Leo Varadkar (Dublin West, Fine Gael) | Oireachtas source

I imagine I will not take that long. Our country’s second Minister for Finance believed that the purpose of Government was to allow the greatest freedom for all - what he called "the greatest possibilities for the good of all". Yesterday, that message was at the heart of budget 2019 presented by the current Minister for Finance, Deputy Pascal Donohoe. It was a budget he summarised in his conclusion as "a responsible budget for a modern and caring Ireland that aims to be at the centre of a changing world." Budget 2019 is our attempt to achieve the greatest possibilities for the good of this country, for hard-working mums and dads, people starting out in work, those struggling to purchase a home, carers, the elderly and families.

Our message is simple. First, this is a responsible budget, balancing the books, and planning for the future in a prudent and sustainable way. That is because we believe in securing our prosperity and avoiding repeating the mistakes of the past. We have put a little money back into people’s pockets through income tax and universal social charge, USC, reductions, pension and welfare increases, pay increases, increases in the minimum wage and reduced costs for childcare and healthcare. We believe in rewarding work. We believe people should have the freedom to make their own decisions about how they spend their hard-earned money. This a budget that is Brexit proof because we believe in being prepared. We have also invested in public services and infrastructure.

Budget 2019 ensures we are in control of our destiny. It insulates us from uncertainty abroad and enables us to lay the foundation stone for building a better, stronger and more secure Ireland in the years ahead. Economic progress is not measured simply in economic statistics. It is seen in the difference it makes to families, the elderly, hard-working parents and people struggling to make ends meet. I refer to actions such as reducing the cost of childcare and making more families eligible for subsidised childcare, reducing the cost of medicines for those who have medical cards and for those who do not, reducing the cost of visits to the doctor, can make a big difference to people’s lives.

Budget 2019 is taking place at a time we are seeing the benefits of the progress we have made. We are determined to share those benefits as widely as possible. It also comes, however, at a time the external landscape is becoming more challenging. International developments in areas such as trade and tax have the potential to impact on our economic well-being, as do rising energy prices and the possibility of higher interest rates.

We have also entered a critical time in the negotiations for the UK’s departure from the EU.  Everyone in this Chamber knows that Brexit presents very significant challenges to our economy and society.  This means we cannot deviate from the prudent path that has underpinned Ireland’s recovery to date. In this period of uncertainty, we must avoid repeating the mistakes of the past and manage the public finances soundly.

The main economic indicators show an economy continuing to perform strongly. In 2018 to date we are experiencing another year of very strong growth.  GDP growth is forecast as 7.5% for this year and 4.2% in 2019. We all know, however, that in Ireland's case GDP is not the best measure of real economic progress.  It is notable that other indicators, such as consumer spending, domestic demand, tax take and labour market developments, all confirm that Ireland's economy is growing strongly, but not as fast as GDP may suggest. Unemployment has fallen to 5.4% and total employment is almost 2.3 million, a record high. Over 360,000 new jobs have been created since 2012, mostly outside of Dublin, which is a notable achievement. However, this success has also contributed to growing pressures on our economy, especially in terms of housing, traffic and labour shortages.  The economy requires careful management and choices if we are to avoid the mistakes of the past.

Every budget is about choices, and we can also see the choices that other political parties would have made courtesy of their published alternative budgets. The choices this Government makes are founded in responsibility. The economy is going well but that does not mean that it should be taken for granted or that we can take our eyes off the ball. Growth and economic expansion is not a given.

Budget 2019 proposes an increase in current expenditure of 4% in line with the level of growth the economy is experiencing. In the past, other governments lacked this level of prudence. Between 1998 and 2008, for example, the average increase in current expenditure alone was 11% per annum.  That is 11% more spending every year to cover the day to day expenses of the country, at a time when the economy was not growing that fast. When we look back at that period now, and we recall the utter devastation of that crash, the recession it created and the harm it caused to people across our country, it is deeply dispiriting that so many parties in this House have not learned those lessons. The pre-budget submissions from Sinn Féin, the Green Party, the Social Democrats, the Labour Party and People Before Profit all show that the competition on the opposition benches is to spend, spend, spend and spend some more, and then borrow some more to pay for it all. Prudence is absent and profligacy is the order of the day. This is just populism. Those same pre-budget submissions show that those parties do not understand the importance of stable and consistent tax policies.

As the Government demonstrated yesterday, there is a role for increasing taxation in certain circumstances, but those circumstances must be clear and we should avoid multiple tax increases for no policy rationale other than raising revenue. We changed the special 9% VAT rate for tourism back to 13.5%. That was a tax initiative introduced in 2011 at the height of the recession to create jobs in the service industry at a time when we had an unemployment crisis.  The rate was to have expired in 2013, but was continued until this year.  Along with initiatives like the Wild Atlantic Way and the abolition of the airport tax, the special VAT rate has worked. However, it is no longer needed.  Employment in tourism has risen to 235,000 and Irish tourism has enjoyed a record summer, with record revenues and visitor numbers reaching their highest figures ever in the past year. It is now appropriate to end the incentive and use the additional money raised - some €600 million in a full year - to fund investment in housing, healthcare and other public services where the money is most needed. However, we are still investing in tourism long-term, because we recognise its value to the economy and in how we show ourselves to the world.  We are also conscious of the employment it provides in rural areas. Budget 2019 allocates an additional €35 million to the Department of Transport, Tourism and Sport specifically for the tourism sector, including €4.5 million for successful initiatives across the country, such as Ireland’s Hidden Heartlands and the Wild Atlantic Way.  We are also going to invest nearly €10 million to further develop our greenways, which have been successful in Waterford, Mayo and other areas.

When it comes to framing a budget, we believe increases in taxation should be thought through and their implications understood. We must avoid a scattergun approach with a large number of tax increases that would undermine economic confidence.  Unfortunately, appreciation of that is limited among other parties. The Social Democrats alternative budget has over €1.5 billion in tax hikes in one year alone from 14 separate tax increases. The Labour Party alternative budget has over €1.6 billion in tax hikes from 11 separate tax increases. Sinn Féin’s alternative budget proposes an astonishing €2.9 billion in tax hikes from over 20 separate tax increases. The Green Party’s alternative budget has an astounding €3.5 billion in tax hikes from 13 separate tax increases. Not to be outdone, People Before Profit goes even further, proposing €16 billion in tax hikes. Those proposals cover just one alternative budget. They involve billions in tax hikes via dozens of different taxes at a time when the economy is growing well. Imagine what the Opposition parties would do together if they had five budgets, or in less favourable times. These policy initiatives would greatly undermine our economic performance and thereby limit our ability to meet the growing demand that our public services be properly funded. In marked contrast to that irresponsibility and populism, I must acknowledge the constructive and positive role played by Fianna Fáil, the main Opposition party, in this third budget under the confidence and supply arrangement.

As I travel the country and talk to different groups about the work of the Government and its plans for the future I usually explain our approach to the economy in terms of six principles. Sound management of the public finances and reducing our national debt, which still stands at over €40,000 per head, is one of those principles. My wish is that we once and for all break out of the cycle of boom and bust, of tax cuts one year, followed by tax hikes the next, pay increases given only to be taken away again because they were paid for with funny money, and stop-start investment in roads, public transport, healthcare and housing, which in the long term is more expensive. Instead of boom and bust, this Government wants Ireland to have what many other countries in northern Europe have, including sustained increases in living standards and sustained improvements in public services and public infrastructure year on year for a generation. That approach must become our new normal.

The Government has been determined to ensure that our strategy for budget 2019 is based on steady increases in public expenditure underpinned by stable and predictable tax revenue.  Expectations have increased given the remarkable performance of our economy, which is a good thing in the round.  However, not all these demands can or should be met. They should certainly not be met in the same year. Budget 2019 will be the first budget with no deficit since 2007. It has taken us 12 years to get to this point, including four years of good economic growth. It could be easily lost. Our prudent management of the economy to date has provided the scope to increase expenditure next year in a sustainable way, with record allocations for Departments such as health, education and housing. We are also committed to maintaining a broad tax base that generates a sustainable revenue stream necessary to fund public services. We cannot and should not build permanent expenditure commitments on revenues that may not be sustainable. For this reason, we are setting aside some of the historically high levels of corporation tax for the purpose of creating the rainy day fund. To be prudent, we are also projecting that revenues from corporation profit tax will actually fall next year. The rainy day fund will be set up with €1.5 billion from the Ireland Strategic Investment Fund and will be supplemented with an annual contribution of €500 million from the Exchequer starting from next year.

The second principle is to continue to raise living standards in a sustainable way for all our citizens. That can be done in four different ways: lower income taxes; better pay; increased pensions and welfare payments; and reducing the cost of public services, such as childcare, GP visits, drug costs, prescription charges and insurance. At long last, we have fully reversed the cuts made by governments of the past in weekly payments to carers, people with disabilities, the blind and lone parents with young kids. We have restored the 100% Christmas bonus to all social welfare recipients this year, and from March there will be a €5 increase in the maximum weekly social welfare payments.

Budget 2019 will also help families. We have increased the home carer tax credit by €300 to €1,500, recognising the value of parents who stay in the home to look after young children. The Government also recognises the importance of those first few years in the life of a child and what they mean for their proud parents, so a new paid parental leave scheme will be introduced next year to provide two weeks’ extra leave to both parents in the child’s first year. That will be in addition to maternity leave and paternity leave. We believe in helping the most vulnerable and so we are increasing the qualified child payment for children under 12 by €2.20 a week and by €5.20 a week for children over 12. We have also increased the back-to-school clothing and footwear allowance. These changes will have a positive impact on child poverty in 2019.

A particular focus in our tax policy is reducing taxes for those who earn middle incomes. We have already taken the lowest-paid out of the tax net. The lowest-paid 30% in Ireland do not pay any income tax any more. That is a good thing. However, people on very modest incomes pay the highest rate of income tax. We do not believe that is fair. It is not the norm in other European countries and it is damaging our competitiveness when it comes to attracting talent and good jobs to Ireland. With budget 2019 we are continuing to reduce the tax burden on middle-income earners. For example, we have reduced the universal social charge, USC, to 4.5% for the third rate. We have also increased the entry point to the higher rate of income tax for all earners by €750, increasing it to €35,300 in the case of a single taxpayer and €70,600 for a double-income couple. We have provided for public sector pay increases and an increase in the minimum wage, and we are seeing increases in private sector pay as a result of our growing economy.

The third principle is achieving full employment, improving employment rights and ensuring universal access to a pension plan for everyone, particularly those in the private sector, two thirds of whom currently have no occupational pension to fall back on.

The fourth principle is our ambitious programme for investment in infrastructure. Capital spending on public infrastructure will increase by 24% next year. We are going from being a country with a relatively low spend on infrastructure to one that will be one of the highest spenders in the European Union in a few years' time. This year we will spend an additional €1.4 billion on schools, universities, roads, public transport and other important infrastructure projects. We are a young country. We are a country with an expanding population, unlike other countries in Europe. As such, we need to invest in infrastructure. As we are also a country that has just become wealthy in the past couple of decades, there are many areas where we need to catch up when it comes to public infrastructure. In part, this is being achieved through our ambitious Project Ireland 2040 plan backed up by a ten-year €116 billion investment in housing, healthcare facilities, education, transport, broadband and climate change, which will help bring economic opportunity to all parts of the country.

Under budget 2019, we are allocating an additional €53 million in capital next year to fund the first round of projects under the new rural regeneration and development fund. The Minister for Rural and Community Development, Deputy Ring, and I look forward to making that announcement quite soon. We are investing in rural Ireland and ensuring that planned developments are ambitious and sustainable. There has also been a €60 million increase in funding for the Department of Agriculture, Food and the Marine, allowing for a new beef scheme and increased payments for areas of natural constraints. As part of budget 2019 we are also investing €286 million in new transport infrastructure, including the completion of the runway overlay project at Knock Airport; cycling and walking projects around the country; and beginning work on the road to Sligo between Castlebaldwin and Collooney. A further €40 million will fund rehabilitation and repair of pavements on regional and local roads.

Other measures in budget 2019 reflect this decision to invest in our future. The Department of Education and Skills will have a budget of almost €11 billion next year, an increase of €500 million from last year. This reflects our changing demographics and our belief in the importance of education as the great leveller and giver of opportunity. Part of that investment will involve the creation of 1,300 new posts in schools next year. We believe in helping children with special educational needs reach their potential. Next year we will invest more than €1.8 billion in their education. This means we will bring the number of special needs assistants to a record high of almost 16,000 in light of the enormous need for them.

To prepare for the jobs of the future we are providing more than 15,000 new places in higher education, including 1,200 craft and earn-as-you-learn places, 1,100 traineeships and 5,000 places to promote lifelong and flexible learning. We will also fund almost 3,500 additional undergraduate places as we invest in the building blocks of our future prosperity; the imagination, the creativity and the ingenuity of our young people and all those in higher education.

We recognise that one of the greatest challenges facing this country is the area of housing and homelessness. The problem is that these actions take time to have an impact given the lack of investment during the years of economic crisis. We have heard and been affected by the stories of those who are at the sharp end of this crisis, especially children. This Government firmly believes that every family should have a roof over their head and a place to call home. We are all concerned about the current levels of homelessness, as well as the shortage of housing supply. Under budget 2019, we have allocated a total of €2.3 billion for housing, an increase of 25%. We are also providing an additional €93 million in local authority funding for housing next year. We are determined to maximise and speed up delivery and help the people who need it the most.

We have allocated €1.25 billion for the delivery of 10,000 new social homes in 2019, taking people off housing lists and into long-term tenancies. Budget 2019 also allocates an extra €121 million for the housing assistance payment, HAP, next year so we can provide homes for almost 17,000 individuals and families for whom we do not yet have social housing built. While these kick in, we are making an immediate investment of €60 million in capital funding in order that we can help those in emergency accommodation right now and provide additional family hubs, thus reducing reliance on hotels and bed and breakfasts. We will also provide an extra €30 million for homelessness services next year. In addition, €100 million is being dedicated to a serviced sites fund to help local authorities make land available for subsidised affordable housing. This will be increased to €310 million over the next three years. In 2019 alone, we are increasing the planned funding from €20 million to €89 million. This will facilitate the delivery of around 6,000 subsidised affordable homes over the lifetime of the fund.

As everyone in the House will know, climate change is the greatest long-term challenge facing our world. Budget 2019 provides for an investment of €103.5 million for improvements in grant and premium rates for planting forests and introduces a beef environmental efficiency pilot, BEEP, to further improve the carbon efficiency of beef production. We are also allocating €70 million to the targeted agriculture modernisation scheme, TAMS, and providing an additional €70 million for environment and waste management programmes. Vehicle registration tax, VRT, is being increased on newly-purchased diesel vehicles as an environmental and health measure. We are also extending support for the transition to gas-powered buses and trucks as an environmental measure. Our policies in this area are informed by the work of the Climate Change Advisory Council, as well as the Oireachtas Joint Committee on Climate Action. They are influenced by the Economic and Social Research Institute, ESRI, report, and the Minister for Finance is committed to setting out the long-term trajectory for carbon tax to 2030. For those who may criticise our commitment to the green economy, it is worth noting that Ireland is now a member of the Paris Collaborative on Green Budgeting and the National Treasury Management Agency, NTMA, is due to issue Ireland’s first green bond shortly. These measures are helping to integrate climate change considerations into our broader economic and social activities.

The fifth principle is modernising our public services and ensuring better value for money for the taxpayer, for patients, for students and for families. Reform of healthcare is our biggest public service challenge and so we have published our plan for the implementation of Sláintecare, the all-party mission statement that will bring about universal healthcare in Ireland over the course of the next decade. Budget 2019 provides an additional €700 million to health by way of a Supplementary Estimate. We will also increase the health budget to €17 billion next year. This represents an increase of 15% in health spending in just over two years. This is now the highest level of health spending in the history of the State. We are determined to get value for money and better outcomes for patients. We need to make sure that money actually gets to the patient. By increasing the qualifying threshold by between €25 and €48 per week, as much as €2,000 a year for a family, we will make an extra 100,000 GP visit cards available in 2019. This is less than the 500,000 recommended by the Sláintecare report but is a step in the right direction. We must take account of the capacity constraints in general practice.

Budget 2019 also provides for a 25% reduction in prescription charges, from €2 to €1.50, for all medical card holders over the age of 70 and a €10 reduction in the maximum any family or household has to pay for its medicines each month.

For the first time in the history of our State we will invest €1 billion in mental health, a significant announcement on World Mental Health Day. It is again crucial that this money gets to the patient.

We have also raised the income thresholds for the affordable childcare scheme because we want to make it easier for families to find and pay for childcare for their young children and we want to encourage more parents back into the workplace. The base income threshold is being raised to €26,000 in net terms and the maximum income threshold will now be €60,000. We are increasing the multiple child deduction to €4,300. This means many more middle income families will become eligible for the affordable childcare scheme.

One of the greatest services the State can provide is maintaining law and order in order that people are safe on the streets and in their homes. We have a roadmap for a radical reform of An Garda Síochána in the report from the Commission on the Future of Policing in Ireland and we are investing to make its recommendations a reality. Next year, the budget of An Garda Síochána will be increased by €60 million, meaning we can recruit an additional 800 gardaí. Taking account of retirements, this will increase the size of the force by 500 next year. This means that by the end of next year we will have increased the size of the force by more than 1,000. We are also investing €220 million in projects such as the forensic science laboratory, Garda ICT, Garda vehicles and Limerick Prison.

An additional €29 million is being provided for our Defence Forces, to replace equipment and improve infrastructure for our Army, Air Corps and Naval Service.

The sixth and final principle relates to our role internationally. Earlier this year, we launched our ambitious plan to double the scope and impact of Ireland’s global footprint over the next seven years, entitled Global Ireland 2025. Under this initiative, we are opening 26 new diplomatic missions around the world, representing the most ambitious renewal and expansion of our international presence ever undertaken. Crucially, we have also reaffirmed our commitment to global justice, reducing inequality and promoting peace through a commitment to increasing overseas development aid and continuing our strong track record as peacekeepers. Under budget 2019, we will increase our total overseas assistance budget by €110 million. As a result, our overseas development assistance will be at its highest level in ten years, at 0.31% of GNI*. We are slowly working on our commitment to reach 0.7% of GNI* by 2030. There are budget increases for our global-facing agencies, including Enterprise Ireland; the IDA; Bord Bia and Tourism Ireland.

When I became leader of my party and Taoiseach, I made a commitment to double spending on arts, culture and sport within seven years. That required an increase of approximately 10.5% per annum. I am pleased to confirm that the increases in the budgets for arts, culture, heritage, the Gaeltacht and sport all exceeded this figure this year. We are on track to meet the commitment and, in fact, we are slightly ahead.

As a Minister and as Taoiseach, I have maintained a special interest in the self-employed. When I was Minister for Social Protection, I had the privilege of extending to the self-employed access to paternity benefit, treatment benefits and the invalidity pension. The budget provides for further actions to assist our self-employed citizens. It includes extending jobseeker's benefit to the self-employed in 2019 and a further increase in the earned income tax credit. We will continue to increase the earned income tax credit until it is in line with PAYE workers.

Given the close connections between the Irish and the UK economies, Brexit will inevitably have a negative impact on the economy. Ireland’s contingency planning is well advanced and continues to be a central Government priority led by the Tánaiste. Recognising the importance of east-west trade, we have initiated actions to help prepare our ports and airports to take account of a changed trading relationship with Britain post-Brexit. This complements actions taken, including those announced in last year’s budget. More than €450 million has been allocated for business, including a €300 million Brexit loan scheme for business and a €2 million Brexit response loan scheme for the agrifood sector. As part of budget 2019, we will invest €300 million in a human capital initiative. We are also launching a future growth loan scheme for SMEs and the agriculture and food sector, with another €300 million behind it. We are also providing more than €110 million for Brexit preparations across several Departments. A total of €60 million in current and capital Brexit-related supports are being provided to improve resilience in the farm sector and improve productivity in the food sector. As part of the same long-term thinking, we are investing in integrating our transport, energy and communications networks with continental Europe, providing new resources for tourism development and promotion and helping Brexit-exposed firms to diversify international markets.

In addition to Brexit, changes in the international tax landscape, increasing trade protectionism and increasing geopolitical tensions all present challenges to our economy as do increasing fuel prices and the possibility of increased ECB interest rates. Automation, artificial intelligence and other forms of technological innovation are rapidly developing and are expected to change radically many jobs and enterprises and entire industries.

Domestically, the principal risk relates to potential overheating of our economy as we approach full employment. The best way to mitigate these risks is to grow capacity, improve the resilience of the economy and increase productivity. The Government has decided that we need a new economic initiative for Ireland to tackle the challenges facing us. The future jobs initiative will drive our development as a resilient, innovative, and globally connected economy, capable of coping with technological and other transformational changes ahead. It is aimed at enhancing productivity, labour market participation, innovation, skills and talent and the low-carbon economy. It will comprise a small number of impactful and deliverable actions in each of these areas. The Minister for Business, Enterprise and Innovation and I are leading a whole-of-Government effort to develop this plan and it will involve extensive consultation.

Sustainable economic growth is not a goal in itself. We prioritise it because this is how we ensure every person has the opportunity to succeed and have an equal chance to share in our nation's prosperity and that all parts of the country benefit from our relative prosperity. Budget 2019 is prudent and responsible, striking the right balance between improving living standards, overcoming our structural challenges and securing our economy against the challenges we are likely to face in the future. I commend it to the House.

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