Jennifer Carroll MacNeill (Dún Laoghaire, Fine Gael) | Oireachtas source

I am very pleased to appear before the Seanad to discuss budget 2024, which was presented to Dáil Éireann earlier today by the Ministers for Finance and Public Expenditure, National Development Plan Delivery and Reform. I have copies of the speech.

Recent years have seen the Irish economy grapple with a series of economic shocks - Brexit, the pandemic, Russia's invasion of Ukraine, and a rate of inflation not seen in decades. Despite these significant challenges, we have an economy operating at full employment with a record high of 2.64 million people at work, and an unemployment rate of 4.2%. This positive economic performance is a testament to the resilience of the Irish people and the success of the Government's policy responses. This budget will provide further support to households and firms who are continuing to feel the impact of rising prices. It is again a progressive budget that prioritises the most vulnerable in society.

Key measures in the budget include increases in the standard rate of income tax cut-off point, increases to tax credits and a reduction in the universal social charge, USC, rate to help reduce the tax burden on individuals. There are one-off cost-of-living measures such as the deferral of the restoration of fuel excise increases and the extension of the 9% reduced VAT rate on electricity and gas. The budget contains a range of supports for enterprises including a targeted capital gains relief for angel investors in innovative start-ups. The supports for housing, include amendments to the help-to-buy scheme, increases in the rent tax credit, mortgage interest tax relief, and tax relief for landlords. Climate transition measures include an extension of the accelerated capital allowances scheme for energy efficient equipment and incentives for electric vehicles. The establishment of the Future Ireland Fund will help future-proof our economy and our public finances.

I will now turn to the economic outlook. Budget 2024 is being framed against a highly uncertain global environment. Our key trading partners are experiencing an economic slowdown, which is already reflected In our recent export performance. Indeed, as a small, highly open economy, what happens globally has immediate repercussions for Ireland. Over the last year or so, the economy has experienced the effects of multi-decade high rates of inflation, with inflation averaging just over 8% in 2022. That had a huge impact on the everyday lives of our people. Fortunately, inflation has eased somewhat in recent months and is projected to average 5.3% this year. For next year, inflation is projected to be 2.9%. As a result, collective living standards should improve for the vast majority in the next 12 months, with income growth exceeding the rate of inflation. In terms of the domestic economy, modified domestic demand - the preferred measure of domestic activity - is projected to increase by 2.2% both this year and next.

I will turn now to the fiscal outlook. A general government surplus of €8.8 billion is projected for this year and €8.4 billion next year. However, excluding the impact of our windfall corporate tax receipts, estimated at around €10 billion to €12 billion this year, an underlying deficit of €2 billion is in prospect for 2023. That is why it is essential that we do not build up permanent fiscal commitments based on potentially transitory corporation tax revenues.

The summer economic statement set out the parameters for budget 2024. It acknowledged that the Government had decided to temporarily adjust its 5% spending rule to take account of the fact that inflation is projected to be above trend next year. Net core public spending will now increase by 6.1% next year.Budget 2024 consists of a core expenditure package of just under €5.3 billion and a tax package of more than €1.1 billion, which is a total core budget package of €6.4 billion. It also includes a net temporary package of €2.7 billion. In addition, there is non-core expenditure of €4.75 billion, including an additional €250 million for the public capital programme funded by windfall corporation tax receipts. Budget 2024 provides significant supports to mitigate the impact of cost-of-living pressures for vulnerable families and firms without unduly adding to inflationary pressures.

Turning first to income tax, over the past four budgets, Government has introduced a range of supports to help reduce the tax burden on individuals. We have taken more than 220,000 people out of the upper tax bracket through the last three budgets since the Covid-19 pandemic. Budget 2024 continues the trend and includes the following measures: an increase in the personal, employee PAYE and earned income tax credits by €100 each; an increase of €2,000 in the standard rate income tax cut-off point, increasing entry to the higher rate of income tax to €42,000, which is an overall increase of €10,000 over the past ten years; and a reduction of the 4.5% rate of USC to 4%. This is the first reduction in USC rates in five years. It is also important to mention that the entry threshold will be raised to €25,760 in line with the increase in the national minimum wage, and the USC concession for medical card holders will be extended a further two years. In addition, the home carer and single person child carer tax credits will increase by €100 and the incapacitated child tax credit by €200 from €3,300 to €3,500.

To put these changes in perspective, a single person earning €46,000 in 2024 will see an increase of more than €2,000 in his or her annual net income as a result of income tax and USC changes since 2021. A married one-earner couple with two children with an income of €65,000 would see an increase of more than €2,500 over the same period.

Additional temporary measures to help address inflationary pressures include an extension of the 9% reduced VAT rate for gas and electricity for another 12 months, as well as deferring the restoration of the final tranche of fuel excise increases, which was due to happen on 31 October 2023. This is something for which Senators called repeatedly. The outstanding amounts will now be restored in two equal instalments on 1 April 2024 and 1 August 2024.

Alongside cost-of-living pressures, housing remains a key focus for this Government. In terms of the rental market, the Government is increasing the value of the rent tax credit from €500 to €750 per year for 2024 and also extending its eligibility. Additionally, Government is introducing a tax relief aimed at small landlords. Subject to certain conditions being met, rental income of €3,000 for the year 2024, €4,000 for the year 2025 and €5,000 for the years 2026 and 2027 will be disregarded at the standard rate.

Budget 2024 will also introduce a temporary one-year mortgage interest relief for homeowners with an outstanding mortgage balance on their primary dwelling house of between €80,000 and €500,000 as of 31 December 2022. Relief will be available in respect of the increased interest paid on the mortgage in the calendar year 2023 as compared with the amount paid in 2022, at the standard rate of 20% income tax. The relief wilt be capped at €1,250 per property.

The help-to-buy scheme is being amended to ensure that applicants of the local authority affordable purchase scheme can also avail of it. To incentivise better use of the existing housing stock, we are increasing the vacant homes tax to five times the property's basic local property tax rate whereas it had been three times that.

On insurance, today, we are changing the levy charged to finance the Motor Insurance Insolvency Compensation Fund from 2% to 1%. I am happy to confirm that this will benefit policyholders on renewal from 1 January 2024 and I expect it to be passed on. The cut to this levy will have a direct positive impact on the cost of motor insurance in addition to the Government's programme of reform and will reduce the overall level of contributions to the fund by approximately €20 million. There have been improvements in the cost of motor insurance over the past few years. As we know, official data shows that premiums have fallen by more than 40% since 2016, benefitting 2.2 million policyholders in Ireland.

I want to see businesses benefit next from Government insurance reforms including the new personal injury guidelines, duty of care changes and anti-fraud measures. Like motorists, businesses, too, must see reductions in future premiums at renewal time owing to what is a more equitable, stable and predictable insurance market situation in Ireland as a consequence of the Government reforms.

It is essential that we continue to support the enterprise sector in Ireland and plan for innovation and industry for the future. Legislation will be published in the Finance Bill to implement the 15% minimum effective tax rate for large companies as provided for under the OECD pillar two agreement.

The research and development tax credit will be increased from 25% to 30%. This will maintain the net value of the existing credit for businesses subject to the new 15% minimum tax rate. However, it will also delivering a real increase in the credit to those smaller companies that will not necessarily be in the scope of pillar two.

For small and medium-sized enterprises, budget 2024 also introduces a new targeted capital gains tax relief for angel investors in innovative start-up SMEs. This will allow angel investors to benefit from a reduced rate of capital gains tax of 16% when they dispose of a qualifying investment for gains up to twice the value of their investment, subject to a lifetime limit of €3 million in gains. Budget 2024 also includes enhancements to the employment investment incentive and retirement relief, which is very significant for business owners and, indeed, farmers.

In terms of agriculture, a number of important reliefs, such as the consanguinity relief and accelerated capital allowances for farm safety equipment, are being extended to support the farming sector, and there is more on that. In the area of climate action, the Government remains committed to protecting the environment, reducing emissions and, crucially, supporting newer cleaner technologies. Therefore, the Government is extending the accelerated capital allowances scheme for energy-efficient equipment for an additional two years. Additionally, the zero VAT rate on the supply and installation of solar panels for private dwellings will be extended to schools. The existing preferential benefit in kind, BIK, treatment rate will remain for 2024 and 2025. The existing vehicle registration tax, VRT, relief for battery electric vehicles will be extended for a further two years. Carbon tax will rise from €48.50 to €56 per tonne of carbon dioxide emitted from 11 October. There are a number of other revenue-raising measures but I am afraid I am out of time.