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

It is much easier to throw stones from the sidelines rather than to go into the battle and fight one's corner.

Our party welcomes the fact that the economy is doing very well in overall terms. GDP growth was 5.2% last year, will ease to around 4.3% this year and is forecast to soften further to a still healthy 3.5% next year. It must be noted, however, that the Department of Finance forecasts that growth will slow every year between 2016 and 2021, all this against the great unknown which Brexit remains. Growth of 3% to 4% per annum is what we need to maintain. It is a sustainable level which avoids huge pressures and overheating in the economy. While Ireland is not obliged to reach its medium-term fiscal objective in 2018, Fianna Fáil believes the Government is right to seek to do so. Achieving a balanced budget in structural terms next year is a significant milestone which will have been achieved as a result, primarily, of the sacrifices of the Irish people. Beyond 2018, establishing a rainy day fund is the right thing to do. It is a fund on which we can draw when economic conditions are less favourable. Such a fund is a sensible part of budgetary policy and will be a sure sign that we have matured and learned the lessons of the past.

The principal revenue-raising measure in the budget is the increase in commercial stamp duty to 6%. In view of where the economy is at and the use to which the proceeds are being put, we support this increase. We hope the measure will redirect some of the construction capacity being absorbed by the commercial sector into building the homes we need as a country. It is important that where land zoned for residential development is sold and actually built on, this increase in stamp duty will not apply. I welcome the Minister's comments in that regard.

However, there are a number of cautionary notes to be struck as there is a potential fault line in the budget numbers on this issue. Commercial stamp duty is, ultimately, a tax on property transactions. The yield will depend on the number and value of such transactions in 2018. However, the proceeds are being used to fund recurring changes on the expenditure and taxation sides of the budget. The impact of the change in stamp duty will have to be carefully monitored. The Minister has based his budget on the assumption that a 4% increase in the duty will yield an additional €376 million next year, which is an almost 150% increase on the yield of €256 million in 2016. One big assumption is underpinning the budget numbers and I would like to know the basis on which the Department has estimated the yield from the increase. Is it, for example, based on an assumption that there will be no change in the volume of such transactions in 2018? If a problem emerges, there will be a hole in the budgetary arithmetic and that is a risk about which we need to be aware.

Servicing the mortgage on their home is the largest outgoing in the monthly budget of many individuals and families. There are more than 732,000 principal dwelling house mortgages in Ireland today. This year, some 40% of them, or more than 292,000 mortgage accounts involving in excess of 420,000 mortgage holders, will benefit from mortgage interest relief. The average benefit is more than €600 per qualifying account, although it is much higher in some cases, especially for those who bought between 2004 and 2008. Many of them have the largest mortgages in the State. Mortgage interest relief is currently paid to those who bought their home between 2004 and 2012. Under existing law, the relief is due to end completely for all mortgage holders at the end of December this year. If this were allowed to happen - it is the existing legal position - mortgage bills would increase by €160 million combined per year with many individuals and families facing a sizeable increase in their mortgage repayments. Thousands of mortgage holders not aware of this would receive an unwelcome shock in January and I have no doubt it would push some of them into arrears. During the last election campaign, we were the only party that campaigned to retain mortgage interest relief until 2020. We secured agreement last year that it would be retained to 2020 and phased out over the next three years as opposed to ending it overnight, which is the current position. The details of the phasing out have been confirmed in the budget with the tapering off the relief to 75%, 50% and 25% over three years. I welcome that confirmation for the almost 74,000 family home mortgages in arrears.

The Government's mortgage-to-rent scheme has been an absolute failure up until to now with fewer than 300 cases successfully completed. When this is contrasted with the fact that more than 32,000 family home mortgages are deep in arrears of two years or more, we can get a sense of just how much of a failure that scheme has been. There has been a great deal of talk from Government not just over months but, indeed, over years about revamping the scheme and it was well past time there was action on this issue as the banks and vulture funds foreclose on people who face the real prospect of losing their home. We have brought forward our own legislation that would empower an independent office to impose a solution to restructure a mortgage in arrears and I look forward to presenting this Bill to the Oireachtas Joint Committee on Justice and Equality in two weeks for detailed scrutiny.

Our party stands on the side of thousands of mortgage holders who were denied their contractual right to a tracker mortgage rate. Many of them have been treated disgracefully by their lender. They deserve their money back plus interest and they should be compensated. Fundamentally, we need to know how all the main banks happened to make the same mistake which was contrary to the interests of mortgage holders. The lack of answers so far is just not good enough and the entire House should combine and unite on that issue.

With such a tight fiscal space for 2018, income tax measures were always going to be relatively modest in this budget. While others believe that income taxes should remain untouched, Fianna Fáil believes the burden should be reduced in a prudent and sustainable way for hard working individuals and families. It should not be forgotten that pensioners also pay tax on income in excess of the exemption threshold of €18,000 for an individual and €36,000 for a couple, thresholds that have remained unchanged for a number of years. On income tax, our focus was on the USC. This is based on the democratic mandate we received in the general election last year and the fact that reducing the USC is a condition of the confidence and supply agreement. The USC measures announced by the Minister will impact more than 1.8 million people earning more than €13,000. The gains are modest but combined with the entry point to the higher rate of tax, someone earning the average industrial wage, which is currently €36,919, will gain approximately €246 in the budget. When the changes in last year's budget are added, their gain is well in excess of €400 per annum. This might not be much for some people but it certainly is for many of those we represent and the value of its benefit should not be so easily discounted.

Looking at the bigger picture, workers and pensioners are paying much more income tax than they were previously. For example, in 2007, a total of 2.156 million workers paid €13.6 billion in income tax whereas, in 2017, a total of 2.063 million workers, approximately 100,000 fewer, are expected to pay a total of €20.2 billion. The modest reductions announced earlier should be seen in that context. In 2007, income tax represented just under 29% of the total tax take or €6,300 per worker. Almost ten years later, income tax represents almost 40% of the total tax equating to €9,800 for every worker. This clearly demonstrates how workers and pensioners are shouldering a substantial burden in the economy and that should be recognised by the House. While the income tax base has broadened, it is among the most progressive tax systems in the EU and the OECD. This is as it should be and Fianna Fáil defends the progressive nature of our income tax system. Those who earn more should, and do, pay more but increasing the tax burden on higher earners further will not be without consequence. The suggestion that increasing the tax burden on those who earn more than €100,000 will not in any way damage our economy is ill-founded and those who propose this also advocate increasing PRSI for employers of these higher earners. They consistently ignore the advice that we receive from IDA Ireland and other agencies that seek to market Ireland as a place for inward investment in a competitive global environment.

Fianna Fáil welcomes the increase in the earned income tax credit, which will impact close to 150,000 self-employed workers. It still does not equal that of a PAYE worker but it is a move in the right direction and, as a party, we are committed to ultimately ensuring the self-employed and PAYE workers are treated equally in our tax system. I welcome the progress that has been made regarding the share based remuneration scheme. For most SMEs, this is a particularly important issue in attracting talent and investment to their businesses. I look forward to that being rolled out.

We must recognise the tireless work carers provide for their loved ones and I welcome the increase in the home carer tax credit, which will benefit approximately 81,000 households. Many home carers, including stay-at-home parents caring for children, are not claiming and benefiting from the credit and there is work to be done to be build awareness of it.

As a country, according to the White Paper published last Friday night, the Exchequer expects to collect just under €8 billion in corporation tax receipts this year, representing approximately 15% of our total tax take. Indeed, the White Paper projected an increase of €250 million more in corporation tax receipts this year than was expected when the summer economic statement was published. It is worth bearing in mind that in 2012 the Exchequer collected less than €4 billion in corporation tax and, even in 2014, the figure stood at €4.6 billion. Notwithstanding what Mr. Seamus Coffey said in his report, there is a question about the sustainability of growth in receipts of that order. Some 80% of all corporation tax is paid by multinationals and the top ten multinational groups pay more than 40% of all corporation tax.

This is apart altogether from the employment taxes paid by, and on behalf of, the 200,000 people employed by foreign owned companies in Ireland, not to mention the indirect taxes and indirect jobs they provide. The increased scrutiny of our corporate tax system in recent times must be considered alongside those facts. Fianna Fáil welcomes the publication of Seamus Coffey's report and supports the implementation of its recommendations.

Last week's announcement by the European Commission that it has referred Ireland to the European Court of Justice for failing to collect between €13 billion and €15 billion from Apple could not have come at a worse time. We disagreed with the European Commission's original ruling last year but that ruling must be respected pending the outcome of the appeals process, which could take a number of years. The simple fact is that it is now more than 13 months since the announcement of the Commission's decision and none of the money has been collected. This has drawn very unwelcome attention to Ireland from the Commission at a time when we really do not need it on the issue of corporation tax. I accept that collecting the money may well be a complex task but one is left wondering how it was allowed to get this point. The deadline for collecting the money was January 2017. In May, the Commission issued a warning to the Irish Government but it was not until July last that the Government even initiated the tendering procedure to bring in external expertise in respect of managing the escrow account.

There is now a concerted effort in Europe to overhaul corporation tax and Ireland must stand resolute in defence of its regime, including the 12.5% rate. There has been a revival of the common consolidated corporate tax base proposals. President Juncker has spoken about removing the veto on corporation tax and there is a French proposal, which is gaining some support, on introducing a new way of taxing high technology or digital companies. We believe these policies are wrong for Ireland and for Europe. Fianna Fáil does not favour tax harmonisation across the European Union. It would only serve to reward the larger countries and to narrow our tax base further. We should remind our counterparts in Europe that the Lisbon treaty made it clear that unanimity is required on corporation tax matters. It was on this understanding and unequivocal commitment that the Irish people ratified the treaty in 2009. Our corporation tax regime is a key pillar of our industrial policy. With the UK reducing its rate and the US planning to do so, we must be prepared to defend it while, of course, continuing to engage fully with the OECD base erosion and profit shifting, BEPS, project and our European partners. We must have a firm and clear bottom line on our position.

There can be no doubt that Brexit represents a major challenge to Ireland and its economy. The euro-sterling exchange rate is volatile. Today, the euro is trading at approximately 89p sterling, but the overall fall in the value of sterling since the Brexit vote in June 2016 is hurting many Irish exporters already. Some economists and analysts are even predicting parity between the two currencies in the not-too-distant future. This increases the price of our exports to the UK and decreases the price of imports from that country. We are already seeing the effects of this. Cross-Border shopping has increased and many traders in the Border region are under serious pressure. The number of tourists from the UK is falling and those who are coming here are cutting their stay time and are spending less. Online shopping is exploding. According to Retail Excellence Ireland, €850,000 is spent by Irish consumers online every hour and €600,000 of this is lost to businesses operating outside Ireland. With over 280,000 people working in the retail sector, this deserves and needs attention particularly in the context of Brexit.

The risk of a hard Brexit should not be underestimated. If the trading relationship between the EU and the UK resorts to World Trade Organization terms of trade it will be nothing short of a disaster for the Irish economy. We believe there should be detailed, sector-by-sector planning. Crucially, this must be done in a transparent way. The report of the Revenue Commissioners which was leaked over the weekend and which was acquired by Tony Connelly of RTE is striking. It sets out in simple terms an overriding finding, that the seamless and frictionless border we have been hearing about from the Government since the vote in June 2016 is not possible in the event that the UK leaves the EU customs union. According to the Revenue Commissioners in the report, there will be no open border in this scenario. We are led to believe that the Revenue Commissioners have been effectively stood down by the Government from continuing their preparatory work on Brexit in terms of detailed planning. This is the wrong decision. However unpalatable it may be, Ireland must be prepared for all possible eventualities because we simply do not know what the outcome of Brexit will be for our country. Fianna Fáil resolutely opposes a return to a hard border between the Six Counties and the Republic and the common travel area must be maintained. Northern Ireland should be designated a special economic zone, similar to other jurisdictions. The Northern Ireland Executive must be re-established. European state aid rules must be relaxed in order that the State can better assist the agrifood industry in particular, as well as affected Irish SMEs. We welcome the announcement today of the low-cost loan scheme and look forward to receiving more details on it. The low-cost loan scheme for the agrifood sector was very successful and it is needed in that sector again, as well as across a number of other sectors.

Last year, during the passage of the Finance Bill, Fianna Fáil secured a commitment from the Minister's predecessor that an independent impact assessment of the help-to-buy scheme would be carried out. It remains our view that such an assessment should have been carried out before the scheme was introduced. The Minister confirmed that he is publishing the report today. I have seen the report because the Minister provided me with a copy of it in recent days. The report has concluded that abolition of the scheme at this time would create uncertainty, damage confidence and would likely impact on new build levels. The report by Indecon finds that, to date, there is no evidence that the scheme has impacted on the overall prices of new homes for first-time buyers but goes on to state that it is vital to monitor the price of help-to-buy new builds over the coming months. The authors also find that the measure does not appear to have had any significant overall impact to date on the level of supply, the main purpose of its introduction. The report rightly identifies that the key challenge for the housing market is to reduce the cost of housing, including both house prices and the cost of construction. Indecon expressed concern in the report's conclusions that the failure to carry out a cost-benefit analysis before the scheme was introduced should not be seen as a precedent for other measures. We hope this warning will be heeded by the Government.

The housing crisis is first and foremost a human tragedy but it is also a major problem for our economy. We are all aware of the rate of increase in house prices and, indeed, the rate of increase in rental payments. Many in this country have lost hope of ever owning their own home. The increased cost of housing is leading to increased wage pressures and increased costs for businesses. Companies thinking of relocating operations to Ireland are asking the basic question as to where their employees will live if they make that decision. Ireland has fallen to 24th in the World Economic Forum global competitiveness rankings and 18th in the World Bank's ease of doing business index. This is now a key issue. My colleague, Deputy Calleary, will deal with the housing area in more detail but I welcome the announcement today of a new initiative to provide funding for the construction of homes by the private sector. We have argued for this for many months. It makes no sense that some builders and developers are obliged to pay up to 15% and 16% for money from international funds while the State has more than €6 billion invested abroad in a global portfolio held by ISIF. We look forward to seeing the details of this initiative but we support it in principle. It must be far more ambitious and far-reaching than the ISIF Activate Capital fund already in place. The lending by this new fund should be conducted on commercial terms and, of course, only to viable projects. There must be proper underwriting relating to decisions to be made in that respect.

A noteworthy gap and deficit with regard to housing is the lack of any move on a national affordable housing scheme. A growing number of people are not eligible to get any support for rent as they are above the HAP thresholds but they have a level of income that is well below what would be necessary to get or service a mortgage. It is a growing cohort and now, more than ever, we need a national affordable housing scheme. We expect the Minister, Deputy Eoghan Murphy, to move on that as quickly as possible. We have not seen the legal advice against bringing forward a vacant sites levy to 2018. We welcome the Minister's intention to increase the rate and note his changing the current seven-year provision in respect of a capital gains tax exemption. Fianna Fáil welcomes this change, as it offers the potential to open up more opportunities for building the new homes we need across the country.

My party has consistently been raising cost of living issues and the costs faced by families. We welcome some of the progress on the drugs payment scheme, the prescription costs and so forth. We have consistently highlighted the problem of high mortgage interest rates. While they are reducing, more progress is required. We will bring a Bill to Committee Stage at the finance committee in the coming weeks, which we believe will help to make more progress on that front.

Motor insurance premiums continue to be a significant issue in the context of household budgets. The Fianna Fáil Party will hold the Government to account for the implementation of the recommendations of the cost of insurance working group.

In welcoming the reduction in deposit interest retention tax, DIRT, we express disappointment that the link with the exit tax rate on other comparable savings and investment products, particularly life assurance investment products, has not been reinstated. This disadvantages and discriminates against between 500,000 and 600,000 savers who choose these products.

The Fianna Fáil Party welcomes the sugar tax. If successful, the tax will not bring in a large amount of money because companies will change the types of products they are introducing and consumers will change their behaviour.

I very much welcome that the Government will make a start on a VAT compensation scheme for charities. My party has consistently raised this issue and I have raised it with the Minister in discussions. I am glad, therefore, that he is making a move on this matter.

On farming, Fianna Fáil is disappointed that there are no measures in the budget to deal with income volatility in respect of income averaging. A number of proposals were made to the Minister on income volatility, for example, on the introduction of a step-out year. I ask the Minister to engage with the sector in the lead-up to the finance Bill to ascertain whether measures can be brought forward in this regard.

While I welcome the measures relating to electric vehicles, our overall performance in this area is simply not good enough. Much greater ambition is needed from the Government on the climate change agenda and meeting our commitments. This is important not only because of the need to avoid fines from the European Commission but also because it is the right thing to do. We owe it to future generations to redouble our efforts to reduce carbon emissions.

Fianna Fáil supports the increase in the minimum wage, as recommended by the Low Pay Commission. For those earning the minimum wage, it is particularly important that cost-of-living issues are to be addressed.

There has been one important reform of the budgetary process since last year's budget. The Oireachtas now has an independent parliamentary budget office. While the office had only a limited role in budget 2018, it has real potential to help reform the budgetary process and give Oireachtas Members a greater role in future budgets.

As a party, Fianna Fáil has conducted its negotiations on the budget in a professional and businesslike manner, without drama or histrionics. Our sole focus at all times has been to secure progress on measures contained in the agreement reached last year, not for our benefit or for the sake of it but in the interests of the people we represent. We have prioritised public services, especially for the most vulnerable and the tax changes we secured will be of benefit to thousands of individuals and families. I look forward to working with the Minister and other Opposition spokespersons on the detailed scrutiny of the finance Bill in the weeks ahead.

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