That Seanad Éireann notes the Budget Statement of the Minister for Finance.
Vol. 185 No. 12
That Seanad Éireann notes the Budget Statement of the Minister for Finance.
I am pleased to be here in the Seanad today outlining the provisions of the 2007 budget and to listen to the debate this evening. Ireland continues to make strong economic and social progress and the key indicators for the future remain positive. It is in this context that the 2007 budget has been cast and with a view to ensuring the benefits of success are shared by all. The Government has set out four key objectives: sustaining a strong economy; supporting employment; promoting improved competitiveness; and building a fairer, more caring society.
The Government's budgetary strategy is based on the objective of continued budgetary sustainability both in the medium and longer term. The public finance position is sound. The debt-GDP ratio is projected to be 23% in 2007, one of the lowest in Europe. The outlook is for a general Government budget surplus of 1.2% of GDP in 2007. This includes the cost of infrastructural investment which, at around 5% of GNP, is running well ahead of the EU average.
The strategy for achieving the Government's key objectives with regard to budgetary and economic policy includes improving equity and opportunity, fostering employment and economic growth, helping families and those on low incomes, enhancing public services and value for money, maintaining high levels of infrastructural investment to secure future economic growth, and pursuing prudent fiscal policies to ensure the flexibility required to respond effectively to any budgetary pressures that may arise in the future. The continuing strong performance of the economy together with appropriate and prudent management of the public finances have made today's budget possible. The tax, social welfare and public investment measures will ensure this success will be sustained and widely shared.
I will set out the context in which this budget has been framed. As one of the most open economies in the world, Ireland's performance depends on its economy being able to respond quickly and appropriately to international developments. Global growth has been robust in 2006, despite volatile oil prices and the latest forecasts from the EU Commission are for an increase of 5% in world GDP for this year. GDP growth in the US is expected to be 3.4% for 2006 but the economy is slowing. Growth in other regions and, in particular emerging Asia, is set to remain strong. The euro area has experienced considerable economic expansion in the first half of 2006 and output growth is expected to average 2.6% in 2006, driven mainly by domestic demand.
The performance of the Irish economy continues to be impressive and GDP growth is expected to rise by 5.4% for this year and by 5.25% in 2007. A key component of our economic strategy was job creation and our success in this area is exceeding all expectations. The number of people employed is now more than 2 million for the first time in the history of the State and for 2006 as a whole employment is projected to grow by 4.4%. This represents an increase of 87,000 jobs, or more people than would fill Croke Park on an All-Ireland Sunday. The outlook for unemployment remains equally favourable and we have one of the lowest unemployment rates in the euro area.
Business policies have helped to nurture new and existing enterprises from the sole trader to the large multinational corporation. We recognise that creating the environment that encourages business is critical if we are to maintain job creation and economic growth, which are essential to maintain social progress. While I acknowledge that inflation has been a concern this year, it is now expected to moderate during 2007, with HICP inflation forecast to be 2.6% in 2007.
We must not, however, be complacent. A number of potential risks remain on the horizon. Further interest rate increases, oil price volatility and the weakening dollar allied to a possible disorderly unwinding of global imbalances, continue to be the main areas of concern. The Irish economy must be resilient if these risks become a reality and improving its competitiveness will play an important role in this regard.
We have achieved economic progress by choosing prudent and appropriate policies and this has created a favourable economic environment for growth. The Government is committed to ensuring that the public finances remain in a healthy position. Prudent fiscal policy means this year we are operating off a budget surplus — one of only six countries in the EU 25 forecasted to achieve a surplus this year. Despite this, we are continuing to provide generously for health, education and social welfare and continuing to introduce measures to reward work and promote enterprise.
The Minister today outlined that a longer-term and sectoral approach will be adopted to ensure public spending is efficient and effective. A total of €48.5 billion is being provided for gross current expenditure in 2007 and this represents an increase of 11.5% over 2006. More than 77% of gross current expenditure is for social welfare, health and education and this demonstrates the priority the Government accords to these areas.
The Government wants to ensure everyone in our country benefits from our economic success, particularly those who are less well off. The total cost of the social welfare improvements announced today amounts to €1.4 billion in a full year and will bring total social welfare expenditure for 2007 to €15.3 billion. From the first week in January, all maximum State and related social insurance pensions will be increased by €16 to €209.30 per week while the maximum personal weekly rate of the non-contributory State pension will increase by €18 bringing it to €200 per week. There has been a €20 increase in the lowest rates of social welfare payments bringing the lowest adult rate to €185.80 per week. The Minister has also provided a further €189 million for other social welfare measures which will include increasing the respite care grant, providing a disability allowance for the 2,700 people in residential institutions, doubling the back to school allowance, and increasing the fuel allowance by €4 per week.
Almost €15 billion will be provided in the health and children area in 2007. Included in this figure is €321 million in 2007 to enhance our capacity to care for a number of important groups in our society. More than €205 million will be provided for additional care packages for our elderly, including an expanded home help service, additional residential beds, improvements to palliative care and day-respite service and enhancement of the support available under the nursing home subvention scheme.
Today, the Minister for Finance has allocated an additional €100 million for health related disability services. As well as providing for additional residential, respite and day places, this funding will enable the introduction of Part 2 of the Disability Act 2005 which involves assessments of need and service statements for people with disabilities, and which will commence for children under 5 years from 1 June 2007. It will also enable the continuing transfer of persons with an intellectual disability from settings inappropriate to their needs.
Of the additional €100 million announced, €25 million is being assigned to support the continued implementation of the mental health services plan, A Vision for Change, as well as funding for the national strategy on suicide prevention. This funding will support the provision of additional community-based mental health facilities, including mental health day centres, day hospitals and community residential facilities, as well as the appointment of extra frontline staff to support adults and children with mental illness. An additional €16 million is also being provided for primary care.
Ireland has led the world by successfully banning smoking in the workplace. To discourage smoking further, which is having such a negative effect on our health, an excise duty of 50 cent is being added per packet of 20 cigarettes and corresponding amounts on other tobacco products.
The budget recognises the essential role education plays as a catalyst in delivering economic success and €7.89 billion has been provided for education in 2007. Over the past four years we have added 6,800 teachers at first and second level and increased special needs assistants by 3,100. A further 800 teachers will be provided at primary level in 2007. A 24% increase in graduates between 2002 and 2004 shows that investment at third level is also paying off.
In recent years, the Government has provided significant resources for child income support and child care. In today's budget, the Minister announced that the three rates of child dependant allowance will be merged and a new standard rate of €22 per week is being introduced in 2007. Child benefit is being increased by €10 per month for all children. The total cost of these child related increases will be almost €244 million in a full year. A national child care strategy was introduced in last year's budget. This is a five-year strategy to address the supply and the cost of child care, costing a cumulative €2.65 billion over that period. A provision of €381 million was included in the 2007 Estimates for the early child care supplement. There will be a further four-week increase in both paid and unpaid maternity leave in 2007, bringing the duration of paid maternity leave to 26 weeks and the duration of unpaid maternity leave up to 16 weeks. Together, these measures should help to ease some of the pressures on young families.
The stock and quality of public physical infrastructure is one of the critical elements in the long-term growth strategy for the economy. While there have been significant developments in infrastructure delivery under the current national development plan, especially in the area of roads, public transport, housing and health care, ongoing investment in these areas is still required. The Minister for Finance stated today that he will publish a new national development plan in January which will commit to a major seven-year programme of investment above current levels, especially in the area of transport. The 2007 capital allocation provides for a total public capital investment of €7.8 billion. Around €7.6 billion of this is Exchequer capital and €264 million is public private partnership capital, to be funded by annual payments from the Exchequer.
We are constantly striving to achieve the objective of a fairer, more progressive and rewarding income tax system. The entry point at which people will start paying tax is being increased to €17,600, or the equivalent of €8.65 per hour, while the PRSI entry point is also being raised to this level, keeping those on the minimum wage out of the tax net, as the Government promised. These measures will cost €501 million in 2007 and €657 million in a full year. The 20% standard tax band is being widened by €2,000 per year. The changes to the credits and tax bands mean that 80% of income earners will continue to pay an effective rate of tax of 20% or less.
The threshold for payments of the health levy has been increased by €40 while the tax exemptions for senior citizens aged 65 are being raised by €2,000 for a single person and by €4,000 for a couple. Tax credits are being increased for widowed persons while widowed parents will receive a special tax credit for five years. The special tax credit for persons who care for an incapacitated children is being doubled to €3,000. The Revenue Commissioners will be putting measures in place to make it easier for taxpayers to claim and receive their entitlements.
Purchasing a first home is always a financial challenge, and to support people in this respect, the ceiling on mortgage interest relief is being doubled for first-time buyers in the first seven years of their mortgage, up to a limit of €8,000 for single purchasers and €16,000 for those who are married or widowed. The increased relief will be available to all first-time buyers in the first seven years of their mortgage. The ceiling for other buyers is also being increased to €3,000 for single purchasers and to €6,000 for married couples. The cost of these measures is estimated to be €50 million in 2007 and €70 million in a full year.
Earlier I mentioned the importance of small businesses to the economy, particularly in terms of job creation and maintaining our competitiveness. Following a consultation process with groups such as the Small Business Forum, it has been announced that the business expansion scheme, or BES, and the seed capital schemes, which were due to expire at the end of this year, have now been extended for a further seven years, subject to the approval of the European Commission. The ceiling per company is being raised from €1 million to €2 million for the BES and the annual limit per investor is being increased from €31,750 to €150,000. The annual investor limit in the seed capital scheme is being increased to €100,000.
Tax administration will now be simpler for 97% of Irish companies. Companies with a corporation tax liability of less than €50,000 can now pay preliminary tax based on their last year's final liability, thereby avoiding forecasting the current year's performance in advance of the accounting year. The small company liability threshold has been increased from €50,000 to €150,000. New companies will no longer have to pay preliminary tax in their first accounting period. The VAT accounting threshold is being raised, VAT registration turnover thresholds are being doubled, while the number of VAT payments for small firms is being reduced from six to three or two per year depending on the case. The full annual cost of these measures, which are designed to reduce the regulatory burden on firms, will be €53 million with an additional once-off cash flow of €84 million.
Protecting the environment must be an integral part of public policy and we must work toward realistic targets in areas such as renewable energy, pollution reduction and waste management. A total of €328 million has been allocated in 2007 for the rural environment protection scheme, including provision for REPS 4, part of the Ireland's rural development programme for the period 2007 to 2013, which will shortly be sent to Brussels for approval. The Department of Finance will shortly carry out a public consultation process to determine how the vehicle registration tax system can be tailored to encourage drivers to choose lower emission vehicles, and will report on the outcome to the Government. Decisions taken in this area will have a target date of 1 January 2008. The Minister for the Environment, Heritage and Local Government will also consult on proposals for rebalancing annual motor tax to encourage drivers to choose cleaner cars, and this would apply to vehicles registered after 1 January 2008.
Farming continues to be an important part of the economy and central to maintaining and developing vibrant and economically viable rural communities. To prosper, farming must be able to respond to a range of emerging challenges, which include developments in the EU and world trade agriculture policy, changes in food markets, increasing trade liberalisation and technological developments. To help meet those challenges, the Government will continue to provide the necessary support to enable farmers to invest in and be innovative on their farms. The Exchequer capital provision for agriculture in 2007 is €279.1 million, inclusive of budget day add-ons of €3.6 million. In line with changes announced in previous budgets and arising from the conclusion of the latest social partnership agreement, the Minister announced a package of measures to assist farmers maintain and develop farming as a viable family business.
The threshold for capital gains tax retirement relief is being increased from €500,000 to €750,000, also from 1 January 2007. The CGT retirement relief is being extended to disposal of leased land subject to certain conditions.
Farm consolidation relief is being extended to 30 June 2009. The existing general 25% stock relief for farmers and the special incentive stock relief of 100% for certain young trained farmers are being extended from 1 January 2007 for a further two years subject to clearance with the European Union under state aid rules. Also, from the 1 January tax exemptions will apply for income derived from certain leases of farm land and a new exemption of €20,000 per annum will be introduced for leases of ten years or more. The overall cost of these measures will amount to €14 million in a full year. In addition to these farm tax reliefs, the farmers flat rate of VAT is being increased from 4.8% to 5.2% from the 1 January 2007 at a full year cost of €16 million.
A welcome development is the introduction, subject to EU approval, of three measures to encourage farmers to grow energy crops. The bioenergy establishment scheme will provide grants to farmers interested in planting willow and miscanthus that can be used for heat and electricity purposes. Grant aid is being provided to offset the high establishment costs of these crops. The estimated cost in 2007 will be €2 million, rising to €3.5 million in 2009. The national aid for energy crops will provide a top-up grant of €80 per hectare to the existing EU premium of €45 per hectare. The purpose of the measure is to stimulate production to meet demand arising from the excise relief scheme and to avoid this being met by imported feedstock The biomass harvesting machinery measure will provide funding for specialised equipment. It is expected that the cost of the national aid for the energy crops and biomass harvesting machinery measures will amount to €3 million in 2009.
The decentralisation programme is progressing and over the next 18 months——
I was wondering when the Minister of State would mention it.
I always finish with a very good story.
This one is a good story, all right.
The beginning, middle and end is a good story.
The decentralisation programme is progressing and over the next 18 months Departments and offices will have a presence in a total of 29 new locations around the country. Over the next six months alone, it is planned that the number of decentralised staff in their new locations will have grown to over 1,000 in approximately 20 towns around the country. The success of my own Department is a good example of the significant progress that has been made. Over 110 staff have relocated to Tullamore since July of this year. To put this in perspective, nearly one in six workers in the Department of Finance is now based outside Dublin. The fact the relocation was managed so efficiently and effectively is testament to the efforts of the staff involved, and points to the ultimate success for the programme. As further progress is achieved it will become clear that Departments can function just as efficiently and effectively outside of the capital.
Today's budget will assist us to meet our economic and social objectives through the range of prudent and innovative measures which have been announced. The significant changes to income tax, which I mentioned earlier, are in line with our policy to reward work. The modifications to VAT and corporation tax acknowledge the contribution which enterprises and, in particular small enterprises, make to the economy. The additional provision for public investment, will improve a broad range of key day-to-day public services.
The major improvements in the payments for those in receipt of social welfare payments and pensions and the additional services announced for the elderly and those in need is the Government's way of showing that it is listening and addressing the concerns of the less well-off and the vulnerable. The budget has been prepared to ensure balance, not just in fiscal or financial terms, but in terms of how it will benefit all of the people living, working and doing business in this country.
I welcome the Minister of State, Deputy Parlon, and his officials to the Seanad to discuss the Budget Statement by the Minister for Finance. We are growing accustomed to these debates over the last couple of years. I have made a list of notable omissions from the contribution of the Minister for Finance, Deputy Cowen, in the other House. One of these was decentralisation and I am glad the Minister of State at least had the decency to mention it.
It covers several pages in the Book of Estimates.
I realise that, but I am referring to what the Minister spoke about. With due respect, we are commenting here on the Budget Statement. It is difficult to fully grasp everything in the accompanying document distributed in the other House, although I have seen most of it.
This budget will probably be most noteworthy for what it does not contain. Last year's budget was referred to by many as the "child care budget". The one three years ago was called the "decentralisation budget". This year's budget does not contain many surprises. I am not particularly perturbed at the fact that there is nothing surprising but it comes about after much media speculation over the last couple of weeks. We can only speculate as to whether this was prodded by Government sources but much of the media reporting appears to have been pretty accurate as regards what the budget would contain.
There were a number of things the Minister did not talk about. He mentioned the word "education" at the end of his comments in the other House, but did not go into detail, despite continuous arguments in both Houses of the Oireachtas as regards the need for increased expenditure on education. The Minister of State has pointed out that we will see an increase in the number of teachers over the next 12 months, which I welcome. However, I was disappointed the Minister did not go into detail on this in his Budget Statement.
The Minister never mentioned transport. It is ironic that it is now 5.30 p.m. on a Wednesday when the vast majority of workers in this city and throughout the country are stuck in traffic at some point or other. They might be on the M50, beside the toll bridge, about which it was speculated there might be an announcement today in the budget, but there was not, or they might be stuck in traffic in regional towns throughout the country.
There was no mention either of increased funding for justice and crime, despite significant increased activity in these areas over the last couple of years.
It is in the Estimates.
It is in the Estimates.
I am referring to the Minister's comments. We have ten minutes to speak, so I am disappointed that he——
I am disappointed the Senator is whining.
Senator Phelan, without interruption.
I am not. In fairness, I shall be pointing to a couple of areas in the budget that are quite positive.
That is good.
I am disappointed, however, that the Minister for Finance did not mention the spiralling in serious crime over the last year. I am particularly disappointed that he did not touch on mental health, as I thought he would, after the dogs' dinner made in the media by the Minister for State with responsibility for that area, Deputy Tim O'Malley. There is the fine print but the Minister could have referred to this area in his remarks.
The old age pension increases are to be welcomed. It is fair to say that the costs pensioners face are significantly higher than they were ten years ago and the vast majority of increases that have come about in the interim have been swallowed by them. There have been 25% increases in the cost of electricity and gas in the last couple of years and pensioners have had pay out for enormous increases. Nonetheless, the provisions today are to be welcomed. The Minister has doubled the fuel allowance in the last two budgets. That is a welcome initiative, but €18 of a fuel allowance is nothing to crow about at a time when fuel costs have increased dramatically. It does not go anywhere near meeting the full costs for pensioners when it comes to providing heat and other energy requirements.
I welcome the changes that were announced on maternity leave. The Minister has made a number of such pronouncements over the last couple of budgets and today's improved provision is to be welcomed. I have raised before the issue of paternity leave, but the Minister did not choose to address this today.
A number of announcements were made regarding small business, referred to by the Minister of State. I broadly welcome them, especially those pertaining to seed funding and business expansion schemes. Nonetheless, it can take a couple of years for such initiatives to impact directly on a particular business. The schemes have been extended for a further seven years, subject to EU approval.
The Minister of State also mentioned bio-fuels and while today's announcements were somewhat tentative, I regard them as a small step in the right direction. Similarly, a significant change was announced today regarding mortgage interest relief. It was interesting that the Minister outlined the possible benefits. His remarks in the Dáil used the example of a couple who could benefit by up to €1,600 from the announced changes. There was great hoopla from the Government benches, despite that a few years ago, the Government removed the first-time buyer's grant in a budget which was of much greater benefit than €1,600 per annum. Obviously, mortgage interest relief accrues over a longer period to first-time buyers.
As I stated, this budget is somewhat like Mother Machree's dog in that it goes a bit of the road with everyone.
That is a cliché.
I will use another cliché. The budget almost has one for everyone in the audience. However, no sector in particular will be jumping for joy as a result of the budget's contents. I was disappointed the Minister did not use the opportunity either to abolish completely the means test for the carer's allowance or to increase its threshold greatly. While he made changes in this regard, they are insufficient and an opportunity existed for significant reform in this regard.
If this budget is considered from the perspective of reform, there is very little of a reforming nature. It includes much tinkering around the edges of schemes and extensions of schemes, such as those for small business to which I referred earlier. However, very few departmental initiatives were announced by the Minister today. His mention of reform of vehicle registration tax was remarkable, although it was put on the never-never in that it would be carried out in a few years' time. It was also noteworthy that he inserted a particular paragraph on the entire area of stamp duty, which was a clear kick in the pants directed at the Progressive Democrats Party and its economic policy. He stated that any reform of stamp duty would end up in developers' pockets, rather than benefitting first-time buyers. I disagree with him. It was well within his grasp today to abolish stamp duty completely for first-time buyers, which would have cost €44 million according to the figures I received from the Department of Finance last week.
They received more than €70 per month.
It would have only cost €44 million to abolish stamp duty for first-time buyers and the Minister could have done so. It would not have gone directly to the pockets of builders and developers because first-time buyers are not the most significant component among those buying houses. I am disappointed the Minister did not do so.
The Government promised it would ensure that all children under the age of nine would be in a class with a ratio of less than 20:1 by the time it left office. Despite the commitments mentioned in this House by the Minister of State, it will not come close to reaching that target by the time of the next general election.
Although I had thought that I had been allocated 15 minutes, apparently I only have ten minutes. Unfortunately, I will not be able to say much more. I wish to make a final point concerning the elderly. I mentioned the improved pensions provision, which I welcome. However, the Minister has a nerve to speak about improving the hours granted for home help, having cut 2 million hours from the system a few years ago. He has a brass neck to tell this to people now. The provision of home help was a key method to keep elderly people in their homes for longer and to maintain their independence. Many people in that position will be galled by the Minister's comments today.
Overall, there are provisions in the budget that are to be welcomed. However it constitutes a missed opportunity——
Someone is trying to send a message to the Senator.
I ask any Members with mobile telephones to switch them off, please.
It was a missed opportunity across the board.
I ask the Senator to conclude, as he has already exceeded his time.
I thank the Acting Chairman for his leniency.
I welcome the Minister of State, his officials and, above all, the budget. I listened to the budget with some emotion. Perhaps emotion is not something one normally associates with——
With the Senator.
—— budgets. However, I did so with pride that we have reached this position, while remembering times past. How many European Ministers for Finance are able to simultaneously run a budget surplus, increase expenditure by 11.5%, including a record social welfare package of €1.4 billion? Perhaps in Norway or Luxembourg, but I cannot think of anywhere else. Ireland has the immense blessings of full employment, low inflation, debt and direct taxes, growth of more than 5%, and a supportive — and I hope increasingly supportive — social welfare system.
Senator John Paul Phelan mentioned various matters that were not included. However, in the broad definition of the term, the budget includes expenditure in the Book of Estimates, as well as in the Budget Statement. Hence, there is no significance to be read into the strong commitment to education, transport or justice from the fact they do not figure largely in the Budget Statement.
The real opposition to this budget does not come from the Opposition benches or indeed from any party in the Houses. I am somewhat shocked by a certain section of what one might call the commentariat. I will mention three or four examples. Hobbs, who was a consumer champion much beloved by Fine Gael approximately 12 months ago, claimed the Taoiseach is past his——
Is the Senator referring to Mr. Eddie Hobbs?
I refer to Eddie Hobbs. He claimed he is past his sell-by date. He stated that: "[T]he public sector seems to be overpaid and inefficient and that needs to be faced down like Thatcher faced down the coal miners." An editorial in Business and Finance, apart from seeking a reduction in the top rate to 36%, states:
[The Government] should be freezing all public sector hiring and wages until after a comprehensive value for money review of all public sector functions ... Anything short of this will be a shamefully apparent bet on the Opposition's incompetence.
I do not criticise the Opposition for not demanding such measures. A columnist for the Sunday Independent stated that reform inevitably requires confrontation and that the Government does not do confrontation, rather it placates and seeks consensus. A former editor of the Irish Farmers’ Journal wrote in a similar vein. All they have in common is that they are anti-trade union and anti-social partnership and believe that, somehow, we could not and should not be enjoying our present prosperity without some sort of Thatcherite Nirvana.
One of the great merits of the Government and its predecessors in the past 20 years is that we have found an alternative approach. Even for the better-off in society, the approach adopted by the Government is far better than any type of Thatcherite confrontation.
That is some comparison.
Social cohesion and harmony are required and Members do not want Rossport five situations nationwide.
I will come to the budget itself. All Members will welcome the announcement that contributory old age pensioners will be in receipt of €209.30, while non-contributory pensioners will receive €200. There is also a very substantial increase in the income tax exemption, which has been a policy of successive Ministers for Finance for the past ten years at least. Child benefit will increase by €10, along with a special boost to child dependants. This allowance was held down for a long time following a survey conducted under the rainbow coalition, in order not to aggravate a tax wedge. However, it is right that it is being done now and that more money is being put into child care. The issues of disability and mental health were raised a moment ago and an additional €100 million was announced in the budget in this respect. Not only has the fuel allowance for pensions been increased, but the eligible income over and above one's pension has doubled to €100.
We all, and many young people, will welcome the improvement in family mortgage interest relief worth €133 per month. No doubt that is the right approach at this point in time. We had the debate on stamp duty last week. It is a question of making a real difference to people. I am not denying that stamp duty may need some reform but there are appropriate times in which to do that. The danger — this came out at our debate last week — is that any changes in stamp duty at this point would most likely go straight into the hands of developers.
We all welcome the income tax changes, which mean that not only are those on the minimum wage kept out of the tax net but that also those on the industrial wage will not pay tax on any of their income at the higher tax rate. Of course there is a substantial increase in the tax band as well as in the personal credits and notwithstanding the cut in the top rate of tax, one will see in the tables that the progressiveness that has been the hallmark, particularly of this Minister for Finance, has been maintained. In broad terms, the proportional benefit is greater at the lower and middle income part of the cohort than at the higher level.
There is a commitment that if we continue to make progress there will be a further 1% reduction in the top rate. I see merit in that in terms of competitiveness. There is merit in having the same top rate of tax in this country as across the water, although in many respects our tax system is becoming more favourable than theirs. The tax credits have somewhat altered the parameters, but we have achieved a position where 80% of income earners are on the standard rate of tax and one third of the population or more does not pay income tax at all.
I also welcome the business provisions, the increase in the BES investment as well as how much individuals contribute, the raising of the VAT threshold, and the improvements in tax administration. I welcome the measures to encourage conferencing in tourism — I raised tourism on the Order of Business this morning.
I welcome the support for farming and of course the fact that the Government is increasingly supporting farming. Not all, or at this stage even most, of it is coming from the EU.
I am glad that the Minister of State, Deputy Parlon, mentioned decentralisation. Of course he, not the Minister for Finance, except in an overall sense, is the Minister of State responsible for decentralisation and it is therefore appropriate that he should mention it.
A far cry from a few years ago. The Minister of State is the man who was putting up hoarding this day three years ago.
It is going well in Tipperary, I assure Senator Burke.
It was supposed to be completed by now.
They have not much to hold on to.
Senator Mansergh without interruption.
I welcome the environmental measures and, in particular, the encouragement of energy crops. Overall, it is an excellent budget which will help sustain prosperity, not just to the next election but for years ahead minus any external shocks. I congratulate the Government on a first-class budget.
May I share my time with Senator O'Toole?
Is that agreed? Agreed.
I welcome the Minister of State and the opportunity to speak on the budget. It is a tradition that has developed in recent times. I welcome it because the budget needs to be debated at this early stage.
Over the past few months the Government spin has been focused on the need to convince the public that this would not be an election budget. Therefore, I sat listening to the budget to see whether or not it would be an election budget. I took out a piece of paper afterwards and wrote down two columns. In order to decide whether or not this is an election budget, in one column I put the short-term steps the Government would take and in the other I put the long-term steps. One can guess what was the outcome. The column of short-term steps was filled and the column of long-term steps was practically empty.
My concern is that this is an election budget, that the Minister focused on the short term. I agree entirely with Senator Mansergh. What a wonderful job the Minister had — to have this surplus, to have this great economy and to be able to spend this money. However, I then looked to see why was one column so long and the other column so short. It was then that I had regrets.
My first conclusion was that I was not too surprised that a Government would look to the short-term with an election only six or eight months away. The only aspect that surprised me was the comparison with the previous occasion. The Government has tried to make it less obvious that this was a short-term budget and an election budget. On the last occasion it did not take this approach and it rebounded within weeks or months of the election.
My first regret, which follows from a debate that I initiated only a couple of weeks ago, is that I do not see any tackling of inflation, which is a serious problem here. If anything, the steps the Minister has taken will encourage spending.
My second regret is that while there has been considerable investment in some of the important elements in infrastructure, and particularly in roads, there was not a word on broadband. If only a tiny amount of the money spent on roads had been allocated to broadband it would give us the opportunity to compete in the marketplace in the years ahead, yet I did not hear that mentioned. Similarly, I heard no mention of educational disadvantage. A significant sum of money has been allocated to it, but it needs a great deal more if we are looking toward the long term rather than the short term.
I am sure somewhere in the budget there is an allocation of money to combat crime, which is another serious element that was prevalent in the past and is now high on our agenda. I did not hear it mentioned. Perhaps it was mentioned and the Minister of State will draw our attention to it when he replies.
The other conclusion I made was there is a danger this is an election budget because it does not concentrate on competitiveness. Senator Mansergh and the Minister of State, Deputy Parlon, spoke of the great economy of recent years and I give full thanks to the efforts to which this and previous Governments have gone to make it such. If we are to maintain the economy as strongly as it has been, we must ensure that we maintain our competitiveness in the years ahead, yet I did not hear any indications of intent in the budget. On that matter, I am concerned.
It is true to say that the next election will not be won or lost on issues such as educational disadvantage or even on competitiveness. That will not be where the problem lies as far as the public is concerned. The more money we have available to spend, the more we should focus attention on the fundamental long-term issues, and, unfortunately, the opportunity to do so has been ignored on this occasion. While I, and I am sure we all, welcome all the various generous steps that have been taken, the Minister had the opportunity to do more. He had the opportunity to take a long-term approach rather than a short-term approach. I regret he has not done so.
I welcome all the short-term measures the Minister announced. It would be a difficult enough budget to challenge. I do not envy the Opposition stating what is wrong with the budget but the Minister has missed an opportunity to take the long-term rather than the short-term approach to strengthen our economy in the years ahead and to ensure we conquer inflation, strengthen our broadband, tackle educational disadvantage and, most importantly, maintain our competitiveness in the marketplace so that our economy remains strong.
I am pleased to have the opportunity to say a few words and I thank my colleague, Senator Quinn, for sharing time with me. I do not fully agree with his opening comments on inflation. I was pleased it was the first matter the Minister mentioned. I thought it was important that he explained to us that it would be reduced, even by 0.1%. Senator Quinn and I would look to see such a trend.
There is another welcome development with regard to macroeconomic factors. I never thought I would see the day when our debt to GNP ratio would be down to 25%. According to the Budget Statement it is almost the lowest in Europe but, effectively, it is the lowest because one does not count Luxembourg.
Tell that to the Luxemburgers.
Luxembourg is probably the only one below us at the moment. That aspect is a huge element. I agree with Senator Quinn that this is an election budget. The Minister is like a mobile ATM machine spitting out billions here and there.
Another one. Some years ago, an American politician was doing an interview on RTE and said, "You put a billion here and a billion there and shortly you're talking about serious money". We all fell around laughing because we did not understand what a billion was. Nobody was laughing today, however, even though billions were going in all directions.
This is a good budget and I welcome its overall provisions. In particular, I welcome the continuing commitment to the minimum wage. I argued long and hard to negotiate that wage some four or five years ago. It was difficult to achieve so I am glad the increase has been delivered, which I welcome.
Looking down through the Budget Statement, one sees something old, something new, something borrowed and something blue.
The Senator is no bride.
It was obvious that the old age pension would feature in the budget but, nonetheless, it is welcome to see the increase hitting the €200 mark. While the non-contributory pension has been kept on the bare €200, I thought the Minister could have raised it a bit more. I do not know why the contributory old age pension contains an odd figure of 79 cent, but that is the way they work in the Department.
As regards new home buyers, I am glad the Minister held out against the surge from the Progressive Democrats.
Not all of them.
The Government seems to have held together despite the fact that there is €3 billion to come back to us. The cap on mortgage relief for first-time buyers does not need to be that low. The amount of money involved is tiny and while I do not think it should be unlimited, it should be more or less based on the average house price. It would have been a welcome step if the Minister had taken the average price of a house and allowed first-time buyers to claim 100% interest relief on that.
Would the Senator like to spend €1 billion of his own money?
Talking of spending a billion of one's own, that leads me almost to my next point. The "something borrowed" element is probably the worst aspect of the budget. I wish to remind the House of what I said here three weeks ago. I said that "something borrowed" is the money we are spending to buy carbon credits and allowances. It is disgraceful.
Whereas I welcome the grants for solar panels and wood-pellet stoves, I still do not understand why there is nothing in the budget for wind-powered generators. That was the worst aspect of the budget. At least the Minister of State conceded the points which the Government side of the House would not concede three weeks ago, shortly before the Stern report, on how badly Ireland was doing in fulfilling its obligations under the Kyoto Protocol. I welcome the Minister of State's acknowledgement in this regard but we need to take urgent action on it.
As regards spending other people's money, that is the whole point. Two weeks ago, Deputy Bruton asked a question, and though I did not hear him pose it again today, I did not hear his entire speech. We were overtaxed, whether by income or other taxes, so there should not be that element of surplus. Somebody is regularly calling it wrong. For the past three or four years in a row, the budget surplus has been way ahead of ministerial predictions. I know the answer to this point is that Ireland has a thriving economy, but I would like the Minister of State to answer this point. Our economic growth has been closely in line with the Department of Finance's predictions. The Department is always brilliant and its officials are the best commentators in giving a prognosis on economic growth for the following year. They got the fundamental things right and were not far off on inflation. They were completely wrong in terms of the surplus, but I think that is deliberate. There was a well-known shopkeeper in Dingle, who was related to me, I have to say.
What place is the Senator talking about?
He had a habit of giving people a great bargain.
Is it Daingean Uí Chúis?
He always had the prices written down, like Flynn's in Banagher, in code. Customers did not know how much items cost but he knew. He would always say, "Look at that. It's £100 but sure I'll give it to you for £80". The budget was a bit like that — the Minister was pumping it up to give it back. He collected too much in the course of the year, so he could give some of it back next year. I do not know how long that trick will work.
From the overall perspective, however, I like the way in which the Minister has spent the money. I will hold my fire on education until we see the details. The Minister for Education and Science had total control and did not allow the Minister for Finance to say one word on education. She is going to outline that later today or tomorrow morning. I look forward to that.
I join with other speakers in welcoming the Minister of State to the House. I also welcome the budget. Senator O'Toole may have spent too much time in the bookmakers or with the three-card-trick merchants when he was growing up in Dingle.
Daingean Uí Chúis.
It was "hard rearing" down there.
It has led him to some flights of fancy.
The Senator should just get straight into the slagging.
Where is the €3 billion?
I will not indulge the Senator so that he can leave now. He will have to wait and hear what I have to say.
Does the Senator have something to say?
Much detail has been discussed and we have gone through many of the individual figures which have been dealt with both by Senator Mansergh and the Minister of State. I would like to take the wider view, which is a simple one into which the budget fits entirely. If investment and work are rewarded, resources are produced which provide the capacity to look after those who are most in need in society. That is what the budget does. It has done so very well for several years past.
Criticisms have been raised in the past, and Senator John Paul Phelan has voiced them, about going back and talking about the way things were. The cliché is that if one ignores the mistakes of history one is condemned to repeat them. Senator Mansergh mentioned what Mr. MacSharry said when he was Minister for Finance. We were in a situation then when all our PAYE revenue was going to service debt.
That is true.
It is important to remember how far we have come — we are now talking about spending billions of euro. If the Estimates include a growth rate of 5%, we are looking at inflation in the order of 3%, and one brings in a budget figure of 11.5% in current spending that will contribute very much to inflation. The budget is pretty neutral. It is fair to claim, as the Minister of State has done, that it is prudent. I have always believed that one can spend money on the capital side where there is a provision of 13%. If that figure is hiked too high, it will contribute to inflation. However, I cannot understand the argument that the budget is somehow inflationary because I think it is quite the reverse. It is neutral in terms of what it will do to domestic inflation.
Stamp duty excepted.
As I said, I do not want to judge it just yet. I will get there in a moment. The budget is quite prudent. Compliance is a major issue for businesses that must fill in the books and deal with red tape. I am not talking about not paying their taxes, which is a different matter. If one read The Wall Street Journal yesterday, it was very noticeable what was said there about this country.
The Senator should remind us of that.
We missed that.
The newspaper was quoting from an international analysis of all the countries involved and Ireland is fourth in the international league. That is why we have investment here because people are confident that they can invest without being suffocated by red tape. It is particularly important and it is being done here to ensure that small businesses at the lower end of the scale do not have to engage in an eternal rigmarole of sending in forms and not paying tax at the end of the day because they do not have to do so.
That is a fair point.
It is entirely reasonable and the Minister has done that.
It took ten years.
If I were examining the budget beforehand and was worried about inflation, I would be looking for splurge but where is it? I do not see any splurge. I believe it was Oscar Wilde who said he could give into everything except temptation. The Minister is an unusual political animal. He is to be congratulated on resisting the temptation to throw money in all directions.
That is the Senator's excuse for the lack of action on stamp duty.
I am sure the Acting Chairman will protect me from unwarranted attacks from the other side. I am one of those who asked what impact providing stamp duty relief for first-time buyers would have on house prices.
The Senator did not say a word when the Minister referred to a figure of €3 billion in the House.
The Minister will confirm that I raised the question at a meeting in Malahide. The problem is that those seeking to buy a new house have a certain amount of money to pay for the house and pay the stamp duty owing. When they place a bid they subtract the stamp duty they would incur, leaving the amount they are willing to pay.
Given the brains available to the meeting in Malahide, why did the Senator's party fail to work out that calculation?
The mechanism chosen by the Minister to address the problem, increasing mortgage interest relief, is a good one. I hope my comments have not caused my party colleague, the Minister of State, Deputy Parlon, to leave the House, although I am pleased my constituency colleague, the Minister of State at the Department of Health and Children, Deputy Seán Power, has arrived to protect me.
The cost of the Minister's initiative on mortgage interest relief will be of the order of €60 million. No one has referred to an important aspect of this measure, that is, its retrospection which means it will apply to first-time buyers who bought a house in the past seven years. The other option would exclude this group and for this reason it is a good measure.
Senator Dardis will have to convince his party of that.
I am prepared to defend the measure on that basis.
The outcome of the study on vehicle registration tax and taxation on CO2 emissions will be interesting. I bet some of the sports utility vehicles, SUVs, will emerge well from the review because most of them are diesel vehicles. We keep comparing them with five litre and six litre petrol vehicles used in the United States.
Diesel is a filthy fuel.
I must put up with an expert engineer who does not know what he is talking about.
Diesel may be better than petrol on CO2 emissions but it is a filthy fuel.
The measures on the business expansion scheme are appropriate, as is ensuring alternative energy production is supported through agriculture. The amount of money per hectare the European Union gives farmers was not sufficient to encourage farmers to grow alternative energy crops but the introduction of an additional payment of €80 per hectare will deliver significant progress in this area.
As the Minister noted, when one considers the budget in terms of the proportion allocated to the vital areas of health, social welfare and education, it passes all tests. It is a good budget, not an attempt to buy the votes of the electorate at the next election. In any event, the electorate is too intelligent to swallow such a move.
We should not get involved in a nonsensical debate about whether this is an election budget. Every budget prior to an election, from all parties, has been an election budget, although none has been as generous as this one. If my party was in Government and in the same position as the current Administration, it would, without a shadow of doubt, introduce an election budget. Whether it would be directed at the same areas is the question I propose to discuss. Allusions to gloriously detached macroeconomic management are but pretences and should be ignored.
In political terms, the Government's handling of the budget was poor because it released in advance details on most of the measures, including some of the most dramatic initiatives, one could expect. We knew a dramatic measure would be introduced to address the issue of first-time buyers and that the old age pension would increase to the magic figure of €200. We also knew the Progressive Democrats would get a 1% reduction in the top rate of tax because they would not get their way on stamp duty. I find it hard to find a reason for that party's obsession with reducing the top rate of tax without attributing motives which Deputy Dardis could not possibly share because he is far too decent a man. I cannot see the obsession with the top rate of tax per se as distinct from those who pay it.
One of the considerable achievements of the budget is the extraordinarily complicated muddying of the waters that has emerged. This began with a Government amendment in this House to a Fine Gael Party motion on stamp duty in which it tried to rewrite the way in which the proportion of those paying tax is calculated by using the effective amount of tax people pay as opposed to the number of people paying specific tax rates. An argument could be made for using this methodology because it would show that the effective amount of tax paid by rich people is minuscule. Its use, however, is a classic example of spoiled child behaviour, that is, when one is losing the game, one changes the rules halfway through to ensure one wins the second half. I thought adults behaved differently.
I will address the great boast made in the budget. After ten years of unprecedented prosperity, the minimum adult rate of social welfare is €186 per week. The Minister was triumphal about this figure which is regarded as one of the crowning achievements of the budget. Do political leaders live in two different worlds, one in which they listen to the advice of prominent economists and public servants on what is an acceptable minimum income and another in which they meet real people? An adult is expected to be able to live on a weekly income of €186, less than the price of a meal for two reviewed in many newspapers at weekends. Twenty years ago, in times of hardship, it may have been possible to argue we could not afford to pay satisfactory social welfare rates. Stating that €186 per week is the acceptable income on which an adult is deemed to be able to live is a statement of belief about how our society is organised, as the fact that the Government believes it is great to have come this far.
When I think of the Fianna Fáil Governments of the 1930s, it calls to mind the introduction of dramatic measures such as public housing and wet time payment for workers who had previously received nothing. Incidentally, the former initiative was described by an academic associated with Senator John Paul Phelan's party as the first sign of Bolshevism but Fine Gael, like all parties, has changed. It was dramatic changes such as these which characterised Fianna Fáil when it still had a feel for the needs of ordinary people. Its approach has transformed into econometrics with the party believing some of the nonsense spoken by economists.
Senator Mansergh gets a little excited about the issue of Ireland's world ranking in terms of income. Regardless of whether it is first, second, third or fourth in the table, this is one of the richest countries in the world. It is pathetic that Government backbench Deputies in the other House stood up and cheered when the figure of €186 per week was announced. Social welfare rates may be better than they used to be — I am familiar with the figures — but Ireland is spectacularly richer than it was ten years ago. I thought the purpose of getting rich was to look after those who are less well off. We did a little better for this group than we did in the past but the figure of €186 sets itself up.
I am intrigued by the confused logic applied to the issue of first-time buyers. Who would object to the change?
However, that is not the nub of the country's housing crisis, which is based on a number of factors, among them the inadequate provision of social housing and the failure of the Government to manage. The Minister of State at the Department of the Environment, Heritage and Local Government, Deputy Noel Ahern, stated in the House a few weeks ago that money was not the problem. I have given him the benefit of the doubt. The problem is the inability to strategically manage everything involved, including land, building, planning and organisation, to provide the numbers and quality in terms of social housing. There is nothing at all to change this.
The same situation applies to affordable housing. We know it is not about money but the Government is still living in the past in terms of a particular kind of Ireland and it has not learned how to put together institutions, organisation and plans. The first-time buyer's mortgage interest relief is most welcome but it will not solve the fundamental problem that housing is too dear and if we do not watch it, most people will not be able to afford to buy their own house. The fundamental problem is one of excess demand because investing in housing is the easiest place in Ireland to make money. Rent from property is simply a way of getting somebody to pay for the privilege of keeping one's property secure. The real benefits are capital gains, which are taxed at the rate of 20%.
Do we want a country that says this is a great way of encouraging enterprise by making property the best place to put money with virtually zero risk and with no problems? If a person is honest they will pay a good deal of tax on their income — unfortunately, many people do not seem to be honest — but they will have a capital gain of 10% to 15%, perhaps more, and they will pay a level of taxation on it which is offensive to the sort of person who earns €45,000 a year earns another €5,000 and pays income tax at a rate of 41% instead of 42%. The Government boasts about the 1% reduction in the rate.
The Senator should look at the figures on capital gains.
I could nearly recite them. We are into voodoo. This notion that the reduction of capital gains tax increased revenues is actually voodoo because it went up as often as it went down in the past ten years, since Charlie McCreevy introduced something which was not mentioned in any election manifesto before it was introduced. It was a classic Charlie McCreevy stroke which the Progressive Democrats loved——
It was one we could be proud of.
——and it has achieved nothing. Everything that is claimed for it——
The Senator is more interested in the perception than the results. He should look at the figures, they speak for themselves.
I know the revenues from capital gains tax. What would the Minister of State expect in a country where capital values have appreciated so rapidly? Would he expect less?
Where did the Senator get the information that people are paying capital gains tax on their principal private residence?
I did not say they were. I am well aware of the limitations.
The Senator should speak through the Chair.
I apologise. I was trying to speak through the Chair.
The most disturbing aspect of this budget is the failure to respond to the strategic issues that have been identified. Both Senator Ross and I have referred to the views of the American Chamber of Commerce Ireland about what is needed in the national development plan. I have recommended to the Leader and others that this document should be read. These are the companies that employ the majority of the people in this country employed by multinationals. Executives from the United States have told these companies that they will not come to Ireland for meetings because it is too difficult to get around Ireland. If this is not a call for a strategic look at——
The Senator should read yesterday's The Wall Street Journal.
I regret that nothing in the budget is focused on the scale of the infrastructure crisis in both transport and broadband and access to air traffic that is confronting this country, as identified by the American Chamber of Commerce Ireland. Ending where I began, it is about the next election and it is not about strategy. To the degree that it neglects fundamental strategic issues, it is an awful waste.
Senator Ryan has raised some interesting points, such as the national development plan, which are a matter for debate on another day. I welcome the budget and I congratulate the Minister. It would be churlish to do otherwise. The fact there is so much money to distribute is a tribute to the Minister's stewardship of the economy and of the finances.
I am glad to see money going to individuals and being given into people's hands where they can spend it themselves as they wish. There are large swathes of the public sector in which money is not the problem. We should be asking people to give us more evidence of value for money that is being spent. If this is union-bashing, so be it. I managed a couple of large public sector enterprises and we never thought it was ideologically impure in any way to ask people to account for the money they received. This point was raised by the Acting Chairman the other day. I have never found senior management in the public sectors I dealt with who did not respect strong management. There is evidence of flabby management across the public sector which should be given attention.
Another matter I wish to raise was not dealt with in the budget. I do not raise this matter in a recriminatory sense but in the hope that it could be placed on the agenda and be considered. It concerns the question of philanthropy. The Minister has been very good in dealing with this matter. He has made it easier for people to give money to charity by means of the tax code. Ireland now has a generation of people with a lot of wealth and quite a number of them are anxious to use that wealth in a philanthropic way.
The question of inter-generational transfers of money is highly technical. People have money which they want to use in a philanthropic way while, on the other hand, there is a growing need in universities, in education, in health research and community work, where philanthropic funds can be deployed. These are very technical issues. I ask the Minister to think in terms of setting up a small group of people who would look at this in order to make it easy for Irish people with wealth and goodwill to dispose of their money in Ireland in a philanthropic way and to make it easier to do so than to export the money. That is the point I wish to make at this stage. Other than that, it would be impertinent of me to do other than welcome the budget and to congratulate the Minister.
I welcome the Minister of State, Deputy Seán Power, to the House. Ten years' ago in this House, a Minister of State was forced to resign following the disclosure, prior to the announcement by the Minister for Finance in the House, of the details of the budget. Many people have said that details of the budget were hinted at by commentators in the media, and in that regard I refer to today's edition of the Evening Herald. I see a small paragraph on page three which is titled, “A glance at the budget”. The detail contained is straight from the presentation made by the Minister. This newspaper was published this morning at 10 a.m. or afterwards and it was on the streets and in the House at lunch time. I could not believe it. It is despicable. I was able to tick off the details as they were presented in the Minister’s speech.
Who was it who did this?
That is for somebody within the Department of Finance or somebody who knew the detail to take up. There was outrage when it happened ten years ago, yet it has happened again. The detail would indicate it was not only presumption on the part of the scriptwriter.
It could have been Phil at work again.
I do not know if he was in Government Buildings early enough this morning to have transmitted it.
This coincides with an article in today's The Irish Times by Vincent Browne. He described the bogus drama of budget day. The article summaries very well all the hype surrounding the budget and what could be done in a more positive way and collectively by the Houses of the Oireachtas in regard to the budget and the Estimates.
There are many items in the budget which are worthwhile and positive. However, an important sentence in the Budget Statement is that a good outcome for taxpayers' money would be the acid test of the success of any budget. We will have to wait for time to pass in that regard. Time and again, we have heard the Minster for Health and Children mention the enormous amount of money being spent on the health service. In an opinion poll in one of yesterday's newspapers, 58% of people polled said Professor Drumm had made no difference and 58% said the Minister, Deputy Harney, had made no difference. It was unusual that the same percentage of people said Professor Drumm and the Minister had made no difference to, or improved, the health service despite all the money spent.
Money was scattered about today to the various areas to improve the services but we will not know of the successes. This poll indicates the failure of the Minister for Health and Children to utilise, in a positive and effective way, moneys given to her Department. If an audit was done on moneys given to each Department on budget day, what would it show? We would hear of failures such as PPARS, electronic voting, etc.
Senator O'Toole commented on what has happened in education. There was only the smallest reference to education despite the needs which are screaming at people. Perhaps we must wait in suspense for the Minister for Education and Science to announce the details.
I had hoped the Minister of State, Deputy Parlon, would have been here so that he could have answered the following question.
He was here.
I am not saying the Minister of State, Deputy Seán Power, will not be able to answer it. The Minister's Budget Statement referred to an increase of 15% in the forestry premium and 17% in REPS payments. Does that mean there will be a 17% increase in all contracted REPS in place, or does it refer to an increase in the announced REPS 4? There is confusion. The information is woolly. If it means a 17% increase to what already exists and if it applies to all people under contract, it is a worthwhile scheme. I suspect, however, that is not the case. I ask the Minister of State to get me the details because it is a very interesting situation for farming.
This budget will do nothing to respond to situations which have arisen in the past couple of months where people have been excluded, forgotten and failed by us, and none more recent than that concerning the Minister of State, Deputy Tim O'Malley, and mental health services for children and adolescents. Although there is a paragraph in the Budget Statement on the policy, there is nothing in it which responds by way of financial support, other than what has been said in previous declarations of intent. I expect the Minister of State, Deputy Seán Power, will row in behind the Minister of State, Deputy Tim O'Malley, in his time of crisis but the reality is there is nothing in the Budget Statement to indicate an improvement.
The Senator will have to read it again.
The Minister of State will have his chance to speak and I look forward to getting answers from him.
I am very happy to speak on the motion. I have been in the House since this debate commenced at 5 p.m. so I have heard everyone speak. It seems there is a misperception in regard to what a budget is about. One must take it in the round with the Estimates. People have been shouting that there is nothing in the Budget Statement for various items but the Estimates were published the week before last and the main programmes for Departments were outlined in great detail in them. People talk as if the budget is the only source of finance for what is to happen. The budget must be taken in conjunction with the Estimates and when one does so, they form a round package.
Social welfare falls to be attended to in the budget but there are also other matters in the budget remit. However, the Estimates are the main means by which finance is given to the various Departments. Nobody brought that up this evening and I am surprised it did not form the main point of debate.
Senator Ulick Burke raised a question in regard to REPS. I would also like the answer to that question because when I read the paragraph, it puzzled me a little. Is it for REPS 4 or for the existing REPS? We will get the answer to that because the officials are very busy looking things up and I know they will produce a reply for the Minister of State. I thank the Minister of State, Deputy Seán Power, for coming to the House. He will be here again tomorrow. I also thank the Minister of State, Deputy Parlon, who was here earlier.
I was amazed when I heard Senator Quinn say he visualised at the outset of the Minister's Budget Statement a short-term and a long-term list and that as time went on, the short term one grew much longer than the long-term one. He asked about the planning and strategy. I remind the House that budgets and Estimates are announced yearly. One is given money for the year to run one's Department and subheads. Of course, one has aspirations for the long term.
There is the absurd question as to whether this is a budget for an election. Whether people like it or not, there will be a general election in May of next year, although the date has yet to be fixed. We are required by law to hold an election. Therefore, the question as to whether this is a budget for an election is nonsensical.
I wish to draw attention to a particular provision of this excellent budget. Purchasing a house for the first time is always a financial challenge and to support people in this regard the ceiling on mortgage interest relief is being doubled for first-time buyers for the first seven years of their mortgage, up to a limit of €8,000 for single purchasers and €16,000 for those married or widowed. The ceiling for non first-time buyers is also being increased, to €3,000 for single purchasers and to €6,000 for married couples. The cost of these provisions will amount to €70 million over a full year.
There has been much pious talk about first-time buyers, but this provision is a practical example of how they and others will be helped through mortgage interest relief. There has been mention of a grant for first-time buyers, but those grants go straight into the póca of the builder. The situation would be similar with regard to stamp duty, the money would go into the other póca of the builder, which would not be much use. It is buyers, single or married, men or women, who will benefit from the interest relief.
The social welfare reforms provided for will have significant benefit for those in need. Senator Ulick Burke spoke about the marginalised. I know many people who will benefit from the increases in social welfare. Senator John Paul Phelan said he welcomed the measures. How could he not welcome these excellent provisions for those in need? I particularly appreciate the increase in the fuel allowance. It was never meant to buy sufficient fuel for a week, but to provide help to people who have difficulty heating their homes, particularly in winter and early spring.
This is a very balanced budget and I applaud the Minister for Finance for it. One would be bedevilled by the economic reporters, the interviews with the Minister and the headlines day after day announcing what the budget would bring. Economists and those who write these reports and interview the Minister for Finance leave me cold. I am speaking as one who has mothered an economist, but I must put up with him. Anyway, he is brilliant, as every mother's child is brilliant.
Over the past few weeks the Minister has opened his newspapers every day to hear one person saying this and another that and he has been barraged continuously on the content of the budget. I watched him carefully today with his calm, midlands face delivering a sensible, down to earth budget. He knows what is needed in society and is able to deliver it because he has never lost the run of himself. Of course he is happy to be able to deliver this budget, as is the Taoiseach. I knew listening to him that there will be many other provisions for disadvantaged about which the Taoiseach will be delighted.
With regard to the Minister of State at the Department of Health and Children, Deputy Tim O'Malley and mental ill-health in younger people, the Minister of State has apologised for what he said wrong. The debate will help focus minds on this acutely needed service for young people and will be worth while if it does that. It will be a good thing if the extra moneys provided can be put towards that area.
I applaud the budget and am delighted to be part of the legislative Chamber on its publication. I wish it God speed and the same to the myriad who will benefit from it.
I welcome this opportunity to speak on the budget. I wish to refer to the introductory remarks of the Fine Gael spokesperson in the Dáil, Deputy Bruton, in respect of people on trolleys. The Minister of State, Deputy Seán Power, would have been there at the time and should agree with me that the reaction to what he said was, to say the least, juvenile and an insult.
The juvenile reaction from members of the Government was insulting to relatives of the people on trolleys and to the 34 people on trolleys in Letterkenny General Hospital today.
The Senator should cop himself on.
I am talking about people on trolleys. Deputy Bruton referred to the people on trolleys and he was heckled and jeered as if the problem did not exist, while 34 people were on trolleys today in Letterkenny General Hospital.
The Senator and his party have all become very sensitive.
Deputy Bruton was heckled and jeered and the Minister of State was part of it and he knows it. That happened during his introductory remarks on the budget today. The people——
I ask the Senator to withdraw that remark. He has made an allegation against me and I ask him to withdraw it.
The Minister of State will have a chance to respond. It is an insult——
The Senator has made an allegation against me in the House and I ask him to withdraw it.
It was the Minister of State and his Government——
The Minister of State has gone very thin-skinned.
The Minister of State and the Government control this House. When Deputy Bruton made reference——
Sorry, order Senator McHugh.
I urge the Chair to be balanced on this issue.
I will. The Minister of State has pointed out the Senator accused him of being one of those who——
I accused him and his Government. He was one of them. It was the Government collectively.
The Senator has made an allegation. The Minister of State has said he was not one of those people and I ask the Senator to accept that and withdraw the remark.
I will not withdraw it. It was him and part of the Government. It is a collective Government and today that group heckled and jeered Deputy Bruton when he mentioned the people on trolleys as if what he said was not true.
The Senator must withdraw the remark or resume his seat. I ask him to withdraw the remark.
I will not withdraw a remark about people heckling and jeering about people on trolleys, with 34 of them on trolleys today in Letterkenny General Hospital.
I am not asking the Senator to withdraw that. I ask him to withdraw the remark that the Minister of State, specifically, heckled. Does the Senator accept that is the point being made by the Minister of State?
If he puts it on the record that he did not heckle.
Does the Senator accept that?
He has not put it on the record.
The Senator has made a personal allegation against me that is incorrect and I ask him to withdraw it.
That is rubbish. The Minister of State should be a man.
The Minister of State has the cheek to sit there and complain about other things and then gives out about something like that. That is pathetic.
How pathetic is the Senator himself——
Come on now Senator O'Rourke, you would not have done it.
Allow me to handle the matter. The Minister has clearly put it on the record that he did not heckle and that what Senator McHugh said was incorrect. Does Senator McHugh accept that?
I will accept that because I want to continue and make my point. I am not going to sit down.
I ask the House to allow Senator McHugh continue without interruption from the Government side.
Thank you. To make my point clear, there were 34 people on trolleys in Letterkenny General Hospital today, the day of the budget. The reference made by Deputy Bruton, the Fine Gael spokesperson on finance, to the fact that there are people on a continual basis on trolleys, should have been taken more seriously than it was. The reaction was like that of a junior or senior infant primary school class in the Dáil today and was disgraceful.
We need to ask deeper and more pertinent questions about the budget. How come the Evening Herald could print most of the content of the budget prior to the Budget Statement? How is it various media could print snippets of the budget all during the week? How is it we have been drip fed the budget all week? Has some of the budget been leaked?
Maybe Deputy Phil Hogan——
I am being interrupted, Chairman. Some ten years ago a Minister of State resigned over a similar leak as a result of a simple mistake by a civil servant. Many newspapers had access to much of the information on today's budget, which basically made a damp squib of it. It was all much ado about nothing because the public in general knew exactly was coming up in it.
Reference was made in the Budget Statement to a review of motor tax — only a review, after ten years in Government. What is that about? The Government has been ten successive years in office, yet it refers in the budget to a review. That is an insult to the public. We are dealing with the people's money.
A budget is no more than the distribution of the people's hard-earned money. I accept that there will be razzmatazz on budget day and a perception that people will be better off in the long run. However, counties like that of the Minister of State, Deputy Seán Power, Kildare, and my county, Donegal, rely totally on the construction and services sectors to sustain employment, as is the case in nearly every county. I make this point because of the information outlined in the budget document, which refers to the economic outlook, GNP growth of 5.7%, GDP growth of 5.4%, growth driven by domestic demand, the small contribution from net exports, a general deterioration in competitiveness, a relatively modest rate of export growth and a low rate of labour productivity. When the razzmatazz and circus element of today's budget is finished, we will have to examine the real aspects of the economy and the long-term economic projections.
It is the labour intensive sectors such as the construction and services sector which keep our economy alive although hanging by a dangling thread. The sooner this Government wakes up and realises it has made mistakes, the better. It should have introduced the tax incentives for innovation and research and development, which it finally introduced today, ten years ago. This is ten years too late, as the Minister of State, Deputy Parlon, knows. I charge the Government with total neglect and irresponsible handling of this economy.
In what country is the Senator living? We have created more jobs than ever before.
The Government can use all the razzmatazz and glamour it wants, and put whatever slant it wants on this.
The problem with this economy is that it is dangling by a thread, including the construction and services sectors.
The Senator should conclude.
It is a disgrace. The razzmatazz and the insult of today will soon be over but the real lives and real people will remain, including hospital patients on trolleys, 34 of them in Letterkenny General Hospital. The Minister of State should tell them and their relatives it was a good budget, as they sit in the coffee dock.
I ask the Senator to conclude.
Elective surgery has been cancelled. Patients have had procedures cancelled. The Minister of State should tell them it was a good budget. I will not.
I wish to share time with Senator Daly.
Is that agreed? Agreed.
I know the members of the Opposition are very upset. I sympathise with them because it must be very difficult to be in opposition to a very successful Fianna Fáil-Progressive Democrats Government. I have not witnessed such excitement and upset on the opposite side of the House for some time.
Our slogan "A lot done, more to do" is very true. We committed to introducing a €200 per week old age pension. That figure has been exceeded for contributory old age pensions, which will be €209, and has been reached for the non-contributory pension, which will be €200. This is a great achievement. We have delivered on our commitment whereas the rainbow coalition could deliver in the region of just £96 when Proinsias De Rossa, former Democratic Left Deputy, now Labour Party MEP — he was in every party — was in office. When he got his chance at the Cabinet table — he was Minister for Social Welfare — he could deliver nothing.
That is nonsense. When he left Government, 1,000 new jobs a week were being created. Unemployment was cut from 16% to 10% in two and a half years.
The Senator is talking through his hat. If he had been more spendthrift, he would still be in Government.
The Opposition has criticised the Progressive Democrats more than it has criticised Fianna Fáil but the reality is that the Progressive Democrats are part of the Government and contributed to and shared in the decision-making in regard to the reduction of the higher tax rate from 42% to 41%, and in making a commitment, when we are back in power together again, to reduce it to 40%.
The Government committed to reduce it to 40% by the end of this Government's life.
We did. It is an objective.
Most people still pay at the top rate of tax.
It is an objective for the Government to return to power with that commitment to the Irish people.
Will the Government ask the people? Will it go to the country? Will it hold an election?
The defining aim of the budget was to reward work and promote enterprise and innovation. I met the Minister for Enterprise, Trade and Employment, Deputy Martin, earlier. He is delighted with the budget because it gave him and his Department what they were seeking for small business.
Ten years too late. Tell that to the people of Roscommon.
I met the president of the Irish Farmers Association, Mr. Padraig Walshe, who is happy despite the fact the IFA might be associated with Fine Gael at times.
Tell that to the farmers.
He is happy in this regard. Everyone I have met is happy with the budget.
What about the farmers of north Leitrim?
I met a man whose son and daughter have a reduction in their mortgage repayments.
The Minister underspent on agriculture.
I have not met an unhappy person since the budget was announced by the Minister, Deputy Cowen, earlier today. I congratulate the Minster of State, Deputy Parlon, and the Minister, Deputy Cowen. I wish the Minister of State well in his work on decentralisation. Well done to him. He should keep up that work.
I thank Senator Leyden for affording me time to congratulate the Minister for Finance, Deputy Cowen, and the Minister of State, Deputy Parlon, who is present on his behalf, for the budget presentation. The Government has made a major achievement in that the budget covers a wide range of areas. Whether it might be an election budget, I can recall a budget where the current Opposition parties, with Mr. John Bruton as Minister for Finance, brought down their Government over the issue of taxation on shoes. It is important to remember that while there will be an election in the new year, every budget makes its own impact in the economy. Today's budget will make a major impact in a number of key areas, such as taxation, children's services, mortgages, the environment and other issues, including services for people with disabilities. The budget provided an additional €100 million for people with physical and mental disabilities, which is very welcome.
It is important to consider the budget in an overall context. It was stated in this debate that inflation was not mentioned in the budget and that more long-term attention should be paid to the issues. I remind the Senator who made that reference that the national development plan, which will be published in the new year, sets out the long-term objectives for the economy from 2007 to 2013. While I realise it has not been possible to read the entire budget in the short time since the budget presentation, the booklet presented with the budget contains a detailed analysis of inflation, which is estimated to converge with the average European rates. It is estimated that inflation rates should level off either next year or the year after.
Given any measure on which one wants to examine the budget, whether with regard to inflation rates, national development plans, care for the elderly, the position of those paying high taxes or children, it is a well balanced budget which ensures the benefits of our thriving economy spread down to the areas that need it most. In that regard, it is a welcome budget. I congratulate the Minister and the Minister of State.
I long for the day when the Government produces a budget, whether it is to its credit or not, and a member of the Opposition in this House says: "Yes. On balance, this was a good budget. They did reasonably well." I long for the day that the Opposition comes to the House and treats a budget seriously and does not just pick on it and say this, that and the other is bad.
Undoubtedly, this budget was one of the easiest budgets in the history of the State to produce and one of the hardest to oppose. I would have welcomed if any member of the Opposition had come to the House today and said: "Yes. We approve of some of this. A lot of this is good." However, what happened in the Dáil has happened here this evening, in that the Opposition has constantly picked on the bad parts. What should have happened——
Senator Ross simply did not listen.
Senator Phelan is behaving in the way I have described. Opposition Senators should have said that this is a good budget and that they approve of it.
Senator Ross should have been here to listen to the debate.
They should have declared their intention to vote for it.
Senator Ross was not here for the debate.
He was not here to listen to the debate.
Senator Ross is talking through his hat.
Rather than acting in such a manner, they decided to engage in a kind of mock war. Everybody knows that this budget was easy to produce. In my view, it was a particular reflection of the Government's management of the economy over the last few years. This is not very easy for me to say because I have spent my life opposing Fianna Fáil in many ways. I do not doubt that the ease with which this budget has been delivered, the considerable goodwill it will generate and the political benefit which may result from it can be attributed to the Government's superb management of the economy over many years.
It is easy to say the budget was tactically wrong. It is easy to say it did not cover this, that or the other. Regardless of how much money one has, there is always something more that one could do. Perhaps this budget is not as tactically clever as it could have been. It does not cover all the corners it might have covered in the cynical way one might expect in the months before a general election. It reflects the prosperity of an economy that has been managed particularly well over a period of time. Our economy's prosperity is not a result of global reasons. It has not happened by accident. We need to consider why Ireland's level of economic growth is exceeding that of almost every other country, including other EU member states.
It is because we are building houses. One would think someone as smart as Senator Ross would know that.
No, it is not just because we are building houses.
Of course it is.
It is not that.
Senator Ross has one minute remaining.
He is doing well.
I have seven minutes remaining.
The Minister of State, Deputy Parlon, needs to be called in advance of the end of the debate.
Senator Ross is doing better than I could do.
Perhaps the Minister of State will give me a little of his time.
Absolutely. Senator Ross is playing a blinder.
Our economic growth can be attributed to the Government's consistent resistance of attempts to increase the 12.5% corporation tax rate. That is the principal reason this economy is in such an incredibly strong position. I applaud both parties in the Government for that.
The only party that is suggesting an increase in the rate of corporation tax is Sinn Féin.
The Opposition should give the Government credit for its approach, which ensured it had so much money to give away today.
Corporation tax was introduced by Fine Gael.
Heckling is particularly——
Corporation tax was introduced by Fine Gael and the Labour Party.
Fine Gael proposes to go into coalition with a party that is allied to the trade unions, which want to increase the rate of corporation tax to 20%. It will come under such pressure all the time. That is its promise.
The people will decide that.
I want to discuss the issue of stamp duty.
These are the key issues——
Senator Ross, without interruption.
I will have to get injury time from the Leas-Chathaoirleach.
You are in injury time, Senator.
He has nothing substantial to say.
Stamp duty is one of the most controversial issues to be raised in this budget. The effect of stamp duty, which is undoubtedly a tax, is difficult to explain to people. The cheap and obvious political thing to do would be to abolish it in respect of first-time buyers. We need to explain this complicated issue to people, rather than mislead them. The decision taken by the Government today is right, although I am not sure how it will work or whether it will work. It is infinitely preferable to double the level of mortgage interest relief for first-time buyers than to give stamp duty back to the developers. I do not think anybody knows what the result of abolishing stamp duty for first-time buyers would be. My instinct and that of most impartial economists I have heard talking about this matter is that, depending on who it is given to, it would simply result in the transfer of a substantial amount of money from the Exchequer to the hands of developers. If one really wants to benefit first-time buyers, it is far more equitable and effective to do what the Government did today.
I ask the Senator to conclude.
I would like to make a plea, which stems from my disappointment in one respect, before I give the Minister of State a chance to endorse what I have said, which he will undoubtedly do. While the Government has used the tax regime to give tremendous encouragement to multinationals, it has missed an opportunity in this budget to allow for a free-for-all on broadband. I thought the Government would give a compete and utter guarantee in this budget or in subsequent measures that every household in the State will get broadband, as they do in Northern Ireland. The Government's failure to give such a guarantee may deter multinationals and jeopardise our future prosperity.
I thank all the Senators who made comments. I thank Senator Ross in particular for his fair appraisal of the budget.
The Minister of State should get him a membership card.
He picked up on what was said when he was out of the House.
He criticised the Government in the end.
As I have been busy all afternoon, I have only just started to learn about the widespread popular acceptance of this budget, which is a result of the Government's superb management of the economy over recent years, as Senator Ross said.
The Senator is blindfolded.
It is obvious that this is not a global trend. Ireland is practically unique, as Senator Dardis said, in having a Government that is able to stay under budget when providing for significant expenditure on social welfare benefits like old age pensions and various forms of infrastructure, at a time when its debt to GDP ratio is just 25%. The only other countries which are able to do that are countries with massive economies which are associated with oil barons. No other country has been able to manage its economy in the way Ireland has done.
I would like to respond to a few issues which were raised. Senator O'Rourke said that I would clarify the point made by Senator Ulick Burke about the rural environment protection scheme. The payments under the new scheme which is being introduced — REPS 4 — will be 17% bigger than the payments under REPS 3. Farmers who are currently operating under REPS 3 are free to transfer to REPS 4 and to avail of the 17% increase in the payments.
Senator O'Toole spoke about mortgage interest relief. The Minister's decision to extend mortgage interest relief means that a couple who are first-time buyers can get a 33-year mortgage over of up to €379,000, which is more than the price of the average house that first-time buyers are choosing to buy. Indeed, the average price of a first-time buyer's house in Dublin is more than €379,000. The relief that has been announced is certainly substantial.
Senator O'Toole raised some concerns about the accuracy of the revenue forecasts. We are living in a dynamic and fast-changing economy. The economy's revenue streams have been impressive and unprecedented. The Department of Finance adopts a very prudent approach to forecasting tax revenue, as it should do. It would be irresponsible of the Department to do otherwise. The production of accurate forecasts is challenging because the workforce is growing very fast, business is booming and asset values are increasing rapidly. I think the Department of Finance has done well.
Senator John Paul Phelan asked earlier about home care packages. The Minister for Finance mentioned in his speech that the Minister for Health and Children will announce the details of the health package tomorrow. That announcement will include references to home care packages and home help.
Senator Phelan also made some comments about transport. Details of capital investment over the next seven years will be included in the 2007-13 national development plan, which will be published by the Minister for Finance in January. The Senator is aware that Transport 21 will form a significant part of the new plan.
Transport 22 will be coming along shortly.
Senator Maurice Hayes raised the question of philanthropy. I welcome the Senator's call for philanthropy to be supported. The tax code already includes generous provisions to encourage charitable donations by individuals. Charities are able to reclaim the tax that is paid on donations in excess of €250 by individual taxpayers at the marginal rate. People who are self-employed are able to take a full reduction against their tax liabilities in respect of charitable donations, subject to the horizontal measure which applies to high earners, which prevents them from reducing their tax liability to zero.
Senator Quinn spoke about our long-term prospects. We have set out the long-term budgetary prospects, including the implications of aging to 2050, in the stability programme update, which is the part of the budget documentation that sets out the economic background. I draw the Senator's attention to chapter 6, which explains our strategy to ensuring the sustainability of public finances.
I thank all the Senators for their contributions. As Minister of State at the Department of Finance, I am happy and proud to be part of the Government that was able to bring in what I believe to be an excellent budget which, as Senator Ross said, has been widely welcomed across all sectors of society.
It could yet turn out to be the sting of a dying wasp.