Having somewhere to call home and accessing a public health system when you need it are among the most basic needs of citizens.
For any society that regards itself as modern, decent, and compassionate – meeting these needs is the foundation on which the rest of society is built. This Budget will ultimately be judged on whether it takes policy on housing and health in a new direction and helps to deliver better outcomes.
Ceann Comhairle, the truth is the government has failed to get to grips with the housing crisis. It is the government that has executive authority; it is the government that controls the Department of Housing; it is the government that is responsible for addressing the housing crisis and it is the government that must accept its performance on housing has not been good enough.
Budget day helps to set the direction of policy and, at its simplest level, provides the money. It is the day-to-day management of government business that delivers on the ground and this is where this government has fallen down in relation to housing.
We haven’t been short of big launches and PR events, but we have been short of homes built. Policies are being announced, launched, re-announced, re-launched but not implemented in practice. The follow through has just not been there. Outside of the bubble of Leinster House, the daily grind of getting things done is what matters to the people we all represent.
The overall message is to cut out the obsession with spin, and focus on delivery, delivery, delivery.
At the very frontline of the crisis, the number of people sleeping in emergency accommodation is a national scandal and a scar on our nation at present.
The government gave its word to those living in this nightmare that no one would be in hotel accommodation on an emergency basis by July 2017. The government didn’t just miss the target by a few weeks or a few months; fifteen months on – the number of people in emergency accommodation has hardly moved.
You would need a heart of stone not to have been moved by the young student given the name ‘Amanda’ on Morning Ireland last Friday – who has spent 2 years staying in a hotel room with her family. And there are many more Amanda’s. Almost 3,700 children are homeless and will sleep in emergency accommodation across our country tonight. This can never be regarded as the norm or as acceptable.
The State must lead from the front in tackling the crisis – by getting back to building public housing in a sustained and ambitions manner.
We welcome the additional funding allocated to homelessness and the increased allocation for the construction of social housing.
Under this government’s watch, home ownership has become a distant dream for more and more of our people. Home ownership is falling rapidly under FG. Fianna Fáil makes no apologies for insisting on a major focus on Affordable Housing in this Budget. Today’s announcement on Affordable Housing is a breakthrough and it now needs to be put into effect.
We have secured a €300m affordable housing package over the next three years including over €200m of new exchequer money. This will provide thousands of new homes which will be made available by eligible first time buyers. These homes will be sold at up to €50,000 below the cost of building the home subject to a maximum discount of 40% of the market value.
On Health, we need to know Minister that what we have before us is an honest health budget. We have not been privy to all the over and back between the HSE, the Dept of Health and the Dept of Public Expenditure in recent weeks – but we’re left with the distinct impression of quite a chaotic budget process for health.
I have no hesitation in saying it was the most difficult area to get feedback on in our negotiations. I am not suggesting you were holding anything back Minister. It seems to be the whole process of agreeing a health budget is crisis driven.
In the coming months, we are facing a supplementary estimate of over €700m. The government has been bailed out by an unexpected corporation tax windfall but this is not a sustainable basis for funding our health service. We have consistently argued for the need for a credible, multi-annual budget for health.
We have secured an extra €20m funding in 2019 to tackle waiting lists through the National Treatment Purchase Fund.
The scandal of children with special needs waiting up to three years for an Assessment of Need they are entitled to in six months has to end.
The extra recruitment of therapists is welcome as is the extra funding for mental health services.
On the current side, Health is getting an extra €1.5bn in 2019 above what was originally allocated for 2018 – for that people will expect to see better access and better services across our health. We need accountability in health and the Minister needs to ensure this money delivers on the key priorities.
Almost two and a half years ago, Fianna Fáil made the historic decision to enter into a Confidence & Supply arrangement to ensure this country had a government.
Back in May 2016, there was no shortage of predictions that we’d cut and run at the first opportunity, that we wouldn’t honour the commitment we gave.
I am not going to say it has been an easy or a comfortable position to be in – because it hasn’t – but despite constant provocation from most quarters in this House, we have stood our ground and kept the word we gave to the Irish people.
From opposition, we have sought to influence budgetary policy and move it in a more progressive direction. We have provided the political stability necessary for Ireland’s economy to grow.
We have brought about a noticeable shift in the make-up of Budgets – with an overall emphasis on investment in public services and increased capital investment. This was the platform we campaigned on in 2016.
This is the third Budget under the agreement. I am not here to say we got everything we wanted. We are not in government. There are no Ministers over here. We are not in charge of any government departments.
But rather than being a spectator, we have sought to use our influence to positive effect. In today’s Budget, we have made progress on a number of crucial policy areas on behalf of the Irish people. The increased investment in public services and vital infrastructure is more than four times greater than the money allocated to tax cuts. Capital investment in our economy will increase by a quarter next year.
Today’s Budget is not a Fianna Fáil Budget but it is a Budget that contains some Fianna Fáil measures.
Income tax / USC
Ceann Comhairle, the income tax package in today’s Budget is modest.
To make no change to our income tax system – as some have suggested – would result in people paying more tax next year. Fianna Fáil would not support a €3.5bn Budget package that actually made people worse off.
We made a commitment that we would secure reductions in the Universal Social Charge with an emphasis on low and middle incomes. Including the cut in today’s Budget, we have secured reductions over the last 3 Budgets in the 3 USC rates: the 1% rate has been cut to 0.5%; the 3% rate has been cut to 2%; and the 5.5% rate has now been cut to 4.5%. Some USC bands have also been widened. We believe these gradual reductions have reduced the burden of the USC in fair and sustainable way.
On income tax, we support the increase in the entry point to the 40% rate of tax by €750. Fianna Fáil believes that people in Ireland enter the higher rate at too low a level of income and this is an important step forward.
If no change had been made to the tax system, over 64,000 taxpayers would have moved up to the higher rate of tax and many more would be paying more of their income at the higher rate. As incomes rise, a static tax system means people pay more tax, so some changes were necessary in this Budget.
The combined effect of these income tax changes is that an individual or couple with an income of €45,000 per annum gain the most as a percentage of net income at 0.7%.
In the Budget negotiations, Fianna Fáil made a particular push for an increase in the Home Carer Tax Credit. A Home Carer Tax Credit is a tax credit given to married couples or civil partners (who are jointly assessed for tax) where one spouse or civil partner works in the home caring for a dependent person including children and persons with a Disability. For many of them, the €300 increase in the tax credit is €300 straight into their pocket. This will be of real benefit to couples where one spouse or partner stays at home to mind children or someone with a disability. It is my experience that many people entitled to this credit are not claiming it so I would urge couples who are largely relying on one income to check whether they may benefit from this relief.
Last Friday the Minister announced that Ireland is set to receive an extra €1.1 billion in corporation tax this year. No doubt this is a positive development but the growing reliance on corporation tax and on a small number of companies is now a key risk facing the economy and our public finances.
The point here is that – while on this occasion – the announcement was a billion euro extra, the question has to be asked what if it goes the other way? If the Minister had to announce last week an expected €1 billion shortfall in receipts, the environment for today’s Budget would be very different.
If we cannot predict corporation tax receipts with any degree of certainty, then there is a real exposure.
In 2011 corporation tax receipts stood at €3.5 billion. Here today in 2018 we are set to receive €9.6 billion in tax receipts. Corporation tax receipts account for over 17% of the total expected tax take for 2018. Nearly 40% of our corporation tax receipts come from just 10 companies.
Another even more startling way of putting it is that about 7% of all tax we collect in the country come from 10 multinational companies. It’s great while it lasts but we have to face up to the fact that this is now a risk for Ireland.
Corporation tax is and extremely volatile revenue stream. The UK and the US are lowering their headline rates to compete with our 12.5%. The European Union is stepping its efforts to bring in the Common and Consolidated Corporate Tax Policy and some form of digital tax.
The OECD’s base erosion and profit shifting programme is ongoing. This all means that the global corporate tax environment is changing rapidly and if just a handful of companies change their tax structure Ireland could stand to lose billions in tax revenue.
All of this underlines the importance of making a start but putting some money away as a contingency in a Rainy Day Fund, which Fianna Fáil proposed in 2015 and negotiated into the Confidence and Supply arrangement.
The Rainy Day Fund is set to be established next year and is supported by a whole range of international and domestic bodies as an important fiscal buffer. The European authorities have been very positive on this initiative. The easy part is saying we have learned lessons from the past. The hard part is making policy changes that give effect to that in a tangible way.
Some future Minister for Finance in a future government will be glad this initiative was taken because it might allow our country to avoid the type of tax increases and spending cuts that had to be implemented when the last crisis struck.
We need to protect ourselves in the event of a fiscal shock. Against the backdrop of a balanced general government budget, the establishment of this fund is an important reform and one we fully support.
Enterprise taxes / SMEs
Ceann Comhairle, the dependence on corporation tax receipts from multinationals is a warning to government of the need to place a greater focus on the thousands of SMEs in the domestic economy. SMEs in Ireland employ in the region of 900,000 people and are the backbone of our economy. Despite the strong economic rebound, life is tough for many of them. Insurance is an enormous problem for a growing number of businesses – something our party has highlighted in this House on countless occasions. Other costs too and emerging labour shortages make trading conditions difficult for many of them.
In the Budget discussions we highlighted the need to improve the taxation environment for SMEs and entrepreneurs. We are disappointed no changes have been announced today on the Employment and Investment Incentive Scheme. This scheme can help provide vital early stage funding for businesses. The Minister has an Indecon report making recommendations as to how this scheme could be improved. A good place to start would be to provide more resources to Revenue to improve the approval process for applications.
We also shared with the Minister the feedback we have received in relation to the share-based remuneration scheme – the Key Employee Engagement Programme or KEEP. The uptake on the KEEP has been weaker than expected and we welcome the changes the Minister is providing for in this Budget.
Fianna Fáil welcomes the extension of the 3 year Start-Up relief for a further 3 years and the extension of Film Relief. The time limited regional uplift in the Film Relief is an important initiative.
Our CGT regime for businesses and enterprises needs major reform, as it is currently uncompetitive when set against the jurisdictions we compete with. CGT is simply too high for people wanting to invest or start their own company. We had asked that consideration be given to increase the €1m lifetime limit in the CGT entrepreneur relief but the Minister has not done so in this Budget. It is Fianna Fáil policy to improve the CGT environment for SMEs and entrepreneurs.
We look forward to discussing a number of these enterprise tax schemes with the Minister during the debate on the Finance Bill.
One area Minister I believe a greater focus is needed is the retail sector. Irish retailers operate 45,000 businesses with 282,000 employees directly employed. While many of them are competing effectively in the online space, many more are struggling to keep pace with the surge in online shopping.
You need to improve the supports available to them under the Digital Trading Voucher scheme. Just an Enterprise Ireland assists firms developing export markets for their goods, internationally focussed retailers need increased supports to take on the global consumer market. If we don’t step up our efforts in this area, the reality is that more and more Irish retailers are going to become victims of goods being bought online from foreign based businesses.
9% Vat rate
Minister, we acknowledge that the decision to raise the 9% Vat rate to 13.5% was a difficult call for the government. While the 9% rate was successful, it was always designed as a temporary crutch until the sector repaired itself. There is little doubt many businesses – particularly in the food sector – will not be able to absorb the increase and will have no option but to pass it on to consumers.
The tourism and hospitality sector has had the benefit of the reduced rate for seven years. In line with the obligations on us under the Confidence & Supply Agreement, Fianna Fáil will be abstaining on the vote on this tonight.
As the 9% rate comes to an end, it is worth remembering today how it was funded in the early years. A staggering €2.5bn was taken from the private pension savings of hundreds of thousands of workers and pensioners by the last government. This raid has had a lasting effect.
It has resulted in the pensions of many thousands of current pensioners and employees being reduced forever. This point needs to be borne in mind when this issue is debated.
Ceann Comhairle, the Confidence & Supply Agreement provides for a supportive tax regime for the self-employed and the introduction of a PRSI scheme for them. The further €200 increase in the Earned Income tax credit is to be welcomed and Fianna Fáil recommits itself to the policy of bringing this credit up to €1,650 to match the PAYE credit at the earliest opportunity. The extension of Jobseekers Benefit to the self-employed is also an important reform and will help to provide an important safety net in the short term for self-employed people whose business gets into difficulty.
Jobseekers Benefit – which is paid for a maximum of nine months – will allow people who are self-employed and who get into difficulty some breathing space to get back on their feet and we welcome this initiative.
Ceann Comhairle, Brexit is the dark cloud that is hanging over this Budget.
This Budget and a whole lot more could unravel on the back of a bad Brexit outcome.
On March 29 next year – just over five months from now – the UK is set to leave the European Union. Negotiations are ongoing and we have little clarity on what the future relationship will be between the UK and the European Union.
Brexit represents the most serious political and economic challenge facing this island in decades and the potential impact on people’s lives both north and south should not be underestimated.
The Good Friday Agreement was signed twenty years ago. The Agreement and the peace it underpins should never be taken for granted or put at risk.
The majority of people in Northern Ireland, from all sides of the community, voted to remain in the European Union. We cannot accept the return of a hard border on our island in any shape or form. The consequences would be far more profound than the obvious damaging economic effects.
We have had various predictions of the effect of a ‘No Deal’ Brexit for our economy.
According to the ESRI and the Department of Finance a hard Brexit will mean a 3.5% drop on economic output over the next five years, a €20 billion increase in the national debt, a 33% reduction in exports to the UK and potential 40,000 job losses.
The Copenhagen report on the impacts on Ireland of a no deal Brexit shows that Ireland’s GDP will be 7% lower by 2030, exports will be 7.7% lower and imports will be 8.2% lower. In truth, no one knows the outcome of a hard Brexit but it would be incredibly damaging in all sorts of ways.
Fianna Fáil continues to believe that Northern Ireland should be given the status of a Special Economic Zone and that there should be no hard border.
While we support the Government in negotiations, Fianna Fáil has deep concerns at the lack of readiness here in Ireland. I note from today’s Budget booklet that provision is made under the Finance Vote for 270 staff – presumably customs officials. We were told in July that the government had approved the hiring of up to 1,000 customs officials and veterinary inspectors.
The provision in today’s Budget appears to be for 270 staff for the entirety of 2019.
In a PQ reply to ourselves just last week, you confirmed that Revenue will require an additional 600 staff because of Brexit ‘based on a scenario of a transition period after March 2019 and a future trade agreement between the EU and the UK’. You also confirmed that Revenue aims to have 200 officers trained and in place between 29 March 2019.
In other words, Revenue needs 600 extra staff if everything goes well – transition period followed by a future trade agreement. But they will have only 200 by next March when we could possibly be facing a hard Brexit.
The bottom line is – if we have a cliff edge Brexit at the end of March – Ireland will not be ready despite the government having had 2 years notice of the March 2019 date.
In the context of well over €1bn of trade over and back across the Irish Sea, this is an extremely serious prospect.
It is crucial that every possible support is given to businesses to prepare for Brexit.
The farming and agri food sector is particularly exposed and need special supports. On Budget day last year, a €25m loan scheme Brexit loan scheme for the agrifood sector was announced. It never happened. There is now a suggestion it will open up in early 2020, having been announced in October 2018.
Given the industry’s vulnerability this is simply not good enough and speaks volumes at the lack of delivery from Government on this area.
SMEs are in critical need of Government assistance also.
We have survey after survey showing that too many businesses are unprepared for Brexit. The government needs to tackle this head on.
The SME Brexit Loan Scheme announced in last year’s budget was not launched until March 2018. In the period to the end of June, only 10 SMEs had progressed to the finance provider approval stage of the process and less than 1% of the €300 million pot had been lent out to businesses.
Only 127 companies out of a possible 2,669 have received ‘Be Prepared for Brexit’ grants from Enterprise Ireland. If we take the maximum allowed of €5,000, only a paltry €600,000 has been handed out.
It is clear that these schemes are overly complex and too costly for companies to apply for.
One final point on Brexit, given what is at stake, it is understandable that the focus has been on defending what we have – no border on the island of Ireland, and the need for free trade to continue east – west as well as north south. But Brexit opens up opportunities too for Ireland and the message needs to go out loud and clear to an international audience that – when the UK leaves the EU – Ireland will be a very attractive place for investment and an ideal gateway to the European market.
Ceann Comhairle, as we enter into a critical period of Brexit negotiations, I know everyone in Fianna Fáil and I am sure everyone in this House wishes the government, the Irish officials and the EU negotiating team every success in the coming weeks as they seek to get the best deal possible for our country.
Aside from Brexit and Corporation tax, Ireland and the Irish economy face a number of risks that are unprecedented.
Overheating and competitiveness
The economy is beginning to approach capacity and the risks of it overheating are real. Labour shortages, particularly in construction, will inevitably lead to greater wage demands and greater wage demands will inevitably lead to higher prices for consumers. In the past, Ireland’s competitiveness suffered and the correction was really painful for all concerned.
Ireland dropped six places in the IMD competitiveness rankings in May and currently stands 24th in the Global Competitiveness Index.
For an economy that is among the most open in the world, being competitive is our currency. We must protect it.
The housing crisis, the lack of progress on broadband, the transport blockages, and of course the cost of doing business are all reasons for Ireland’s recent slippage.
Today, we all tend to focus on Budget day measures but in doing so we are only scratching the surface.
Making good quality broadband available in all parts of the country would be transformative for rural Ireland in particular. Faith is the ability of this government to deliver the National Broadband Plan is ebbing away.
Delivering this Plan is vital to our national interests and essential if we are to bring about any degree of balanced regional development. Put simply, people want to know will it happen and when will it happen.
Cost of Living
For individuals and families throughout the country, the rising cost of living is becoming a serious problem in their day to day lives. Headline figures for inflation suggest that prices are stable. However, when one digs into the figures a clearer picture emerges.
When we just focus on essentials, that every individual and every family cannot live without, the cost of living is increasing and is placing a greater financial burden on people throughout the country.
Irish homeowners continue to pay the highest interest rates on their mortgage in the Eurozone, higher than countries like Greece it must be added. Rents continue to soar and the rent pressure zones are not working.
Each utility provider has hiked energy prices.
Motor insurance premiums are still far in excess of what is fair and reasonable and the cost of petrol and diesel has increased substantially over the past number of years.
The cost and the lack of availability of childcare is placing a massive strain on young families and is cited as the principal reason why more women are not participating in the labour market.
Increased protectionism and trade wars
We are facing the threat of an ever-escalating tensions surrounding trade. As a small open economy we are acutely vulnerable to global trade disputes and growing protectionist policies. With the Trump presidency, the risk of an all-out trade war between the United States, the European Union and China has regrettably increased.
While Ireland has not been significantly affected to date, higher tariffs on more goods will impact us sooner or later.
Fianna Fáil as a party believes in free trade. We believe that breaking down trade barriers can benefit more people and the evidence resoundingly supports this. There are difficulties with free trade, no doubt, but the benefits very much outweigh the costs.
Cost of borrowing
Among the remaining legacies of the financial crisis is Ireland’s large national debt which currently stands at over €200 billion, around €43,000 per person. On a per capita basis Ireland has the third highest debt in the developed world, behind Japan and the United States.
Fortunately, for now, we are living in an era of very low interest rates. In 2014 the interest on Irish government debt was predicted to stand at €8.5 billion in 2018. The reality is that interest this year is likely to be in region of €5.5 billion, a full €3 billion lower.
This is undoubtedly positive but this era will inevitably come to an end.
The ECB is eager to return to normal monetary policies, to unwind its quantitative easing programme and to start to increase interest rates, perhaps as early as 2019. This rise will mean we will pay more on our debt, which will have a significant impact on future budgetary decisions.
When you look at all of these risks, it is hard to escape the conclusion that one or a combination of these risks will materialise over the period ahead. Economic conditions have been favourable for Ireland in recent years and as a result the economic rebound has been stronger and faster than most predicted. When you examine the profile of key risks, we would be naïve to believe this will last forever.
This makes it all the more important we engage in better long term planning and forecasting. Fianna Fáil supports the reforms in the budgetary process. While the government was slow to resource the Parliamentary Budget Office, it is now playing a really useful role as an independent support for Members of the Oireachtas and the Oireachtas Committees, especially the Budget Oversight Committee.
As a party, we called for five years forecasts to be provided as part of today’s publications and we welcome their inclusion.
Ceann Comhairle, there will be a lot of disappointment in the farming community that the proposal for a Farm Deposit Management Scheme is not going to be implemented. We note the extension of income averaging to farmers with off-trade income, and the extension of stock relief measures and the Young Trained Farmers stamp duty. My colleague Deputy Cowen will return to some of the expenditure measures in this area.
Welcome the extension of VRT rebate for plug-in and electric hybrid vehicles. We look forward to discussing during the Finance Bill what else can be done to encourage a move towards hybrid and ultimately electric vehicles.
Ceann Comhairle, the latest report from the UN’s climate change advisory group makes for grim reading. It really does paint an appalling vista.
While the focus today may be on the government’s decision not to increase carbon tax or excise on diesel – we need to see a greater focus on positive initiatives on the climate change agenda.
There is an urgent need for more investment in sustainable transport initiatives, we need to see better grants for retrofitting buildings, we need to support renewable energy and we need to put consistent policies in place. For example, local authorities across the country are facing planning applications for solar farms and have they have provided with no national policy or guidelines for central government. This is symptomatic of the lack of a coordinated national policy on climate change.
In May, the EPA said that Ireland will achieve just a 1% reduction on 2005 emission levels by 2020, instead of the target of 20%. This is an appalling performance and one that will cost us dearly – both financially and from an environmental perspective.
Ceann Comhairle, the Fianna Fáil party entered into discussions on this Budget with a focus on the issues that really matter to people. We campaigned in 2016 on the promise of an ‘Ireland for All’. We didn’t win the election but we gained some influence through the Agreement we entered into.
Even from opposition, we have done our best to give effect to our policies. We can point to a range of specific measures we have delivered while at the same time providing the political stability most people in this country desire. I look forward to working with the Minister and other Opposition spokespersons on the detailed scrutiny of the finance Bill in the weeks ahead.