Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank all my Seanad colleagues for their contributions. Many of the points made could be elucidated further on Committee Stage. The Bill comes from a situation in which we negotiated a Government. We are supported by Independent Members in the Cabinet, principally by the group associated with the Minister for Transport, Tourism and Sport, Deputy Shane Ross, but also by the Minister for Children and Youth Affairs, Deputy Katherine Zappone, and the Minister for Communications, Climate Action and Environment, Deputy Denis Naughten. We are supported across the House by Fianna Fáil, to which the Senator referred. In negotiating an acceptable budget, it is very easy to negotiate bilaterally. I have to negotiate bilaterally such that the agreements all line up at the end. Co-ordinating the negotiations is the difficult part, not just the negotiations themselves.

While it is true that Fianna Fáil is very conscious of the fact that public services are in need of extra investment, we are also conscious of it. What we did during five years in government from 2012 was not a matter of choice, in many respects. We had no option. We were more conscious, in government, than many people in opposition about the state of disrepair of many aspects of the health service and across public services. We did not have to be pushed very hard in this Government and budget to agree to dedicating a greater proportion of the resources available to public services rather than tax reductions. The proportion we agreed to was 2:1 in favour of public services. The budget comes out at approximately 3:1. We have a lot of headroom, which we used.

The major effects of the policy positions of the budget are to be seen not in the Finance Bill but in the Revised Estimates, which will be released soon, and which will show very significant increases across the spending Departments and in the numbers of extra people who will be employed to deliver public services. In this area I claim that the budget is very significant. We are keeping the fiscal rules. Regarding the macros, we will probably end the calendar year with a deficit of 0.9% or 0.8%. Next year, we are provisioning for a deficit of 0.5% and in 2018 we will have a balanced budget.

The employment initiatives we have taken, together with the macroeconomic policies, have been very effective in making the recovery job rich. The latest set of figures from the Central Statistics Office, CSO, put unemployment at 7.3%. Most economists would agree that 6% is probably full employment. In the unemployment figures, there are many people between jobs. Given that there is very big churn in the Irish labour market, there are significant numbers of people between jobs at all times, including people coming back from abroad, changing jobs or changing locations. If we get down to 6% we are probably at full employment, as most economists agree.

Improvements in the numbers at work get sticky when the percentages decrease. As soon as the economy is successful, it begins to attract emigrants back home and immigrants from other European countries. Dublin has become a multicultural city where one meets people from every part of Europe, especially among the young working population. The effect is that many of the jobs created are not filled by people coming from the live register. However, by mid-summer, unemployment will probably be at approximately 6.9% or 6.8%. We have come a long way.

We are in a pretty good position. While there are risks, most of them are from abroad. The biggest domestic risk is debt. Legacy debt is still very high. In the budget, I set a new target. Rather than achieving the European target of 60% of gross domestic product, GDP, we will drive on and try to reach a target of 45% of GDP in the mid-2020s. This will give us more headroom if there is another crisis. There are issues regarding spending too much, and public sector pay is an issue that must be contained. The Minister for Public Expenditure and Reform, Deputy Paschal Donohoe, is talking informally to the trade union movement and we are trying to accommodate the extra costs that may be coming through on the pay side.As of now, there will be no need to amend the figures included in the 2017 budget to accommodate the pressures that are emerging.

On the specifics of the budget, while there was no really strong specific issue, a number of Members mentioned that they would like to see more money being raised from corporation tax. A great deal of money is coming in. We have doubled the tax take from corporation tax in the past two years, as is borne out by a comparison of the figures for 2014 and 2016. The take from corporation tax this year is significantly above the forecasted figure. This dates back to the measures we took in the Finances Bills of 2012 and 2013 when we abolished the double Irish, as well as stateless companies for tax purposes. We have continued by taking action in this Bill on the Panama papers and the section 110 provisions. We have discussed the section 110 provisions with all interested parties and the best tax lawyers in town and think we have got it right, but if it transpires in the course of the year that some tax avoidance scam has emerge, I will back to the Seanad to deal with it because the intention is to close the tax avoidance schemes. Section 110 was brought forward to drive the financial services industry in Dublin and it gave certain tax breaks for securitisation, which is key to financial services. They were subsequently used by property investors for a purpose for which they had never been intended. With the advice of tax lawyers who had found a gap in the law, they misapplied the section 110 provisions to activities for which they had never been intended. What are we doing? We are closing it. Nobody can have a objection because they did not tell Revenue that they were going to use the section 110 provisions in that way. Of course, with the way the people concerned file their taxes, Revenue would not have seen it coming through for 18 months. It is only in the case of the Finance Bill 2016 that we have had a reasonable idea of what has been happening and that we are in a position to move to close the gap.

Senator Michelle Mulherin referred to the living city initiative. It has not been successful. It took two years to get sanction from Brussels because it was a project to which state aid rules would apply. One does not have to revert to Brussels if there is a de minimuschange in a provision that has been sanctioned. The measures which have been brought forward are considered by Brussels to be deminimus. Therefore, we do not have to go back to Brussels again. If, however, we were to extend the initiative to provincial towns such as Mallow, Tralee, Castlebar, Crossmolina and so, we would have to go back and Brussels would stop the initiative for a further two years. I am advising that we wait and see if the initiative, as amended, will work. If it works effectively, there will be an opportunity to extend it to market and provincial towns, but let us test it first. If I were to do anything else at this time, it would be stopped dead.

All of the arguments made by both sides about the USC, up, down, over and back, were political rather than economic. Everyone has a view on it and everyone is entitled to his or her view. Our policy in government is that as resources become available, we will continue on the path followed in the past three budgets towards removing the personal tax burden - PRSI, income tax and USC - from those on low and middle incomes. Since the USC was the last to be introduced and as Senator Kieran O'Donnell said, it was really like a wartime measure; it was a measure to deal with a particular crisis. Since it was a crisis measure, we should start to reduce its impact before we get to the core of the income tax code. That is sensible.

I do not think there was anything else raised that would not be dealt with subsequently on Committee Stage. I look forward to having a dialogue on the amendments tabled by Members on Committee Stage. If I cannot take their advice on board on this occasion, I assure them that I am listening all the time and that I am always amending policies. If it works, I am agnostic on the source of the advice. I thank Senators for their contributions.