Gerry Horkan (Fianna Fail) | Oireachtas source

I thank the Minister. As one of the longest-serving and most senior Cabinet Ministers, it is great to see him here in Seanad to address us.

I welcome the opportunity to discuss the summer economic statement. Since its publication, the Brexit referendum has occurred, generating serious volatility in the markets. The Irish economy now faces a multitude of threats that demands strong government. Of all EU member states, Ireland will feel the biggest impact of Brexit and our economic strategy must reflect this dynamic and rapidly changing situation. It is vital we play a central role in exit negotiations. Our economic concerns need to be heard and fully understood and our interests fully safeguarded.

A key issue during the course of the election for every political party was the choices they would make given the available resources. In simple terms, fiscal space measures the capacity of the Government, as the Minister outlined, to take discretionary tax and expenditure measures after accounting for all known commitments, for example, additional spending required by changing demographics or public sector pay agreements. The fiscal space for the next five years has increased substantially from €8.6 billion to €11.3 billion. That is some €2.7 billion more than anticipated during the general election campaign. Fianna Fáil supports a cautious and prudent approach in this regard. We will not be making commitments based on any additional fiscal space from a revised medium-term objective.

As the summer economic statement makes clear, there are a number of risks to the Irish economy in the years ahead. There was a specific reference to the impending Brexit referendum. The surprise result has brought one of those risks to the fore. In a worst case scenario, a British exit could lead to the introduction of tariffs on trade activity with European states. Irish-owned manufacturing firms would be particularly vulnerable as they sell approximately 43% of their exports to the UK, compared to 11% for multinationals. An Economic and Social Research Institute, ESRI, report has estimated that bilateral trade flows between the UK and Ireland could fall by as much as 20%, with some sectors more affected than others. The Irish agrifood sector, in particular, is much more dependent on the UK as a trading partner than Irish industry in general.Some 54% of Irish beef exports in 2015 went to the UK. As well as the potential for the British exit to spark a recession in that country, it would most likely also be associated with a significant weakening of sterling against the euro, which would damage the competitiveness of our exports to the UK and the relative attractiveness of our goods in markets in which we compete with UK firms.

The Irish economy has great strength, including our attractiveness to multinational firms, our skills and education base, the energy, productivity and innovation of our people and excellence in food and drink production. We also have a world-class tourism product and many domestic firms have grown into international enterprises. We have great potential to provide a good quality of life for our people. The aim of Fianna Fáil is to create conditions that will support an increase in employment throughout the economy. We propose that this be done by delivering a tax regime that rewards individual effort and enterprise, tackles anti-competitive practices and enhances skill levels to support high-quality sustainable jobs.

Within the overall annual budget of approximately €70 billion, there are plenty of choices for Government and policymakers to decide on. One that will receive considerable attention is what happens to income tax and the universal social charge, USC. Fianna Fáil policy remains that we should progressively reduce the burden of USC on all income earners. The total income tax take in 2016 will be over one third higher than the 2007 figure, while other taxes have not yet recovered to peak levels. This demonstrates the extent to which correcting the public finances has fallen on workers.

Income tax now represents 40% of all tax receipts, whereas it was 29% in 2007. The outgoing Government added to the already complicated nature of taxes on income in 2015 by creating an additional rate of USC. There are now four rates of USC for PAYE workers and five for the self-employed. Clearly, there is a need for a multi-year reform and simplification of USC. Our ultimate objective is to remove it from all income up to €80,000 per annum and that surplus income remain liable for USC.

We welcome the rainy day fund that will be established using any unexpected proceeds from corporation tax receipts. As banking assets are sold over the next few years, we will consider putting some of these proceeds into the rainy day fund, as well as using them to directly reduce the national debt. Strict rules should apply as to how and when the rainy day fund could be drawn down.

It is our belief that the focus of any additional resources should be on improving public services and reversing some of the most damaging cuts, while at the same time outlining a pathway to reform taxation over the next three years. There should be a 50-50 split, unlike the pattern of two thirds expenditure cuts and one third tax increases which has been followed by the Government to date.

Our core belief is that spending on public services such as education, health, social protection and child care is progressive in nature as it benefits everyone in society, particularly those on low incomes. In contrast, cutting the top rate of tax for higher earners helps a far smaller number of people.

Ireland's housing crisis is not only the social challenge of our time for those caught up in the housing emergency, but it is also a key economic issue. Ireland is falling way behind the estimated 25,000 housing units needed a year. The Government has failed to provide any meaningful capital plan beyond reheated announcements. The failure to accelerate the transfer of NAMA units has also exacerbated the social housing waiting list and only 10% of homes earmarked by NAMA for social housing have actually been transferred to local authorities.

Fianna Fáil proposes that €1 billion of the of the €2.5 billion in cash the Ireland Strategic Investment Fund is sitting on be immediately allocated for the construction of social housing. Data provided in the Dáil indicates that the average cost of construction of social housing units is €152,000 per unit. This indicates that upwards of 6,500 units could be made available under this proposal.

The health service has also gone through an enormous period of upheaval in recent years. Cuts of approximately €3 billion have been imposed and resources have been stretched to the limit. Health service staff deserve enormous credit for working under these pressures. Fianna Fáil believes that any available resources should be prioritised for services in mental health, discretionary medical cards and the recruitment of additional therapists that will provide much needed services for children, in particular those who need speech and language, physical and occupational therapies.

The public now wants to see action on issues of concern in their lives, such as the squeeze on household budgets, housing waiting lists, excessive mortgage interest rates, long-term mortgage arrears and deteriorating public services. I look forward to the debate on the summer economic statement and the other reforms in the budgetary process. I again thank the Minister for his contribution.