Speech by Michael McGrath TD Fianna Fáil Finance Spokesperson Budget 2018

Published on: 11 October 2017

On World Homeless Day, I think it is fair to say that this Budget and more importantly this government will be judged – more than any other issue – by how it tackles our homeless and housing crisis. Today’s Budget is being introduced in a very positive economic environment but under the dark shadow of escalating crises – under this government’s watch – in health and housing.

During the stalemate the followed the election last year, Fianna Fáil was the only opposition party to recognise it had a responsibility to ensure the country had a government. That remains the inescapable backdrop to this minority government and to this Budget.

Today’s Budget includes progress – in some cases modest, but progress nonetheless – on many of the key priorities in our Confidence & Supply Agreement including:

1.    Reductions in the USC with an emphasis on low and middle income levels

2.    Avoiding the sudden loss of mortgage interest relief for 420,000 mortgage holders

3.    An increase in the tax credit for over 150,000 self employed people

4.    €55m funding for the National Treatment Purchase Fund

5.    An increase in funding for Housing Assistance Payments

6.    Extra funding for social housing

7.    A reduction in the pupil teacher ratio in primary schools

8.    Ringfenced funding of €35m for Mental health funding

9.    A further €5 increase in social welfare payments including the Old Age Pension

10. Increased capital investment in key sectors of the economy

11. Disability

There are many more examples – particularly on the spending side and my colleague Deputy Calleary will deal with this in more detail.

This is the 2nd Budget introduced under the Confidence & Supply Agreement – a budget which we as a party have sought to influence in the direction of a fairer Ireland. For us, this means prioritising public services and investment in the economy.

We have achieved this with the overall Budget day package placing twice the emphasis on public investment over tax reductions.

Were it not for our involvement, I do not believe today’s Budget would have such a mix. This 2 : 1 split is not just a meaningless number – by shaping budgetary policy in this way, it impacts favourably on schemes, funding and services for people throughout our country.

It would be wrong to overstate what one budget can achieve – especially when resources are limited – but we do welcome the progress made on many of the commitments we secured in the agreement. Last year, we ensured the country was given the first progressive Budget in six years – a fact confirmed by then Minister and now Taoiseach Varadkar – and today’s Budget builds on that progress towards fairer budgets.

Ceann Comhairle, the economy is going well, but there is deep uncertainty about what lies around the corner. There are critical questions about the future:

·         What does BREXIT mean for Ireland?

·         What impact will a Trump Presidency have on inward investment?

·         What impact will Europe’s renewed focus on corporation tax have on Ireland?

If these are some of the economic questions, the questions for our society are even greater.

Ceann Comhairle, the defining feature of this government so far has been its abysmal failure in housing and health. Of all the figures that will be quoted today, there are some far more important than others – today in Ireland, we have:

·         8,270 people in emergency accommodation including 3,048 children

·         678,438 people on some form of a hospital waiting list

Ceann Comhairle, we do remain committed to the political agreement we entered into last year but I don’t think anyone can argue that the government’s performance in housing and health is either acceptable or sustainable. We are consistently told by government – especially in housing – that money is not the issue.

If that is the case, no more press launches, glossy brochures – just get on with it and build the houses we need. Less talk, fewer promises, and more action please.

In health, the government really seems to have run out of ideas. In the talks last year, we proposed the reactivation of the National Treatment Purchase Fund. It was resisted by FG but now seems to be the centrepiece of your policy to tackle spiralling hospital waiting lists.

Ceann Comhairle, no doubt Sinn Féin will shortly launch a blistering attack on this Budget and – I would hazard to guess – an even more blistering attack on Fianna Fáil.

They’re good at attacking. That’s what they do. Our message to Sinn Féin is a very simple one – you had your chance – you had your chance to influence this government – but when it really mattered – when the opportunity was there – you bottled it.

Sinn Féin is the classic hurler on the ditch – full of opinions, full of wisdom but when the opportunity comes to don the jersey, take to the field and take some responsibility – whether it be in Westminster, Stormont or here in Leinster House – they run for the hills!

It is – after all – a lot easier to throw stones from the sidelines rather than going in and fighting your corner.


Ceann Comhairle, our party welcomes the fact that, in overall terms, the economy is doing very well. GDP growth was 5.2% in 2016; it will ease to around 4.3% this year and is forecast to soften further to a still healthy 3.5% next year. However, it has to be said the Department of Finance is forecasting that growth will slow every year between 2016 and 2021 – and all this against the great unknown that is BREXIT.

Growth of 3-4% per annum is where we need to keep it – at a sustainable level and avoiding a situation where huge pressures build up in the economy.

For these reasons, even though Ireland is not obliged to reach its medium term fiscal objective in 2018, we believe the government is right to seek to do so. Achieving a balanced budget in structural terms next year is a significant milestone. It will have been achieved as a result of the sacrifices of the Irish people.

Beyond 2018, we think that establishing a Rainy Day fund is the right thing to do – a fund which we can draw on when economic conditions are less favourable. Such a fund is a sensible part of budgetary policy and would be a sure sign we have matured and learned the lessons of the past.

I would have thought we’d hear more today about the long term challenges our economy and our country is facing:

·         Where is the long promised auto-enrolment pension scheme in the private sector?

·         What is being done to meet the skills deficits being built up in our economy – particularly in trades and in services?

·         How are we going to protect the future of our regions, alongside the incessant march to urbanisation

Mortgage Interest Relief

Ceann Comhairle, for many individuals and families, servicing the mortgage on their home is the largest outgoing in their monthly budget.

There are over 732,000 principal dwelling house mortgages in Ireland. This year, some 40% of them – over 292,000 mortgage accounts involving over 420,000 mortgage holders – are benefitting from mortgage interest relief. The average benefit is over €600 per qualifying account – and the benefit is much higher in some cases – especially for those who bought between 2004 and 2008. Mortgage interest relief is currently paid to those who bought their home between 2004 and 2012.

Under existing law, mortgage interest relief is due to end completely for all mortgage holders at the end of December this year. If this were allowed to happen, mortgage bills would increase by some €160m per year – with many individuals and families facing a sizeable increase in their mortgage repayments.

Thousands of mortgage holders – not aware of this – would receive an unwelcome shock and I have no doubt it would push some individuals and families into arrears.

In the last election, Fianna Fáil was the only party that campaigned to retain mortgage interest relief to 2020.

We secured agreement last year that it would be retained to 2020 and phased out over the next 3 years as opposed to ending overnight and the details have now been confirmed in this Budget.

In simple terms, mortgage holders who benefit from the tax relief at source will in 2018 keep 75% of the benefit they had in 2017; they will keep 50% in 2019 and 25% in 2020.

With almost 74,000 family home mortgages in arrears, I would like to particularly welcome confirmation today of the extension of mortgage interest relief for existing recipients for a further three years – albeit on a reduced basis.

The Governments Mortgage to Rent Scheme has been an absolute failure up until now with fewer than 300 cases successfully completed.  Contrast this with the fact that over 32,000 family home mortgages are in arrears of two years or more. There has been a lot of talk from government about a revamp of the mortgage to rent scheme, it’s well past time we saw some action.

We have brought forward our own legislation that would empower an independent office to impose a solution to restructure a mortgage in arrears. I look forward to presenting this Bill before the Oireachtas Justice Committee in two weeks’ time for detailed scrutiny.

I want to say Ceann Comhairle our party stands on the side of the thousands of mortgage holders who were denied their contractual right to a tracker mortgage rate. Many of them have been treated disgracefully by their lender. They deserve their money back plus interest, and they should be compensated. We also need to know how this happened in the first place. The lack of answers so far is just not good enough.

Income Tax

With such a tight fiscal space for 2018, income taxation measures were always going to be relatively modest in this Budget.  While others believe that income taxes should remain untouched, Fianna Fáil believes that the burden should be reduced in a prudent and sustainable way for hardworking individuals and families. It shouldn’t be forgotten that pensioners too pay tax on any income above the exemption threshold – of €18,000 for an individual or €36,000 for a couple – and these thresholds have not been increased in recent years.

On income tax, our focus was on the Universal Social Charge – this is based on the democratic mandate we received in the general election and the fact that reducing the USC is a condition of the Confidence & Supply Agreement.

The USC measures announced today will impact over 1.8 million people earning over €13,000 across the country.

The gains are modest for sure but, combined with the increase in the entry point to the higher rate of tax, someone earning the average annual earnings in Ireland of €36,919 will have gained around €246 per year in this Budget.

When you add in the changes in last year’s Budget, their gain is well over €400 per annum. This might not be a lot of money for some people but it certainly is for many of those we represent and the value of this benefit should not be discounted too easily.

If you look at the bigger picture, you can see how workers and pensioners are now paying so much more tax than before.

·         In 2007, a total of 2.156m workers paid a total of €13.6bn in income tax.

·         In 2017, a total of 2.063m workers are expected to pay a total of €20.2bn.

Ten years on from 2007, about 100,000 fewer workers are actually paying the exchequer almost 50% more in total income tax.

In 2007, income tax represented under 29% of the total tax take, €6,300 for every worker.  Nearly ten years later and income tax now represents 40% of the total tax take, €9,800 for every worker.  This clearly shows that the income taxpayer is shouldering a substantial burden in this economy and this must be recognised by this House.

While the Income Tax base has broadened it is also true to say that it is among the most progressive income tax systems in the EU and the OECD.  This is as it should be and Fianna Fáil defends the progressive nature of our income tax system. Those who earn more should and do pay more. However, increasing the tax burden on higher earners further and further is not without consequence.

The suggestion that increasing the tax burden on those who earn over €100,000 will not damage our economy is ill founded. Those who propose this also advocate increasing employer PRSI on the employers of these higher earners.

What they ignore of course is that those – such as the IDA – who are out there selling Ireland in a competitive global environment consistently tell policy makers that high personal taxation is a deterrent to international investment coming to Ireland. I think we ignore what they say at our peril.

The notion that increasing the tax burden further on those over €100,000 will not ultimately have an impact on those earning less than €100,000 is also not founded in reality. Making Ireland less attractive and less competitive will ultimately affect the wider economy and all workers.

Ceann Comhairle, Fianna Fáil welcomes the increase in the Earned Income Tax Credit which will impact around 150,000 self-employed workers in this country.  It is still not equal to that of a PAYE worker but it is a move in the right direction.  As a party, we are committed to ultimately ensuring that the self-employed and PAYE workers are treated equally in the tax system.

We will encourage progress to be hastened on the share based remuneration scheme.  Many SME’s, particularly in the tech sector, need the expertise to grow and without this they are finding it very difficult to compete with the larger companies.

We must recognise the tireless work that carers are providing for their loved ones and I welcome the increase in the Home Carer Credit which will impact nearly 81,000 households. It remains my view that there are many home carers out there – including stay at home parents caring for children – who should be getting this credit but are not claiming it because they are not aware of it.

Corporation Tax

Ceann Comhairle, as a country, we now – according to the White Paper published on Friday night are expecting to collect just under €8bn in corporation tax receipts this year – representing 15% of our total tax take. The White Paper is projecting a €250m increase in corporation tax receipts before the end of the year above what was expected in the Summer Economic Statement. It is worth bearing in mind that in 2012, we were collecting less than €4bn in corporation tax – so there is a question about the sustainability of receipts growing at this pace.

We know that some 80% of all corporation tax is being by multinationals.

We know that the top 10 multinational groups pay over 40% of all corporation tax.

This is altogether apart from the employment taxes paid by and on behalf of the 200,000 people employed by foreign owned companies in Ireland. Not to mention the indirect taxes and the indirect jobs.

The increased scrutiny that our corporate tax system has come under in recent times has to be considered alongside these facts.

Fianna Fáil welcomes the publication of the Coffey Report and we support the implementation of its recommendations.

Last week’s announcement by the European Commission that it has referred Ireland to the European Court of Justice for failing to collect between €13bn – €15bn from Apple couldn’t have come at a worse time.

Fianna Fáil disagrees with the original State Aid ruling by the Commission and we support the Government’s appeal.  Yet we must respect the decision handed down from the Commission while the appeal process takes its course.

It is now over 13 months since the Commission announced its decision on the Apple case at the end of August 2016. Yet none of the money has been collected.

I accept that this is a complex process but one is left wondering how it has got to this point.  The deadline for collecting the money was January 2017. The Commission warned the government in May 2017 to collect the money.

The government didn’t commence the tendering procedure for custodian services until July 2017 and last week the Commission referred us to the European Court of Justice for not collecting the money.

There is now a concerted effort in Europe to overhaul corporation tax and Ireland must stand resolute in defence of our regime, including our 12.5% rate.

There has been a revival of the Common and Consolidated Corporate Tax Band or CCCTB.  President Juncker has spoken about removing the veto on corporation tax. Recently a French proposal has gained support from major European States where internet companies would be charged tax based on where their sales take place.

These policies I believe are wrong for Ireland and wrong for Europe.  We in Fianna Fáil are not in favour of tax harmonisation.  It would serve only to reward the larger countries and would in further narrow our tax base.  The Lisbon Treaty made it very clear that unanimity is required when it comes to corporation tax matters.  It was on this understanding that the Irish people ratified the Lisbon Treaty in 2009.

Our corporate tax regime is a key pillar of industrial policy.  With the UK reducing its rate and the US planning to do the same we must be prepared to defend it.

Despite the challenges we must not resort to simply saying no to every proposal.  We must continue to lead the way with the OECD BEPS programme and we must continue to engage with our European partners while – at the same time – being crystal clear where our bottom line lies.


Ceann Comhairle, there can be no doubt Brexit represents a major challenge to Ireland and our economy.  The euro / sterling exchange rate is volatile. Today it’s trading at 89p to the euro but the overall fall in sterling since the Brexit vote in June 2016 is hurting many Irish exporters.

Some economists and analysts are predicting parity in the not too distant future.  This increases the price of our exports and decreases the price of imports from the UK.  Already we are seeing of the effects in the sectors most dependent on trade with the UK.

Cross border shopping has increased and many traders in the border region are under serious pressure.  The number of tourists from the UK is falling.  They are cutting their staying time and spending less.  Online shopping is exploding.  According to Retail Excellence Ireland, €850,000 is spent by Irish consumers every hour online and €600,000 of this is lost to businesses operating outside Ireland.  With over 280,000 employees, the retail sector deserves some attention Minister – especially with Brexit in mind.

The risk of a hard Brexit should not be underestimated.  If the trading relationship between the EU and the UK resorts to WTO rules it will be a disaster for the Irish economy. Goods from the Agri Food Sector such as beef will be most hit as tariffs could be in the region of 40%.

Fianna Fáil believes there should be detailed sector by sector planning and crucially this must be done in a transparent manner.  We need contingencies for each eventuality and businesses need urgent assistance from Enterprise Ireland and the State to better enable them to diversify the markets outside of the UK.  The leaked memo over the weekend from the Revenue Commissioners is striking.

The overriding finding in the report is that the seamless and frictionless border we had been hearing about from government is just not possible in the event the UK leaves the EU Customs Union. According to the Revenue, there will be no open border in this scenario. The Revenue has been stood down by the government from continuing their preparatory work on Brexit. This is the wrong decision.

However unpalatable it may be, Ireland needs to be prepared for all eventualities because we simply do not know what the final outcome of Brexit will look like.

Fianna Fáil resolutely opposes any return to a hard border between Northern Ireland and the Republic and the common travel area must be maintained. Northern Ireland should be designated a Special Economic Zone similar to other jurisdictions.

The Northern Ireland Executive needs to be re-established.  This is critical at such a crucial juncture in Northern Ireland’s future.

We believe that European State Aid rules need to be relaxed in order for the State to better assist the Agri Food industry and affected Irish SME’s.  We welcome comments from Guy Verhofstadt on establishing a Brexit Fund to help the most affected States like Ireland.  The Government must now show leadership to ensure this fund becomes a reality.

Commercial Stamp Duty

Ceann Comhairle, the principal revenue raising measure in this Budget is the increase in Commercial Stamp Duty to 6%. In view of where our economy is at and the use these proceeds are being put to, we support this increase. It would be our hope that this measure will re-direct some of the construction capacity being absorbed by the commercial sector into building the homes we need.

It is important Minister that where land zoned for residential development is sold and actually built on – that this increase does not apply. We don’t want to make building homes more costly or less viable because of this change.

There are a number of cautionary notes to be struck.

Commercial stamp duty is a tax on property transactions. The yield will depend on the number and value of these transactions. However, the proceeds are being used to fund recurring changes on the expenditure and taxation side of the Budget. The impact of this change is going to have to be monitored closely.

Given that stamp duty on non-residential property transactions brought in €256m in 2016 – you are making a very big assumption about the yield from this tax.

If it does not materialise, then there is a hole in the public finances. There is a risk here Minister and it is one you need to be aware of.

Help to Buy

Last year during the passage of the Finance Bill, Fianna Fáil secured a commitment from your predecessor that an independent impact assessment of the Help-to-Buy scheme would be carried out. It remains our view that this assessment should have been done before the scheme was introduced. You have confirmed that you are publishing the report today.

I note the report has concluded that abolition of the scheme at this time ‘would create uncertainty and damage confidence and would likely impact on the levels of new builds’.

The report by Indecon finds that to date there is no evidence that the scheme has impacted on overall prices of new homes for the first time buyers – however, it goes on to say ‘it is vital to monitor the price of HTB new builds over the coming months’.

The authors also find that the measure does not appear to have had any significant overall impact to date on the level of supply.

The report rightly identifies the key challenge for the housing market is to reduce the cost of housing, including both house prices and the cost of construction.

Indecon expressed concern in the report’s conclusions that the failure to carry out a cost benefit analysis before the scheme was introduced should not be seen as a precedent for other measures. I hope this is a warning the government will heed.

NAMA / Housing

The housing crisis is first and foremost a human tragedy. But it is a major problem for our economy aswell.

House prices and rents are continuing to grow at an alarming rate.  According to latest CSO figures house prices have increased nationally by 12.3 per cent in the last 12 months.  The latest Daft figures show rents have increased by 11.8 per cent nationally and 12.3 per cent in the capital.

Many have lost hope of ever owning their own home.

The increased cost of housing is leading to increased wage pressures and increased costs for businesses.  Companies thinking of relocating here are asking the basic question – where will our employees live?

We have fallen to 24th in the World Economic Forum Global Competiveness Rankings and we are 18th in the World Bank’s ‘Ease of Doing Business’ Index.

The National Competiveness Council is warning of cost pressures in the economy and the potential knock on effects to our competiveness.

My colleague Deputy Calleary will deal with the housing area in more detail but I do want to say we welcome any initiative that will help to fix the broken funding model for the construction of new homes we so badly need. This is an issue we have been highlighting for a long period of time. The funding model is not working in the residential construction sector.  Banks are providing – at most – up to 60 or 65 per cent funding for residential construction projects at a cost of around 4 to 6 per cent.  Builders and developers are forced to look to international funds to fill the gap where the cost can be well above 10 per cent and in some cases much higher.

We urgently need an alternative funding model.  Currently ISIF is sitting on Global Portfolio of over €6 billion.  This money is invested in global funds outside Ireland.  It is doing nothing for the Irish economy.  Fianna Fáil believes a portion of this money should be redirected towards providing capital on a commercial basis for the construction of social and affordable housing.  Activate Capital set up under ISIF already does this in partnership with global investment firm KKR but we believe the scale of it is nowhere near sufficient to meet the crisis at hand.

Lending by this new entity should be done on commercial terms and only to viable projects.

I am concerned that it seems little preparatory work has gone into this. I would have to question how long approval from the European Commission will take.

Vacant sites / CGT

Ceann Comhairle, we have not seen the legal advice which apparently advises against bringing forward the vacant sites levy to 2018. We welcome the intention to increase the levy when it does come into effect in 2019. Addressing the issue of land hoarding is vital if we are to get housing supply to where it needs to be.

Cost for Families

Ceann Comhairle, we need to aggressively tackle the high costs that individuals and families in our society face. Whether it be high mortgage rates, motor insurance premiums, the cost of energy, waste collection, rents, heath insurance – we must seek to bring down the cost of living where we can.

As a party, we have placed a major emphasis in this Dáil on the cost of mortgages in Ireland and the cost of insurance.

Some progress has been on mortgage interest rates in the past couple of years, but more needs to be done to bring rates here closer to European norms. We will continue to focus on this issue and we will bring our legislation to Committee stage in the coming weeks. This Bill will move to end discrimination in how new and existing customers are treated by banks and will force lenders to compete on rates alone rather than cashback gimmicks.

Motor insurance continues to be a major issue, while CSO figures have stabilised, many motorists are still reporting huge increases upon renewal and many more are being refused insurance when they attempt to shop around.  We will continue to hold the government to account on the implementation of the recommendations of the report on the Cost of Insurance Working Group.

The Setanta case continues to rumble on with no end in sight for claimants.  Many of these claimants who have contacted me have suffered horrendously because of this and yet the Government cannot provide any clarity on the issue.  It has been nearly five months since the Supreme Court made its decision and claimants still have no answers.

The liquidator now expects to cover only 22 per cent of claims.  Former customers of Setanta are receiving letters from solicitors telling them that they could be personally liable for compensation.  This is not good enough and the government needs to step in and ensure policyholders are not left out of pocket.

We welcome the measures in this Budget that focus on reducing costs including the reduction in the monthly Drugs Payment Scheme threshold and the cut to prescription charges.

On childcare, I want to welcome the changes announced in relation to the ECCE scheme. The anomaly that not all children are able to benefit from a full second free ECCE year has been a real bone of contention.

Ceann Comhairle, while I welcome the reduction in DIRT tax again in 2018 by 2% – I am disappointed that the link with the exit tax rate on other savings products – which was broken in last year’s Budget – has not been reinstated. It is estimated that between 500,000 and 600,000 savers are affected by this policy, including many savers who invest in life assurance investment policies. People feel very aggrieved that there is different treatment of broadly comparable financial products and the differential is due to grow as DIRT is reduced and the exit tax is not.

Minister, Fianna Fáil supports the introduction of a so called sugar tax. Of course if this is effective, it won’t bring in a whole lot of money because companies will change their products – and we already see this happening – and consumers will change their habits.

Ceann Comhairle, it is disappointing there has been no progress on a Vat Compensation Scheme for Charities. The Vat on Charities Working Group reported in October 2015 and there was a real expectation that this Budget would see a Vat Compensation Scheme introduced.

Minister, there will be major disappointment in the farming sector that there are no measures in this Budget to deal with income volatility. I know you had various proposals to allow a step out from income averaging but you haven’t included them in the Budget. I would ask you to engage with the farm organisations in the coming weeks to see if this issue can be addressed as part of the Finance Bill.

I would like to welcome the measures for electric vehicles. Our performance in this area really is appalling and we need far greater ambition from government in tackling climate change and meeting our commitments. This is important – not just because of the need to avoid fines from the European Commission – but because it is the right thing to do. We owe it to future generations to redouble our efforts to reduce carbon emissions.

Ceann Comhairle, we support the increase in the minimum wage as recommended by the Low Pay Commission and confirmed by the Minister today. For people who are earning at or close to the minimum wage, the government can also help them by reducing the cost of living as we suggested earlier – including the cost of essentials such as accommodation, insurance, transport costs and so on.

Minister, the 9% Vat rate in the tourism and hospitality sector has played an important role in protecting and creating new jobs across the country. There have been calls for the reduced Vat rate to be discontinued. We do not believe this is the time to take such a step given the uncertain environment for the tourism sector at the moment.


Ceann Comhairle, there has been one important reform since last year’s Budget and that is we finally have a Parliamentary Budget Office in place – it only had a limited role in this Budget but it has real potential to help reform the budgetary process and give a greater role to Oireachtas members in the process.

As a party, we have conducted our negotiations on the Budget in a professional and business-like manner and without any drama or histrionics. Our sole focus at all times has been to secure progress on measures contained in the Confidence & Supply Agreement not for our benefit or for the sake of it – but in the interests of the people we represent. We have prioritised public services – especially for the most vulnerable – and the tax changes we secured will be of benefit to thousands of individuals and families around the country. I look forward to working with the Minister and opposition spokespersons on the detailed scrutiny of the Finance Bill in the weeks ahead.

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