Micheál Martin, as a nominee for Taoiseach and the only candidate who could lead an alternative to the Fine Gael-led Government. We all know the outcome of that process. It behoves us all now to work as best we can in the national interest. That is what we have sought to do as a party since election day. We look forward to debating the budget measures in much greater detail in the weeks ahead in the form of the Finance Bill and the Social Welfare Bill. There is a great onus on us all to examine in detail the measures contained in these Bills and we look forward to fulfilling our parliamentary duties in that regard. All Fianna Fáil Deputies and Senators will more than play their parts to ensure budget 2017 will receive proper scrutiny in the period ahead.

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