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

I welcome the opportunity to contribute to the debate. It is important to recall the backdrop to the budget. Election 2016 left Dáil Éireann in an uncertain state of affairs with no clear mandate for any party to govern but it was clear that the people resolutely rejected the right-wing policies of the previous Government. They did not want tax cuts at the expense of investment in vital public services. We recognised our responsibility as a party to ensure the country was provided with a stable government and it was in this context that we negotiated the confidence and supply agreement. The agreement ensures a stable government and a 2:1 split at least between investment in public services and tax cuts. This is the second budget in which this overarching requirement has been achieved, yet the agreement is much more than a ratio between investment in public services and tax reductions as it goes much deeper than that. It is because of the agreement that changes to the USC were directed at lower and middle income earners, that pensions and other social welfare payments have been increased for the second successive year and that there will be more investment in health care, in particular, mental health, an area deprived of much attention for many years.

Yet again, the agreement has made this budget a fairer and more progressive one. It is by no means a perfect budget and many of the changes are only incremental and certainly modest but without the influence of Fianna Fáil, it would not have been as progressive.

However, there are fundamental challenges that demand delivery and not spin. Before turning to the tax measures in the legislation, it has to be pointed out that under the watch of both this Government and the previous one, the crises in housing and health care continue to worsen. Almost 700,000 patients are on some form of hospital waiting list and more than 8,000 people are homeless, including over 3,000 children. These statistics are a stain on our society but behind them are real people who are still failing to experience the economic recovery that we all welcome. The Government has consistently published report after report and press release after press release on housing, yet there has been previous little action on the ground. There has been a blatant lack of attention on social and affordable housing. We welcome the moves on social housing in the budget but they will not make up for the damage done by decisions made in the past. We do not need another report; we need more action in respect of the delivery of social and affordable housing throughout the country. We also welcome the €55 million increase for the National Treatment Purchase Fund, NTPF, in the health sector to reduce waiting lists. When the confidence and supply agreement was being negotiated, this measure was opposed but it now seems to be the centrepiece of the health care strategy.

The headline figures for the economy are positive. Economic growth is up and unemployment is down. GDP increased by 5.2% last year and it is expected to increase by 4.3% this year and 3.5% next year. While these figure are undoubtedly positive, they must be treated with a degree of caution. They can obscure the many serious issues people face in their daily lives, they can obscure the issues I mentioned in housing and health and they can obscure the still-pervasive mortgage arrears crisis while the prospect of a hard Brexit hangs over us. On the fiscal side, it is vital that we meet the medium-term objective in 2018. It is not legally required but it is the right thing to do. We need our finances to be on a stable footing into the future.

I turn to the announcements on budget day, which are reflected in the Bill. On income tax, we welcome the increase in the tax band for individuals earning more than €33,800 and commensurate with that single income families on a higher level. However, we only welcome it in the context of reductions in the USC which will be directed at lower and middle-income earners. This is consistent with the confidence and supply agreement and this is what we stuck to during the negotiations. It would have been unpalatable for us as a party if the tax reductions were solely focused on increasing the entry point to the higher tax rate. While increasing the entry point will only affect those earning more than €33,800, in contrast the cuts to the USC will affect more than 1.8 people earning more than €13,000 per annum. Though the measures are certainly modest, cutting the 2.5% and 5% rates of USC is the fairest option to take. Through them, we have ensured the budget will be far more progressive than it otherwise would have been. Taken with last year's reductions in tax, the effect on people's disposable income will be significant. While some may scoff at the weekly gain from them, I assure the House it is not insignificant for many. For a family facing higher rents and insurance and child care costs, the combined effect of the tax reductions will be a modest help, but a help nonetheless. There are those who argue there should be no tax cuts at all but I remind the House that in 2007 some 2.156 million workers paid €13.6 billion in income tax while in 2017 some 2.063 million workers will pay more than €20 billion. Therefore, 100,000 fewer workers are paying €6.6 billion more in income tax now. It is clear that income tax payers need sustainable and progressive relief from the burden placed on them during the economic crisis and the necessary budgetary correction that occurred over the past number of years. Some people argue that the higher paid should pay even higher taxes but Ireland has one of the most progressive income tax systems in Europe and the OECD. This is as it should be. People who earn more should contribute more but applying more taxes to individuals earning in excess of a threshold of, say, €100,000, which is often quoted, would only serve to discourage investment and job creation. Colleagues should not take our word for that; they should take the word of those who are marketing Ireland as a destination for further investment.

At a time when we face a crisis in our health service, penalising medical staff with highly sought-after specialised skills will only compound the problems we face in that sector. Tax hikes would cripple any chance of attracting more foreign direct investment and attracting and retaining key personnel across important sectors of our economy.

I am glad that we have seen movement in this budget on the home carer tax credit. This will impact on nearly 81,000 households. Caring for a loved one, as thousands of stay-at-home parents and carers who care for people with disabilities or infirmities choose to do, is a key part of any functioning and just society. It is only right that we reward these people for the vital role they play. Again, I call on Revenue to undertake some form of awareness campaign to bring this tax credit to the attention of the many people who I believe are entitled to it but who are not claiming it.

We welcome the improvement in respect of the earned income tax credit. While it is disappointing that it was not fully equalised with the PAYE tax credit, it is moving in the right direction nonetheless and will impact on nearly 150,000 self-employed workers throughout the country. It cannot be right that, on the one hand, we want to encourage enterprise and job creation yet, on the other, we tax the self-employed unfairly. We must work over the coming years to fully equalise the taxation treatment of the self-employed with that of PAYE workers. This is an objective to which I commit our party.

Similarly, we are encouraged by the introduction of the key employee engagement programme, KEEP, a share-based remuneration scheme, in the budget. If set up correctly, this scheme will enable smaller companies in particular to retain key employees who are essential for them to grow. We hope this scheme will be given approval under state aid rules and can be set up speedily in order that companies might participate in it. The Minister might provide an update on the state aid approval process and on when this measure will become operational.

We are disappointed that there has been no move on the CGT lifetime limit for entrepreneurs, particularly in the context of Brexit. This is potentially a vital tax relief to encourage enterprise and growth in our economy, particularly in areas of highly mobile investment, and it will have to be addressed in upcoming budgets. Similar entrepreneurs in the UK can earn up to £10 million over their lifetimes and be taxed at 10%, while the threshold here remains at €1 million.

We welcome the continuation of mortgage interest relief, albeit at a tapered rate. Mortgage arrears continue to be a major issue, with nearly 32,000 families in arrears of more than two years. For them and others like them, there is little light at the end of the tunnel. Ultimately, this will lead to more court proceedings and more repossessions unless we continue to reform the process of dealing with mortgage arrears and tilt the balance in favour of those who are trying hard to keep their family homes.

As we know, the mortgage-to-rent scheme has been woefully inadequate in dealing with this crisis to date, with fewer than 300 cases completed. Tomorrow morning, at a meeting of the Joint Committee on Justice and Equality, I will introduce for legislative scrutiny a Fianna Fáil Bill that aims to tackle serious mortgage arrears cases. The Bill passed Second Stage and is now commencing scrutiny. I urge everyone in the House to get behind the Bill, which, essentially, would remove the bank veto in cases involving principle dwelling homes or family mortgages.

It was in this context that Fianna Fáil committed in the lead-up to last year’s election to extend mortgage interest relief beyond its current end date of December 2017. Due to our influence, we secured that measure in the confidence and supply agreement, resulting in this budgetary measure whereby the relief will be extended, albeit on a tapered basis, for a further period of three years rather than ending overnight at the end of this year, which is the existing legal position. As we know, mortgage interest relief provides tax relief at source to people who purchased their homes between 2004 and 2012 when house prices had peaked. These are the people who are most likely to be still affected by negative equity, where the loan outstanding exceeds the value of the house or apartment. These people cannot move to a more sustainable solution by moving to a more affordable home because they are trapped. The average annual relief to each of the near 300,000 mortgage accounts is approximately €600 currently. I welcome that it will not end completely at the end of 2017.

The bedrock of our industrial policy is our competitive corporation tax regime. Not only do we have the exceptionally competitive 12.5% rate but we also have the research and development tax credit and the knowledge development box. Currently, foreign multinational companies employ approximately 200,000 people in Ireland. This is altogether aside from the indirect jobs created in domestic companies that rely on multinational business to grow and prosper. In recent times, there has been increased focus on our corporation tax regime from both Europe and the US. On the one hand, we see many countries, including the UK, reducing their rates, with others such as the US promising to do so. On the other hand, we have seen the revival of the common consolidated corporate tax base proposal from the European Union. This proposal would harmonise corporation tax throughout the European Union and, if implemented, will serve to narrow our base. Fianna Fáil resolutely opposes any such move from Europe and Ireland needs to be very clear that, under the Lisbon treaty, corporation tax policy is the competence of sovereign member states.

We must continue with the BEPS programme that we signed up to through the OECD and we must work with our European partners in a constructive and positive way to make corporation tax policy throughout Europe more transparent. In this context, Fianna Fáil welcomes the publication of the Coffey report. This is an extensive report on a highly complex area of tax and Fianna Fáil welcomes the public consultation exercise now under way in respect of a number of the recommendations made by Mr. Coffey. We look forward to contributing to the debate on these issues. The Minister announced in the budget a move to limit the amount of income that can be offset by capital allowances on intangible assets and we welcome those proposals. Provision for this is made in the Bill. The global corporation tax environment is changing rapidly and, as I have outlined, our tax policy is being challenged in a variety of ways. We must continue as a country to be ahead of the game. We cannot afford to take a back seat and watch these changes unfold. We must play an active role on the world stage, in Europe and in the OECD.

Brexit is the single biggest threat facing Ireland, both economically and politically. Economically, we have all seen the depreciation of sterling against the euro and how this is making Irish goods more expensive relative to British goods. This issue is particularly acute in the Border region already and has manifested in online shopping. The fall in the value of sterling has already had a notable impact on the tourism sector. While overall tourism numbers are up, the number of those travelling from the UK is down. UK tourists are spending less time and less money here. We agree with the decision to maintain the lower 9% VAT rate for the tourism and hospitality sector. While the tourism sector appears very strong in Dublin, in many other parts of the country it is nowhere near as strong.

I want to make it clear that Fianna Fáil resolutely opposes any return to a hard border between the North and the Republic. We have consistently held this position since the Brexit vote despite what some Members and, indeed, individuals in our own party and others might say. While it is ultimately a decision for the UK, we still believe it is in the best interests of all concerned that the UK remains within the customs union. While this may not turn out to be the case, we all must work to avoid a hard Brexit. A reversion to WTO rules would spell disaster for Ireland, particularly for the agrifood sector where tariffs of up to 40% could be charged on our exports. We need a detailed sector-by-sector analysis and we must not shy away from considering the implications of a hard Brexit, which we do not want to see happen, but this is by no means an unlikely outcome and we must be prepared for it. The Taoiseach argues that this will serve only to be a self-fulfilling prophecy. We heard no such argument when the Department of Finance undertook a sectoral analysis of the economy and the impacts of Brexit on it. I heard no such argument when the ESRI published its analysis of what a hard Brexit might look like. Indeed, I recall debating these issues openly with the previous Minister for Finance on how Revenue was preparing for Brexit. These were and are important reports. They have influenced the debate on Brexit and how we respond to it. Simply put, I cannot see how withholding reports that have already been completed informs the debate on Brexit. We believe Northern Ireland should be designated a special economic zone and that state aid rules should be relaxed in certain areas and sectors most affected by Brexit. In that light, we welcome the setting up of a Brexit lending fund for SMEs and we hope it is approved on state aid grounds by the European Commission.

The key revenue raising measure in this budget is the increase in non-residential stamp duty from 2% to 6%. This measure was not outlined in the confidence and supply agreement and broadly Fianna Fáil is in favour of it. It certainly can be argued that the commercial construction sector is growing at an exceptional pace and it is directing scarce and vital resources away from the residential construction sector to build and provide the homes we need for our people. However, the proposal raises concerns. First and foremost is the estimated extra revenue from this measure in 2018. It is expected that €376 million will be received through this measure. The budget is based on this premise. This estimate is based on 2016 and 2017 values and volumes and if they do not perform to the same level the Exchequer may be left short in 2018. It is a risk which has to be highlighted. Another concern is its effect on the agricultural sector and I welcome the moves the Minister has made in this regard, particularly the changes to the consanguinity relief.

Housing is the most acute issue facing our society. The increase in house prices and rents is pushing more and more people into emergency accommodation. House prices have increased by over 12% in the past 12 months and rents have increased by close to 12%. The State needs to step in. We welcome the extra funding for social housing but it does not go far enough. Social housing provision was gutted in recent years and there is a long way to go before it can be fully restored.

We welcome the new fund which is being established and which we debated earlier during Oral Questions to the Minister for Finance for the provision of debt finance to the private sector for the construction of new homes. That is an important measure. We have consistently called for the establishment of a vacant site tax, a tax on vacant property will tend to lower the price of that property and make it more affordable for residential development. We hope the measures announced in the budget will tackle the land hoarding issue. There is a lot more work to be done in that regard and we will discuss it on Committee Stage.

The moves on sugar tax for soft drinks and an increase in tax on tobacco are positive, as is the increase in VAT on sunbeds. The Minister did mention EU state aid approval for the sugar tax. Given that the deadline is quite tight for implementing this measure, he might update the House on that issue and say what stage that approval process is at. There are positive initiatives in this Finance Bill on electric vehicles and changing the taxation treatment from a benefit-in-kind, BIK, perspective. We very much welcome that.

Fianna Fáil will stand by the commitments we made in the confidence and supply agreement. We did that last year and we intend to do the same this year but we will engage in robust debate throughout the course of this Bill and we will bring forward proposals on it. The agreement has made this budget a fairer and more progressive one. What we need on the key issues facing our society now is action, particularly on housing and health. I look forward on Committee Stage to going into a detailed section-by-section analysis of the measures set out in the Finance Bill 2017 and will contribute as positively as I can to that debate.

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