Tom Parlon (Laois-Offaly, Progressive Democrats)

As an aid to that process, I will highlight some of the more pertinent points.

To begin with, we must be clear what exactly it is we are about. The Government wants to continue to ensure that we protect and increase employment in the increasingly competitive environment in which we find ourselves. We must also continue to modernise our economy through major capital programmes. These objectives can be fulfilled in many ways but our aim is to distribute the fruits to all through better services and a fairer sharing of resources, while being mindful of those most vulnerable in our society, particularly those with disabilities. This budget meets those aims.

Before discussing the main budgetary measures, I draw attention to the economic backdrop to the budget. As is always the case, we must be conscious of the international economic outlook because our economy is significantly influenced by what happens around the world. It would be foolish of the Government if it did not acknowledge that there are always risks to any forecast. These include such issues as future developments in the level of oil prices, the evolution of international exchange rates and the international response in terms of interest rates. We must be mindful of all these risks and act accordingly so as not to undermine the future prosperity of all. If there is no major shock from these or other international factors, the prospects for the economy over the next few years are favourable.

The Minister has forecast that in the coming year the economy will grow by 4.7% in GNP terms and 5.1% in GDP terms. Employment is expected to increase by some 35,000, thus ensuring that unemployment will remain low at 4.4%. Price inflation is also expected to average 2.5%, close to the EU average. We must do the right thing and be mindful of our international competitiveness, which must be a key priority for all.

On the basis of this economic view, the Minister has set a number of budgetary targets for 2005. An allocation of almost €45 billion is provided for gross spending on public services, a more than 9% increase on last year. The Exchequer borrowing requirement is set at just under €3 billion, or 2.3% of GNP. A general Government deficit of 0.8% of GDP and a debt ratio of 30% of GDP are set. The objective is to keep growth in spending correlated to revenues while being prudent regarding the level of debt. In this context, the Minister's targets are aimed at helping to contain inflationary pressures, a central theme of Government policy.

Before turning to the specific measures in this budget, it is appropriate to make a few brief comments about overall tax policy. Much has been said in recent times about taxation and what the Minister should or should not do. The key principle is to ensure the burden of taxation is low and has a broad base, thereby ensuring the amount of revenue generated is sufficient to meet the many important social needs faced by society. This budget targets resources at the lower paid. Accordingly, the Minister has increased the employee tax credit by €230. Moreover, the personal tax credit is increased by €60 for single persons and €120 for married couples to bring them to €1,580 and €3,160 per annum respectively. These improvements in the credits ensure that all those on the minimum wage are fully outside the tax net, a key commitment in An Agreed Programme for Government. As a result of the changes, more than 650,000 of the 1.9 million income earners will be exempt from paying tax on their earnings. In recognition of our inability to do so in the last two budgets, given the more difficult economic circumstances that prevailed, the standard rate income tax band is increased by €1,400 per annum for all earners, together with increases for single parents and widows. This band-widening takes 52,100 taxpayers off the higher rate of tax.

The Minister also made a number of changes to specific tax reliefs for the aged, the disabled and for widows. Senators will find the details set out in the budget book. A further change that will be of benefit to low paid workers is the substantial increase in the threshold for the health levy. To those who claim this Government does not care, I point to one significant fact in this area. Since 1997, the percentage of the total income tax bill paid by the lower paid has fallen from 14% to less than 6%.

Senators are aware that there has been much debate in recent times concerning the role played by tax reliefs in the tax system. The Minister has sought a thorough evaluation of the effect of all relevant incentive reliefs and exemptions and asked his Department and the Revenue Commissioners to bring forward proposals that will achieve a balance between the benefit to the investor and the benefit to the common good. Senators will note with interest the Minister's intention to act upon such proposals and his related commitment that the termination dates for various schemes laid down previously in this year's Finance Act will not be changed.

Tax reliefs have a role in promoting fair play. In this regard, I point to the changes made in the area of residential stamp duty. For first-time buyers of second-hand houses, there will be no stamp duty on purchases of up to €317,500 in value and reduced rates on purchases up to €635,000.