Noel Ahern (Dublin North West, Fianna Fail)

I welcome this opportunity to present to Seanad Éireann key features of today's budget. This is the first unified budget which brings together the resources available and the various demands for expenditure.

Today, the Tánaiste and Minister for Finance announced a budget which is prudent, progressive and inclusive. In the last 12 months the global environment has altered and a number of downside risks have emerged. Continued economic and employment growth will depend on how we respond to these changes and risks. This budget has been structured to strengthen the economy's capacity and retain its flexibility. This will allow us to respond effectively to this new, more challenging economic environment and to be in a position to take advantage of whatever opportunities may emerge.

The Government's objective is to maintain sustainable growth while continuing to implement a responsible fiscal policy. Government policy is focused on maintaining and improving public services today while also planning and building for the future. The Government's key priorities are therefore, responsible management of the public finances, delivering a challenging public infrastructure investment programme, caring for the less well-off, strengthening education and training and protecting the environment. Today's budget will protect the incomes of the vulnerable, support ordinary working people, promote our environmental goals and help home-buyers and boost the economy.

The global economy has remained strong this year and world GDP is estimated to grow by more than 5%. However, financial turbulence, increasing oil prices, the slowing US and UK economies and currency fluctuations, particularly the weakening dollar, all present strong downside risks for 2008. The Irish economy has also performed strongly in 2007 and GDP growth is expected to be around 4.8%. While housing investment has moderated this year, other investment activity, including NDP spending, continues to perform well. Taking account of external and domestic risks, GDP is therefore forecast to grow by 3% in 2008.

Employment growth has been a major success story for Ireland and the Government estimates that 72,000 net new jobs will be created in 2007. Non-Irish nationals now account for nearly 12% of the labour force. The unemployment rate averaged 4.5% in the first three quarters of the year and this compares well with other countries in the eurozone. The current position should be compared with ten years ago when the unemployment rate was over 10%.

Our future success depends on our willingness and ability to enhance the competitiveness of the Irish economy in all sectors. We are no longer a low cost economy. Therefore competitiveness must be strengthened through increased productivity, particularly in the services sector and through innovation and quality improvements.

It is in the context of this economic environment that budget 2008 has been framed. Although circumstances have changed since the pre-budget outlook was published in October, theTánaiste has increased provision in a number of key areas. However, to achieve this, he has planned for a general Government deficit of 0.9% of GDP for 2008.

In January this year, the Tánaiste launched the National Development Plan 2007-2013. The plan sets out the Government's investment strategy for our economic and social infrastructure over the medium term. Despite the tightening budgetary pressures, the Government has prioritised capital infrastructure. The new multi-annual capital envelope for each Vote group was published today and shows that capital expenditure is to be maintained at an average of 6% of GNP over the next five years. The capital investment programme for 2008 will therefore be over €8.6 billion and will focus on transport, education, housing and environmental services.

A total of €3.8 billion gross expenditure has been provided today for transport. Of this, €1.7 billion will be invested to improve our national roads network which is essential for long-term economic and social prosperity. Almost €1 billion will be invested in our public transport system. The remainder will be allocated to improve our non-national roads, regional airports and ports. Road safety is also a high priority area. The high number of fatalities and serious injuries on our roads is a matter of ongoing concern for all of us. A total of €44 million has been allocated to the Road Safety Authority in 2008 to help bring down these numbers.

There has been a major financial investment to improve our water services infrastructure in the previous and current national development plans. In 2008, €471 million will be allocated. This investment will finance schemes throughout the country, including major schemes for supply to Dublin, Limerick, Donegal, Kildare Portlaoise, Waterford and Castlebar.

In the past three years, the Government has provided over €2 billion in education infrastructure. This has provided 28 new schools and major refurbishment and extensions in existing schools. In 2008, capital investment will be €828 million. Over €594 million will be used to provide accommodation for 13,000 extra children next year while €184 million will provide for infrastructural investment at third level.

I am also pleased to see that an area for which I had responsibility for some five years, namely, housing policy, has been provided with a record Exchequer provision in 2008 of more than €1.7 billion. Taken together with non-Exchequer financing, the overall housing package totals approximately €2.5 billion.

This increased funding is in line with the housing commitments contained in Towards 2016 and demonstrates the Government's determination to honour these obligations in full. It will allow for the commencement of a significant number of new social housing units. Work will progress under the regeneration programmes, including the ongoing redevelopment of Ballymun, as well as bringing to completion a large number of units under both the local authority and voluntary housing programmes. In total, it is expected that programme output will amount to some 9,000 homes in 2008. The funding will also support the delivery of 5,500 new affordable homes. In addition, funding will also be maintained for the provision of Traveller and homeless accommodation.

Ireland must respond to the challenge of climate change and take steps to meet our Kyoto commitments. In the Budget Statement, the Tánaiste provided a carbon report in line with the undertaking in the programme for Government. He reported that currently, Ireland's greenhouse gas emissions amounted to some 70 million tonnes annually based on the latest available data.

In the past two budgets, tax and expenditure measures were introduced in this area. Today, the Tánaiste and Minister for Finance introduced major changes to vehicle registration tax and motor tax. The vehicle registration tax rate available to cars registered on or after 1 July will be based on the CO2 emission rating of the car and not the engine size. There will be seven VRT rates, ranging from 14% to 36%, with the higher-emitting cars paying more. Existing incentives for certain hybrid electric and flexible fuel cars will be extended to 30 June 2008 and after this date, there will be a further top-up relief to €2,500 on the VRT payable on these cars. Electric cars and electric mopeds will be exempt from VRT from 1 January 2008.

On motor tax, the Minister for the Environment, Heritage and Local Government has proposed an increase in motor tax rates of 9.5% for cars below 2.5 litres and 11% for larger cars from 1 February 2008. In addition, it is intended that the Minister for the Environment, Heritage and Local Government will bring forward a proposal to link motor tax to CO2 emissions instead of engine size for new cars from 1 July 2008. The Tánaiste has also provided for the National Treasury Management Agency to purchase carbon credits through the carbon fund.

The State energy companies will invest €1.7 billion in 2008. This will be mainly in electricity and gas transmission and in distribution networks in new and modernised power generation and wind energy projects. The Exchequer will provide €86 million for energy in 2008, which is almost double the 2005 investment, and this demonstrates the Government's commitment in this area. In addition to the €150 million planned in the national development plan for energy research, the Tánaiste has allocated a further €13.2 million for this purpose. A specific focus of the research will be to develop alternatives for renewable energy from ocean sources. A total of €13 million has also been provided for energy conservation.

Farming plays a number of important roles. These include contributing to economic growth, sustaining rural communities and conserving our environment. A number of measures have been introduced to support agriculture and help farmers meet the standards in the EU nitrates directives. Due to the successful take-up of the farm waste management scheme, an increase of €35 million was announced to bring the provision to €150 million for 2008. In addition, €370 million has been allocated to REPS 4, which will benefit nearly 60,000 farmers.

Farm taxation changes announced today include a new relief from capital gains tax on the dissolution of farm partnerships and the relief will run for a period of five years. In addition, the Tánaiste made arrangements to allow farmers who receive diversification aid under the sugar beet compensation package to spread the payments for income tax purposes over six years. The farmers flat rate addition for VAT is being retained at 5.2% for 2008.

Fishing plays a critically important role in our coastal communities. However, to ensure a sustainable fishing industry there is a need for restructuring and a reduction of the number of fishing boats. A total of €21 million is being allocated in 2008 for a decommissioning scheme for fishing vessels and the tax code will be amended to help maximise the take-up of the decommissioning payments.

The Government is committed to ensuring significant improvements in the quality and delivery of health services. The provision for health next year has been increased by 7.6% to almost €16.2 billion. This includes new funding of €276 million for a range of health developments, including services for the elderly, for people with disabilities and for children. An additional €110 million has been provided for the introduction in 2008 of the nursing home support scheme, A Fair Deal, which will bring the total public expenditure for nursing home care for the elderly to €920 million. An additional €50 million is being provided for the disability sector. This is in line with the budget 2005 multiannual investment programme towards the implementation of the Disability Act 2005. A total of €29 million in additional funding will be provided for the expansion of cancer care services, while additional funding of approximately €87 million will fund immunisation programmes and other health care improvements.

The abuse of drugs is of major concern to our society and today the Tánaiste provided an extra €12.5 million, in addition to the provision in the pre-budget outlook, to facilitate the implementation of the national drugs strategy rehabilitation report. This will ensure the expansion and strengthening of the local drugs task forces and for the roll-out of services to new commuter belt towns, mainly in Leinster. From midnight tonight, the excise duty on cigarettes will increase by 30 cent per pack of 20, inclusive of VAT, with pro rata increases on other tobacco products. This measure has been introduced to promote improved public health and should be welcomed.

Ireland's ability to respond quickly and effectively to technology advances in recent years has provided a significant boost to economic and employment growth. Positioning ourselves at the frontier of new advances will be important if we are to achieve and maintain competitive advantage in specific areas. Major ongoing investment in science and technology will be required to ensure we can exploit emerging advances. To this end, the budget provides for an increase of €36.5 million, bringing the total investment in this area to almost €300 million in 2008. This will fund continued investment in basic research in centres for science, technology and engineering and in strategic research clusters. The budget also provides for €133 million for current science, technology and innovation expenditure for higher education research.

The announced enhancement of the research and development tax credit scheme is a complementary measure to the Government spending on science, technology and innovation. The base year which is used to calculate expenditure on research and development is being fixed at 2003 for a further four years to 2013. This will provide greater certainty to industry in respect of the scheme.

A total of €84 million in additional funding has been provided for overseas development assistance, ODA. This will bring our total ODA contribution to €914 million, or 0.54% of GNP, in 2008. Ireland's target ODA contribution ratio is 0.7% of GNP in 2012.

The Government is committed to ensuring that the less well-off also benefit from today's budget. The total cost of the social welfare improvements announced today will be €957 million in 2008 and €980 million in a full year. Maximum weekly personal rates for contributory, transition and related social insurance State pensions will increase by €14 per week, while the maximum personal weekly rate for the non-contributory State pension will increase by €12 per week. This brings the State contributory pension to €223.30 per week and the State non-contributory pension to €212 per week. In addition, the social insurance qualified adult allowance for claimants of pension age has been increased by €27, to bring it to €200 per week.

In recognition of the importance and the contribution of carers, the carer's allowance and carer's benefit will increase by €14 per week and the respite care grant also has been increased by €200 to €1,700. All other personal social welfare rates will increase by €12 per week and this will bring the lowest full adult social welfare rate to €197.80 per week. There will be proportionate increases for people on reduced rates. In general, rates will increase from the first week of January 2008.

Services for older people are an immediate priority for the Government. The Government's commitment to older people is set out in the latest partnership agreement, Towards 2016, and reinforced by the commitment of €9.7 billion in the national development plan. Over the last two years, the Government has added €400 million to services for older people, which is targeted primarily at community supports for the elderly. These include the provision of home care packages, home helps and day and respite care. This support is continued in the 2008 budget with a further allocation of €25 million for elder care, including the provision of home care packages and other community support services. The duration of payment of the national fuel scheme will increase by one week, to 30 weeks, commencing from April 2008.

The Tánaiste has provided for an increase of €14 per week, to €221.80, in the minimum rate of maternity benefit and adoptive benefit from January 2008. Child benefit rates will increase by €6 per month for each of the first and second qualifying children, to €166 per month, and by €8 per month for each subsequent qualifying child, to €203 per month, effective from April 2008.

The upper income threshold for entitlement to the one-parent family payment will increase by €25 per week to €425 from May 2008. Family income supplement income thresholds will increase by €10 per week in respect of each child.

The back-to-school clothing and footwear allowance will increase by €20 to €200 in respect of each child aged two to 11 and by €20 to €305 in respect of each child aged 12 and over. The widowed parent grant is being increased by €2,000 to €6,000, effective from today. The Family Support Agency will be provided with additional funding for marriage, child and bereavement counselling, research projects and other services. The money advice and budgeting service, MABS, will be provided with additional funding for training and additional support to MABS companies.

A key feature of recent budgets has been to reward work through a fairer and more progressive tax policy. One element of this was to keep the lower income groups outside the tax net. This approach has been maintained in this budget and the measures announced today will keep 32,600 income earners outside the tax net. The personal tax credit for a single person has been increased by €70 and €140 for a married couple. The employee tax credit will also increase by €70 per annum. The entry point for a single person on PAYE has increased from €17,600 to €18,300 and the PRSI and health levy entry points have also increased accordingly.

The 20% standard income tax band is being widened by €1,400 per annum to €35,400 for a single earner and €44,400 for a married couple with one earner. For married couples with two earners the band will be €70,800. As the 2008 projected average industrial wage is €34,000, this should keep the liability of those on average earnings at the standard rate.

Other increases in personal tax credits include the following. Tax credit for an incapacitated child will increase by €660 to €3,660 per annum, the home carer tax credit is being increased to €900 per annum and age credit will increase by €50 to €325 for a single person and by €100 for a married couple. The age exemption has also being increased to €20,000 and €40,000 respectively and the allowance for trade union subscriptions will be increased from €300 to €350 per annum.

As a result of today's budget, the number of earners who will be outside the tax net in 2008 will be more than 878,000. The total cost of the income tax, PRSI and health levy measures will be €432 million in 2008 and €585 million in a full year.

The small company tax liability threshold for the payment of preliminary tax on the simpler prior-year basis is to be increased from €150,000 to €200,000. The tax liability threshold at which preliminary tax is not payable has been increased from €150,000 to €200,000 for new start-ups. Small business VAT registration thresholds have been increased to €37,500 per annum for services and €75,000 for goods from 1 May 2008. This will take 2,700 businesses out of the VAT system.

The stamp duty charge on financial cards will be reduced. For credit cards it will be reduced by 25% to €30; for combined cards, by 50% to €10 and for ATM and debit cards, by 50% to €5. However, there will be an increased duty on cheques from 15 cent to 30 cent per cheque. This supports the shift from paper to electronic transactions.

Gross expenditure for the justice area will total almost €2.7 billion in 2008. This major investment will fund a range of developments. These include continued expansion of the Garda Síochána to a total of more than 14,200 fully-attested Garda by end-2008, delivery of a modern communications system and other measures to support the fight against crime. Additional funding of €5 million is being provided for social inclusion initiatives. In addition, €14 million is being allocated to the Prison Service for its building programme and for the roll-out of a new communications system.

The housing market has slowed in recent months. Contributory factors include higher interest rates, tighter credit control and changing consumer sentiment. Acknowledging the importance of the construction sector to our economy, today's budget includes a range of measures designed to support rather than unsettle the market. Mortgage interest relief has been increased for first-time buyers by €2,000, to €10,000 for a single person and by €4,000 to €20,000 for a married couple.

The most significant improvement today is the major reform of stamp duty. Property valued at less than €1 million will be charged stamp duty on the basis that the first €125,000 will be exempt from tax and the balance will be charged at 7%. Purchasers of houses valued at more than €1 million will be charged at 9% on the portion of the price in excess of €1 million. The effective rate on most homes will be well below the headline rate and the maximum effective rate up to €1 million valuation is 6.5%. The current exemptions for first-time buyers and buyers of new homes will be retained.

Currently there is a five-year rule to avoid clawback of exemption where the owner moves out and lets the property. This has now been reduced to two years. These measures were designed to simplify the system, to improve the efficiency of the housing market, to support employment and to boost confidence and economic activity. Under this heading, the income tax relief on rent payments will be increased by 11%. Finally, the threshold for the rent-a-room scheme will be increased from €7,620 to €10,000.

This budget was framed in the context of change both in the global and domestic economy. The Tánaiste and Minister for Finance has introduced a budget which is broad in its reach and generous, particularly in the areas of social welfare and home purchase. The approach taken has been clear and decisive, which can only benefit our economy in the uncertain times ahead.