Eoghan Murphy (Dublin Bay South, Fine Gael) | Oireachtas source

I thank Senators for the opportunity to speak on this important debate on the budget. I have a number of notes and I hope to get to every point raised by each Member. I will do my best to leave my party political hat at the door but it may be difficult at times. I will leave my neoliberal hat at the door anyway. I always thought I wore a Lakean neo-Wilsonian hat. That is what I used to parade around in back in my student days.

I want to speak first to the ratio of spending to tax reductions and the 2:1 ratio in the confidence and supply arrangement with Fianna Fáil. The arrangement was important in terms of putting a government in place and not falling into the risks facing other countries in Europe, which now face not being able to form a government. It has moved now to a 3:1 ratio. It is important to look to the programme for a partnership Government, the 156-page document, and the commitments arrived at between Fine Gael and Independent Ministers. They looked to moving to a budget with a 3:1 ratio, which is where this comes from. That is an important source for the change in direction since the formation of Government.

There was a comment on capital gains tax only being available up to €1 million. The reduction to 10% is important in terms of a step change in making ourselves as attractive a location as possible for the relevant types of investment when we look at the comparisons in the UK.

The measure for first-time buyers is not a pure demand-side measure when we consider the details because it can only be leveraged against new builds. That should incentivise supply. I was interested to hear contradictory remarks in the Chamber about it doing nothing to increase supply but also lining the pockets of developers. I am unsure how that adds up. Reference was made to the cost of new builds within the M50. This applies to new builds up to a price of €600,000. However, the tax rebate is capped at €20,000 and it applies at 5% up to €400,000. It will allow people to leverage their own additional income when buying a new build as a first-time buyer. We should remember they are leveraging their own income against the rebate. It will not work against people who are looking to buy new builds either outside the M50 or within it.

The budget has been Brexit-proofed in every sector of the economy. Let us consider the contingency planning that has gone on for a year or more. Everything the Government is doing across each sector of the economy is being done with Brexit in mind. There are specific measures, including increased funding for our diplomatic presence in different jurisdictions overseas and new posts for Enterprise Ireland and IDA Ireland. Others relate to agriculture and measures for small and medium-sized enterprises and higher education. These are all designed with Brexit at the forefront because it is such a great challenge for this Government, as it will be for future governments in the coming ten or 20 years.

We have seen new investment in third level education for the first time since the crisis. The allocation of €36 million is a significant investment. It is welcome but we recognise we need to go further. There is a problem with the funding model for third level and if we do not get it right we will have far bigger problems down the line. The Minister for Public Expenditure and Reform, Deputy Donohoe, referred to the commitment to increased investment in third level, as well as looking at the funding structure and coming with proposals later in the lifetime of this Government. Measures for additional teachers have been allocated in this budget, as well as 900 extra resource teachers. This is important in terms of ensuring we meet the needs of our students.

The capital spend represents an increase of 26% over 2016 and that is important. Of course we are coming from a low base in capital spending because capital spending was cut so dramatically when the crisis took hold. However, we are now trying to build it back as resources allow. Of course, every additional allocation of money spent on capital takes away from current spending and from the investments people want in pensions, education and health care. We have to find a balance. When we are considering budgetary choices and what we call the fiscal space and the European rules, we have to make choices. One is balanced off against another. If we call for an increase in capital spending, then we have to propose where to decrease current spending. A review of the capital plan is scheduled for next year. This relates to the plan announced last year. This is important because new resources are being put towards capital spending. We need to ensure they are being addressed in the appropriate areas. I agree that the EU rules should give greater flexibility when it comes to capital spending, public private partnerships and potential changes from EUROSTAT that might have a negative impact on our ability to leverage public funding and to get increased private investment into capital infrastructure projects.

Reference was made to the universal social charge cuts. This is important and people will welcome a lower tax burden when we see how the tax burden was increased for those fortunate enough to be able to remain in work through the crisis. Up to 300,000 people were unemployed and there was a vast cut in our tax base. Extraordinary taxation was put on people who were working. The economy is recovering and more people are going back to work. The figure is now over 2 million people, which is where we were before the crisis. This means we have scope to reduce that tax burden on people. We need to consider the difficult circumstances low and middle-income earners are facing. These include people with young families, lone parents and young students who are working. The USC cuts will help them to retain more of the money they earn from the hard work they do. That is why reducing the tax burden at low and middle-income levels is so important.

Cigarettes have gone up by 50 cent. Personally, I would have gone up a little more because of the extraordinary cost smoking has, not only in terms of the health and lives of people but also in terms of the economic cost for the State and every taxpayer.

We cannot do everything in this budget. We have to make increases and changes, particularly in areas like social welfare, where we can on a step-by-step basis. Of course we would have liked to increase the pension by more than €5, but what would that mean in terms of increasing other social welfare weekly payments? We are trying to be fair. We are trying to bring fairness to as many people as possible because everyone suffered in the crisis. We cannot do everything in one budget but we believe that in this budget we have made important changes for enough people and we have signalled that those changes will continue in future.

Health spending will increase more than 7% over 2016. The increase is more than €1 billion. That is incredibly significant. The important thing is that this money is spent in the right way. The Minister for Public Expenditure and Reform referred to a review next year of all spending, not only in terms of the increases announced each year but in how we put the €58 billion to work for social goods in our economy. That is really important and there is an important role for the health committee to play in targeting that spending to ensure it is being spent appropriately.

We have to work the Lansdowne Road agreement. It is important for industrial peace. The people who sign up to that agreement are bound by it and are working to it. Having said that, a commission will be established and will undertake important work in terms of mapping out the future as to what public sector pay and industrial relations will look like in the years ahead.

The gradual reduction in DIRT is important. We are moving it down to 33%, which will make it the same as the rate for capital gains tax. I think that is the right direction. However, we should recognise that because rates are so low in the banks, depositors do not get a great return from whatever savings they have at the moment. Anyway, the Government will do what it can to relieve the burden of taxation in this regard.

Rebuilding Ireland is an important plan and represents a strong commitment from the Government. The plan needs time in certain areas to allow it to work. There are other more short-term measures like the €200 million that was previously announced, €50 million of which is in this budget, to release potential landbanks and infrastructure investment. That is incredibly important in parts of Dublin when it comes to building new bridges across the Liffey and other landbank projects. It is also important in terms of building wastewater treatment and roads and other things we can do to ensure that our land, which is a finite resource, particularly around urban areas, is being used in the appropriate way.

Funding is being put in place to recruit new gardaí. This is being matched with funding to bring in civilian people to do administrative work in the Garda. There will be several hundred posts. This is important to ensure gardaí, who are so well trained and who know how to keep the peace, are able to work on the front line rather than being overburdened with administrative work. The Defence Forces were mentioned in the context of funding as well. They do incredible work. It says something important about the Government and the priorities of the Oireachtas that, with the scarce resources we have for defence, we chose to deploy them in the Mediterranean to save the lives of people who are desperate to flee harrowing circumstances in their countries. That says something good and it is good that we are maintaining that commitment in the Mediterranean and overseas.

The new measures under housing address a number of areas, including homelessness. The figures include €28 million for emergency accommodation and a 220% increase in funding for housing assistance payments. We have measures in place for students under the room-to-rent scheme as well. There are measures for first-time buyers and new builds. There are measures to renovate existing stock. Mortgage interest relief measures are being extended. All of these will work together, hopefully, to try to unlock the choke point in housing supply at the moment. That is vital not only for the homelessness crisis and people on social housing schemes or those trying to get on social housing schemes, but also for young couples and first-time buyers who are trying to buy for the first time to get some stability in their home lives as they build them. It also is relevant for people who are looking to downsize who have been caught in a negative equity trap that still has not realised itself and may not. Others may have growing families and may need to move in to different types of accommodation. We need to allow all of that to work and allow a proper market to function. We hope these schemes will work in tandem with the good work being done by the Minister for Housing, Planning, Community and Local Government, Deputy Simon Coveney.

One of the important things in agriculture that will be of immediate significance to people in the sector is the ability to step out from the income averaging over five years. People need to be able to step out this year, if necessary, because of the difficulties encountered and the difficulties coming down the line in respect of the impact of Brexit and how it will hit our agrifood sector.

Sterling and currency fluctuations are of concern. There are further changes to come in terms of the relationship between sterling and the euro. Some companies have hedged. Some companies have natural hedging because they import but others are not in this position. We are trying to look after those exporting companies in this budget. There is a scheme in place, the foreign earned income, to help them diversify into foreign markets.I recently had the opportunity to do that in Asia with 12 Enterprise Ireland client companies doing excellent work there and looking to build new relationships on existing ones. That scheme will help. In its contingency planning, Enterprise Ireland has also flagged the potential need for some sort of a fund which could step in to deal with currency exchanges. The contingency planning we are doing around Brexit is a constant. It did not stop when the decision was announced. It was based on the 12 months’ previous work we had done and we are constantly reviewing it. There is a mechanism through the Taoiseach’s Cabinet sub-committee for us to report back in about different developments and changes we believe may need to happen, based on the feedback we are getting from the various markets.

A new spend transparency website, under the Department of Public Expenditure and Reform and e-Government for which I have responsibility, was launched today. It gives as much detail as possible in real time not just to Oireachtas Members, but members of the public. When one checks the website for trends over the past several years, one will see the amount of money going to unemployment support has decreased, while the amount going to income and back-to-work supports has increased. The Government uses public moneys to invest in people who are trying to get back into work. That is the most productive way to do it. It is more beneficial for those individuals as well. The website is whereyourmoneygoes.gov.ie.

The 45% debt to GDP ratio is an important target. It is important we state now how we look to the future and protect the economy into the next five to ten years. It is important we reduce our exposure to the foreign bond market, which can be unpredictable, and the need to borrow or service debt, in so far as being able to prioritise investment in our economy in the years ahead.

An amendment to the section 110 provision has been published by the Minister for Finance. Consultation is ongoing and further details of that will be worked out in the course of the finance Bill. On a separate note, increased resources will be given to Revenue for it to collect taxes efficiently. We are also looking at areas where Revenue can tackle tax avoidance. The Minister has also flagged potential changes to legislation as a result of the leak of the Panama papers. From that, we hope to collect quite a significant amount of increased taxation into next year and the year after.

In so far as how we tax people in our economy, I do not believe it is fair that a Government would take more than half of what someone earns in a given week. That acts as a disincentive to work and productivity in the economy. For those earning €50,000 or more in the economy, who are paying 81% of all universal social charges and income tax, is it fair to ask them to pay even more? I do not think so and it would be counterproductive in the economy. When one looks at how we structured the economy, we focused on getting people back to work. Through doing that, we have brought in extra revenue to the Exchequer. Through that, we have been able to reduce taxation for those working already. In turn, this has allowed increased investment in companies and jobs, as well as increased productivity in the economy. This is the means by which one gets extra taxation, namely, increasing activity. The more one taxes something, the less one will get from it. There is a point at which it becomes completely counterproductive. When we look at certain proposals from certain parts of this House, that is exactly what we would be walking into. The model we have used over the past five years has worked. There are over 2 million people back in work. We are now in a position where we will eliminate the deficit by 2018, bring debt to GDP ratios to a sustainable level and have money to increase investment in our society. I do not know why we would risk that model which is working. When one looks at negative and less than 1% growth levels around the world, and despite Brexit, Irish growth rates are forecasted at 4.2% this year, 3.5% growth next year and 3.25% the year after that. This model is working for us. I do not know why we would throw that out and risk it on some mystic, quasi-academic model which has not been proven anywhere.

Car insurance premiums are a concern. The working group of which I am in charge will have proposals in the next couple of weeks for the Minister to help combat increased premiums which are eroding the gains some are seeing in their income tax. We must ensure we come up with sensible recommendations which are going to solve the problem as we see it. I will have those recommendations for the Minister in several weeks and I would be more than happy to discuss them in this Chamber.

Disability is an incredibly important part of what we do as a society and how we invest in the social good. Millions of euro are spent in this area every year. Some contributors gave the impression that nothing is being done and taxes are not put to good use. Of course, they are. In this budget, we have seen an increase in the home carer’s credit, which is important, while dental and optical benefits have been extended. Significant investment is being made in the disability sector. The increase of €5 is something. This budget cannot go further but others will. The extension of the medical card to children and domiciliary care are important measures we are making in our social welfare spend.

There is a 35% increase in spending for early learning intervention. How we view young people is important and how we view an economic investment in our future by focusing on the early learning years. Great work has been done on this in my constituency. It is an important way in which we can structure our resources in terms of government funding. The new structures for child care will be announced by the Minister for Children and Youth Affairs, Deputy Katherine Zappone, in the Dáil later, if they have not been already. It will help low and middle income working parents who have such high child care costs.

A key part of Brexit-proofing is education. In terms of the international financial services strategy which I lead in the Department, we have made upskilling, education and apprenticeships a key pillar of our strategy to increase that sector by 30%. It will be in high-end jobs such as data analytics. We will achieve this by working through the National College of Ireland, the Central Bank and the industry. It is an important part of our commitment to education to ensure we are helping Irish graduates, as well as others at any point in their life cycle, to get good and new jobs. It will allow them to move out of one particular job they may not have liked and go into something completely different. The apprenticeship schemes allow four days in the workplace and one day in the college. It comes with a meaningful salary with a minimum of €35,000 on the first pillar and €50,000 on the second pillar. It is an opportunity to make a meaningful contribution, learn and upskill, as well as the opportunity for new companies to come into Ireland because we have the educated staff they require. That then benefits the wider economy through indirect jobs.

Foreign direct investment created 187,000 jobs in this economy. Depending on the different multipliers and which sector one looks at, it has been worked out that as many as three indirect jobs in ancillary services, such as real estate or catering, are created by each direct job. All companies benefit as a result of foreign direct investment. We must ensure we are investing in education so that this can continue.

The sports capital grant for next year is welcome. Members know how a small investment in sporting capital grants will have a disproportionate positive impact for communities and people’s health and welfare. I am glad this will return next year. I hope it will be announced early to ensure we can have some investments made in advance of the summer season.

VAT and charities is an important area. It is good the Government is committed to examining this further as it requires further investigation. I hope we can do something on this.

There is new funding for transport in the budget through the public service obligation, capital road stock maintenance, finishing the Luas and certain road schemes referred to by Ministers earlier in the Dáil.

The introduction of paternity care is important. The fact that we are combining a universal and a means-tested element is important because we want to ensure the limited resources we have go the people who need them the most. People at the lower and middle incomes who are having difficulties can also get help. The Minister for Children and Youth Affairs, Deputy Katherine Zappone, will speak on that, if she has not already. I do not want to pre-empt her remarks on the finer details.

The commitment to the low paid can be very much seen in the universal social charge reductions, the changes to the thresholds and how they apply to the second and third band. There is also another increase in the minimum wage. Although it might only work to counter an increase in inflation, it is still important. It must be recognised that the increases in minimum wage do not always necessarily benefit those on it. Sometimes people on higher wages experience more of a benefit in real terms compared to those in the minimum wage. We have to be careful when we talk about the minimum wage and not get it confused with the living wage, which is what the Government is working towards.

Is this an expansionary budget? It is important, and when we look at Brexit as well, that we find a balance in being prudent in how we structure our resources, rainy day funds and other checks and balances in spending.However, it is necessary to make investments to protect our economy from some of the threats from Brexit. We need to find a balance between the two concerns. This is a prudent budget that balances the need for investment to grow the capacity of the economy and meet people's needs in areas such as education and housing with the requirement to be cautious enough to protect us from any downturns or negative tailwinds in the international economy.

There is a range of incentives in place for international financial services and, in addition, we have several natural incentives in this regard. For example, we are another common law jurisdiction for companies moving out of the UK and we will, moreover, be the only English-speaking country left in the EU after the UK leaves. Our corporate tax rate has been very effective in securing jobs for the economy. Investments we have made in education have likewise helped to attract employment to the State. Other incentives include a programme to encourage high net worth individuals and companies to relocate here and bring staff with them and the knowledge development box to encourage research and development in the State. Many financial services companies are engaged in research and development projects relating to payments and financial technology, fintech. We are looking to relocate that resource into this country. There is a great deal of commercial space coming online to accommodate these developments. The provision of regional incentives, including in Letterkenny, Kilkenny, Tralee and Drogheda, have helped to build the very strong financial services offering we have around the country. We have good incentives, good clusters and good hubs. We will build off the back of that using the IFS 2020 strategy and other measures that are coming down the line.

The local property tax has been frozen in terms of increases and the recalculating of the base rate, which was due to happen this year. That gives us time to reform the tax and it is important we do so. It was introduced at a particular time in our economic history, a time when we needed to raise a certain amount of revenue. We have an opportunity now to reform it and that work will be guided by reports that have already been done and further work that will be done by the Oireachtas.

This budget demonstrates our ongoing commitment to assisting the low paid. Reference was made to what the last Government did or did not do in this regard. In fact, one of that Government's first actions, in its first budget in 2011, was to increase the minimum wage. We also took 700,000 people out of the universal social charge net and introduced caps for workers earning more than €70,000 to ensure they did not get a disproportionate benefit from tax changes introduced. The evidence does not support claims that certain budgets in the past favoured the wealthy. If we are to have budgeting that is evidence-based, we must maintain some type of respect for what actually happened in the past in terms of budget changes.

The self-employed will see benefits from this budget. SMEs are the job creators and retainers of our national economy and play an important part in local economies throughout the country. Anything we can do to help the self-employed and bring them back to some type of parity with PAYE workers is welcome. The provisions in this budget are just another step in a process that was initiated in previous budgets. We have further to go but we are heading in the right direction.

I am not sure I understand the point about age discrimination against the young. Some €36 million is being invested at third level, the first time we have seen any type of significant investment in that sector since the crisis. Young jobseekers will be better off after this budget. The first-time buyer's incentive disproportionately favours young people. The minimum wage increases and USC reductions will help young people in lower-paid jobs, be they students or otherwise.

The budget provides for a year-on-year increase of over €1 billion in investment in public services in 2017. We had a huge investment in the arts last year to do with the centenary commemorations. No single party should try to claim ownership over the arts. This is something which impacts us all every day, whether we realise it or not. My party has shown its commitment in this regard at every budget since 2011. The Minister for Arts, Heritage, Regional, Rural and Gaeltacht Affairs has done, and continues to do, a huge job. In the film sector, the quality of films being produced and made out of Ireland sends a message to people around the world. There are several exciting potential developments in this regard in respect of which we may see an announcement early next year.

I hope I have addressed all the points that were raised. I very much welcome the opportunity to engage with Senators on this important budget. There is more to come in terms of the finance Bill and other Bills, which will provide greater detail of what we hope to do in the course of 2017. As I said, the Minister for Public Expenditure and Reform has indicated that a spending review will take place next year. While the budget provides for an increase in spending in 2017, there is a need now to review the entire stock of the €58 billion and how it gets spent, to ensure we are spending it efficiently and effectively. We must be certain the taxes that are raised from people's hard work are going towards the public good in a significant way, as we in the Oireachtas see that public good.