Seán Kyne (Fine Gael) | Oireachtas source

What a difference a year makes. The Minister is welcome to the Seanad. It is an extraordinary budget for an extraordinary time. Last year, the greatest challenge facing our country was Brexit and budget 2020 was framed with Brexit in mind. Budget 2021 has been framed with not one but two extraordinary challenges facing us, namely, Brexit and Covid-19.

We are in the midst of a global pandemic battling an invisible enemy that has worryingly regrouped in recent weeks, a stark reminder that we are nowhere near the end of it. Every country in the world has been impacted by Covid-19, their economies devastated and lives and livelihoods lost. At home, domestic demand has fallen by approximately 6% and 320,000 jobs will have been lost by the year end. Our deficit has been forecast to be €21.5 billion.

We cannot forget for a moment the threat that a disorderly Brexit poses. I am reassured by the fact that the budget has been prepared on the basis that there will be no trade agreement between the EU and the UK, although we all hope and would prefer if a comprehensive agreement were reached by 1 January. It is within the parameters of Covid-19 and Brexit that budget 2021 should be reviewed.

This budget is the largest investment in the history of the State. It continues the swift action to support people, businesses and communities throughout the country. The rainy day fund from last year along with the careful and prudent management of the finances of our country in recent years have enabled us to access the funding that is needed now. This point is lost on many people. The budget has a range of measures to support households, businesses, farms and communities, including €8.5 billion for Covid-related supports and an increase of €1.6 billion to bring to €10.1 billion the investment in longer term capital infrastructure.

While the expenditure elements of the budget garner more attention in the coverage for various reasons, the policy changes relating to revenue, taxation and other financial supports are equally important. Let us consider the personal taxation measures. I warmly welcome the increase in the earned income tax credit to €1,650. This brings the figure into line with the PAYE tax credit. We introduced this measure several years ago in recognition of the risk that self-employed people take to create business and jobs. That is most welcome. I welcome the significant increase in the dependent relative credit from €70 to €245. This is clear recognition of the work of so many people throughout the country who care for a relative in various ways. The importance and value of caring have been amply demonstrated this year on account of Covid-19. This measure is an important statement of the type of society we wish to be.

The increase in the ceiling of the second category of the universal social charge will benefit all workers but especially those on lower incomes. With the extension of the help-to-buy scheme, which provides up to €30,000 or 10% of the purchase price of a new home, we will continue to support people to buy their first home. The increase in the carbon tax is a necessary step to combat climate change. I am heartened by the inclusion of enhancements to the living alone allowance and the fuel allowance which will protect the most vulnerable.

In addition to the positive changes to personal income tax measures, the budget also contains key financial policy changes to support businesses and specific sectors. The new Covid restriction support scheme will support businesses that have closed or endured a substantial decrease in turnover on account of Covid-19. The scheme will be of particular importance to businesses in the hospitality, tourism and entertainment sectors that are impacted by various levels of the living with Covid-19 plan. It will, insofar as is possible, provide certainty and enable businesses to continue to meet fixed costs. The scheme, along with the employee wage subsidy scheme, will be vital in supporting viable businesses and maintaining jobs. Another vital support for the entire country, especially for counties dependent on hospitality and tourism, is the reduction in the VAT rate from 13.5% to 9%, effective from 1 November. Will the Minister set out what amount was raised from the recent increase in that tax? Was it in line with projections? I know the industry representatives have said the projections were overestimated. Taken with other supports, including the wage subsidy scheme and the stay-and-spend scheme, the VAT cut will be instrumental in supporting sectors that have been heavily hit by the pandemic and the necessary public health measures.

While the revenue raising measures and additional spending that budget 2021 involve are necessary to support households, businesses and communities, we cannot escape the responsibilities that borrowing such vast sums of money bring. I have no doubt that running a deficit and spending reserves, such as the rainy day fund, are the right steps to take at the moment. However, we cannot ignore the risks. An increase in interest rates - it is a case of when and not if - will push up the cost of borrowing and make accessing new finance or restructuring existing liabilities more expensive. Such outcomes will have consequences for the spending choices of the Government. How much have the changes to the EU rules on the deficit changed due to Covid-19 facilitated this increase in borrowing in budget 2021?

It is essential that we ensure proper oversight of this additional expenditure. It is essential that we avail of EU supports such as the instrument for temporary support to mitigate unemployment risks in an emergency, among others, designed to support member states and their citizens. It is also essential that we engage only in sensible and responsible borrowing with a focus on gradually reducing the deficit and leading towards balanced budgets once again.

No one can say how long Covid-19 will continue to impact on our lives but we must hold on to hope and keep in mind the work of so many researchers, scientists and others who are working to develop vaccines and treatments that will enable our communities and countries to return to normality. Again, I thank the Minister for his work on budget 2021.