In the general election earlier this year, the people spoke and, in doing so, delivered a clear message. They wanted a fairer Ireland with decent public services at its core. They were determined to set Ireland in a new direction. They wanted to see a less divided Ireland, a more inclusive and a more caring country.
It is evident today – the voice of the ordinary people of Ireland has brought about a marked change in budgetary policy.
As a party, we campaigned for and pledged to work towards a fairer Ireland. For us, that’s not just a catchphrase. In practical terms, it means an Ireland that invests in people and services as a priority. The principle of having access to good quality public services, when people most need them, lies at its heart.
We promised to work for an Ireland where the benefits of economic recovery can be enjoyed by all, not just a select few.
This Budget comes at a time of great uncertainty for our country following the BREXIT vote last June and we face into crucial negotiations on what exactly this means for Ireland. This is the inescapable backdrop to Budget 2017 and it is one we must face up to.
Ceann Comhairle, let’s deal upfront with the context for this Budget in our parliament.
The Confidence and Supply arrangement we entered into with Fine Gael requires us to facilitate Budgets ‘consistent with the agreed policy priorities in the agreement’. We should not forget it is the first time in the history of our State that such an arrangement was entered into. It was entered into because it was necessary to ensure – following an inconclusive general election – that a government was formed.
That agreement gives priority to investment in public services over tax cuts and required at least a 2 : 1 split in Budgets to recognise the new priorities. This was essential – in our view – to give effect to the message from voters in the general election in February.
That has been achieved in this Budget. In fact, it has been more than achieved.
In today’s Budget, the split between expenditure on services and investing in our people on the one hand and taxation on the other is actually 3 : 1.
By any measure, this is a significant achievement and is a major departure from the policies of the last Fine Gael / Labour government.
We didn’t get everything we wanted in this Budget, but we have secured some vital progress on a number of priorities set out in that agreement – including in health, social protection, education, housing and fair reductions in the universal social charge.
Ceann Comhairle, I want to be clear on one thing.
While we didn’t write this Budget – from the outside – we influenced it as best we could in the direction of a fairer and more decent Ireland – and we make no apologies for that.
Today’s Budget is a better Budget because of the influence we have brought to bear. On the face of it, it is certainly a fairer Budget that the last five introduced by the previous Fine Gael and Labour government. Like everyone else, we will await all the details as they are released department by department over the coming days.
Many of the measures announced by both Ministers today can be traced back to the ‘Confidence and Supply’ agreement entered into prior to the formation of this government and the drawing up of the Programme for Government.
The fact that Fianna Fáil has some role in the passage of the Budget will of course be used as a reason to attack us.
These attacks will be as predictable as night follows day. What is true is that we have not shirked our responsibility to the people who elected us, unlike others.
It is no harm to cast our minds back to last February when the people voted in a general election. No sooner had the votes been counted, parties like Sinn Féin, AAA / PBP, the Labour Party, the Social Democrats – all said forming a government, was nothing to do with them. They proceeded to take a 10 week holiday.
When it became clear we were not going to get the support to form a government, we recognised our responsibility to ensure the country had a government and played our part in achieving that.
Those who will stand up here and criticise every single item in this Budget need to be reminded they had the chance to have their say but didn’t take it. They couldn’t bring themselves to try to do something positive with the votes they received.
Instead, they chose the comfortable position of saying no, as they always do, to pretty much everything.
For too many in this House, accepting responsibility is always the job of somebody else.
The bigger picture is the centre ground of politics is under attack, not just here in Ireland but throughout Europe. When you look at the alternative, you realise just how vital it is the centre holds. Most people in Ireland are not on the hard left or extreme right, they are moderate, fair minded people who want to see their politicians act sensibly and for the common good.
In fact, they want to those of us with the privilege of being in this House get on with it. They want to see us work together where we can. They want less of the adversarial, over and back, tit for tat politics.
I have learned a few things in politics.
– Those who shout the loudest do not always have the most conviction.
– Those whose policies more easily lend themselves to headlines or sound bites are not always right. Far from it in fact.
And when I look at the remainder of the opposition, I become even more resolute in my view that the centre has to hold. Sinn Féin advocates €1.7bn of new taxes. At a time of an unprecedented rental crisis with landlords leaving the market, they want to increase tax on rental properties. At a time when we can’t recruit consultants for our hospitals, they want to charge them and others 7% more in income tax. At a time of enormous uncertainty, they want to increase tax on employers.
Not to be outdone on the far left, the AAA / PBP have gone for no less than €25bn of new taxes. Yes, €25bn. I won’t even go into it. That is the alternative to the centre ground.
Ceann Comhairle, Fianna Fáil’s central point is that the annual national Budget has to be more that the total of the sums contained within it, it is an opportunity to at least leave a fingerprint of a vision for the country. I will speak in a while about some of the long term challenges our country faces.
In the here and now, our absolute priority has to be to help people who are in a desperate way because of a terrible housing crisis, those who are stuck on endless hospital waiting lists, the elderly, people with disabilities and those who care for them, families of children with special needs and older people at home without adequate supports.
As a party, we put in the hard yards. We negotiated after the election to ensure a government was formed. We negotiated in recent weeks to get as many measures as possible into the Budget.
No, we didn’t get everything we wanted but we have definitely had an impact.
Ceann Comhairle, the Budgetary process in Ireland is undoubtedly a relic of the past. We welcome the reforms which have started but much more needs to be done.
The Committee on Budget Oversight has done a good job in a short space of time. We now need the Independent Budget Office to be established without delay.
Budgeting has to become a ‘whole of year’ exercise.
And there should be no late surprises.
Take Budget 2017, every Oireachtas member was repeatedly told there would be just less then €1billion available in this Budget for new measures. In the last week, this changed by 20%.
This makes a mockery of the budgetary reform process and places opposition at a distinct disadvantage to government in the lead up to the Budget. This must change into the future.
Ceann Comhairle, this Budget has been cast very much in the shadow of BREXIT.
The truth is we do not yet know what it means for Ireland.
BREXIT is a leap into the unknown for Ireland, and is set to become the dominant political and economic issue facing the island of Ireland – at least for the next few years.
We have to accept a number of fundamental truths.
Brexit is going to happen, perhaps in as little as two, two and a half years. It may be a manageable, negotiated process or it may not.
Competing interests in Europe will want to pull the process into different directions. We will 1 of 27 countries at the EU side of the negotiating table, albeit the 1 with the most at stake.
- The fact that nobody wants a hard border with the six counties doesn’t mean it’s not going to happen.
- The fact that the imposition of customs and tariffs would damage both the economies of the EU and the UK doesn’t mean it couldn’t happen, by accident or design.
- The fact that the Common Travel Area we have with the UK pre-dates our membership of the EU does not guarantee it will survive post BREXIT.
The negotiations that will formally commence when British Prime Minister May triggers Article 50 by next March will be among the most important this country has participated in, and we need to be fully prepared.
Much like the Apple tax ruling, the government here seemed ill prepared for the BREXIT vote.
It is an open question as to whether this government has the strength and capacity to meet the challenge of BREXIT.
Only time will tell.
For the past number of decades, we have been in the enviable position of benefitting from US foreign direct investment, while enjoying a strong trading relationship with the UK and gaining all the benefits of European Union membership and access to the single market.
We now need clear leadership to navigate the enormous challenges posed by BREXIT – both the knowns and the unknowns.
This means defining exactly what we want from the negotiations between the EU and UK. It means having a plan in the first instance, but critically a plan that is credible and comprehensive.
There are very current and practical initiatives we can undertake now in order to prepare ourselves for the fallout of Brexit.
Prior to the referendum in June, sterling was trading at 77 pence to the euro. Simon McKeever of the Irish Exporters Association has said their research points to 85 pence as the ‘pain point’ for a lot of exporting Irish companies.
With sterling now trading at 90p to the Euro; that means a lot of pain for Irish firms. Jobs have already been lost. This is making Irish goods and services sold in the UK more expensive and less competitive. Many SMEs operating to tight margins are unable to pass this cost onto their customers and must instead try to absorb it.
Some of the stats around our dependence on trade with the UK are startling.
– We import 85% of our energy from the UK.
– Ireland and the UK exchange €1.2bn worth of goods and services weekly.
– 14% of Irish goods and services are exported to the UK.
– Irish owned companies export 44% to the UK.
– 30% of all employment is in sectors which are heavily related to UK exports.
The fall in sterling is only one example of the immediate pain small businesses are facing in a post Brexit environment. Many commentators forecast a further depreciation of Sterling which will pile yet more pressure on SME’s and other exporting companies.
We have called for a National Hedging Strategy to be devised using the NTMA for those SME’s struggling to come to terms with the depreciation of the pound.
We welcome the plans to reduce the Capital Gains tax for entrepreneurs. The SME sector is one of the principal backbones of our economy and measures like these will encourage enterprise and start ups and will create jobs.
We strongly encourage that the increased funding to Enterprise Ireland and other agencies be directed towards exporting firms that are heavily dependent on the UK market, specifically to assist them in achieving greater market diversification.
The agri-food industry is particularly vulnerable to Brexit, with over 27% of exports to the UK being from food and live animals. My colleague Deputy Calleary will address the major challenges facing the farming community.
Tourism Ireland informs us that the UK is one of our top four markets for overseas tourism delivering some 4.5 million visitors in 2015. Not only do we face being less competitive in terms of our prices but now we could also face a return to restricted travel and passport controls between Ireland and the UK.
This will place even more pressure on our tourist industry and is likely to significantly hurt smaller tourist providers like guesthouses. We are glad to see the retention of the 9% VAT rate for the tourism and hospitality sector. Its removal would only add to the pressure experienced by this crucial sector arising Brexit.
Finally, Brexit has serious implications for the border region and our general relations with Northern Ireland. A hard border between Ireland and Northern Ireland would be a very regressive step, both politically and economically. Many businesses in the Border region rely on the free movement of goods and customers across the border in order to succeed.
A hard border could potentially be the death knell for many of these businesses both North and South. We have a unique perspective as the only country to have a land border with the UK and we need to emphasise this at the European level in order for our concerns to be heard.
We welcome the other measures announced today including…….
There are undoubtedly opportunities from BREXIT too – particularly in the area of inward investment from multinationals wishing to retain a foothold in the European Union and from financial services firms currently in the city of London.
The IDA is going about its work quietly but with purpose and we fully support them in their efforts to bring more investment to Ireland in light of BREXIT. There are particular opportunities in the financial services area. We need to ensure that our regulatory system has the capacity to accommodate more international financial service providers. We do not want brass plate operations. We want real operations, with real jobs.
For all of these reasons and more, we have called for a Minister with overall responsibility for BREXIT to be appointed and we repeat that call today.
Today’s budget provide for modest reductions in the universal social charge. Fianna Fáil supports these measures.
There are those who say there should be no tax cuts whatsoever.
We believe that working people all over this country also deserve to benefit from the economic recovery. After all, they are paying the taxes which make it possible to provide for public services.
We should also bear one key statistic in mind. Prior to Ireland’s economic crisis in 2008, less than 30% of all tax collected in the country came from income tax. Last year, workers paid over 40% of all tax by way of income tax. The reductions announced today won’t make any enormous difference to anyone but people will take some comfort from seeing the USC going in the right direction.
The maximum gain for a worker is €350 per annum. The burden of the USC is being reduced for all workers, but the gain is greatest in relative terms for those on low and middle incomes – as provided for in the Confidence and Supply agreement.
Equally, it is important to be straight with people. Fianna Fáil does not believe it is either possible or desirable to abolish the USC during this Dáil term. It will not happen. To do so would be to put vital public services at risk. However, should the economy continue to recover, there will be scope to continue to ease the burden imposed by the USC.
We also repeat our view that there is a need for a plan to reform and simplify our income tax system. We effectively have three different tax charges, each with a different entry point and a total of 10 rates, 15 bands and 22 personal tax credits.
Ceann Comhairle, Fianna Fáil did press for a reduction in DIRT tax in this Budget. Savers have been hit incredibly hard in recent times. The Minister has announced a 2% cut for 2017 and further cuts in future years. I would like to have seen a greater cut, but at least this is a start.
The rate of DIRT has increased from 20% to 41% since 2008, with an additional 4% PRSI for people who have a certain level of unearned income. This has come at a time when interest rates are rock bottom.
There are people who really depend on interest income and they have suffered a double whammy in recent times – a collapse in interest rates and a massive hike in DIRT tax.
Today’s announcement on DIRT is a very modest step in the right direction.
Ceann Comhairle, it is every person’s wish to provide financial security for family members and people close to them. People will naturally want to be able to pass on the benefits of their lifetime’s work to their children, grandchildren and other family members depending on their particular circumstances.
In relation to inheritance tax, we strongly felt that the Programme for Government commitment to only increase the Group A threshold was very unfair and I made this point to the Minister in recent weeks.
The yield from Capital Acquisitions Tax has increased by over 65% since 2011. In 2015 the largest category of inheritance cases – at 33% – was in respect of nieces and nephews followed by gifts / inheritances involving what is known as “strangers in blood” at 23%. A total of 21% were in respect of a sibling, while only 18% of cases involved a child of the disponer.
The Programme for Government Group A (parent to child) threshold from €280,000 to €500,000 but leave the Group B (other blood relative) and Group C (stranger in blood) thresholds unchanged. These are already at very low levels of €30,150 and €15,075 respectively and were not changed in Budget 2016 when the Group A threshold was raised by nearly 25%.
A failure to change the Group B and C thresholds would be particularly unfair to people who do not have children but have relatives they wish to provide for. Fianna Fáil has been campaigning for some time for greater fairness in relation to how inheritance tax applies in Ireland and welcome the changes announced today.
Home carer tax credit
Minister, we also welcome the fact that the Home Carer tax credit is being increased again in this year’s Budget.
Many families are dependent on a single income and this will be a very small help.
However, they will be more than annoyed that they are denied any benefit from the childcare package announced in today’s Budget.
Ceann Comhairle, I welcome the Minister’s comments in relation to Ireland’s 12.5% corporation tax rate. Fianna Fáil is unequivocally committed to defending this rate. We are very sceptical of the European Commission’s plans for a Common Consolidated Corporate Tax Base.
In terms of corporation tax receipts, we are undoubtedly building up a dependence on a small number of companies and this will need to be carefully monitored.
We need to continue to play our part in the international efforts to tackle the way in which profits can be shifted from one jurisdiction to another, while at the same defending our vital national interest.
1st time buyer scheme rebate
Ceann Comhairle, Fianna Fáil firmly believes that home ownership is good for families and good for communities. Having a place to call your own, build a vibrant family life around and pass onto future generations is a firm pillar of a prosperous society.
Yet that basic dream is slipping away from an entire generation. For them the tax reductions we see today will simply disappear into the widening chasm of rent that is swallowing up more and more of their income. They are working just to stand still. They may be the first generation to be worse off than their parents since the Second World War.
However, the First Time Buyers tax rebate announced today risks making the situation worse. Given what happened in the past, it is essential that any intervention in the property market is the subject of a full impact assessment. So Minister, we want to know what expert advice is available to the government in support of this measure and what independent assessment of the likely impact on the market has been done?
Our overriding concern in relation to the first time buyer scheme is that it does not address the key issue – the lack of supply.
For months now, we have been told the problem is one of supply. Yet, what you have come forward with is essentially a demand side measure.
I suspect your grand plan is that this scheme will push up prices and that will then stimulate supply.
– This scheme also raises fundamental issues of fairness. If you are a returning emigrant and you haven’t paid taxes in Ireland in recent years, are you denied the right to benefit from the scheme?
– If you want to remain in your local community and there happens to be no new housing supply there, are you denied the right to benefit from the scheme because you’re forced to buy a second hand home?
– What if you are on modest income and haven’t been enormous tax in recent years, are you denied the right to benefit from the scheme?
For a young couple tired of bouncing around the rental market the appeal of big bang financial support is irresistible.
The government should know better. But those who do not learn from the past are doomed to repeat it.
Fundamentally, we must address the underlying costs that are keeping house prices beyond the reach of young people and not stoke up the market even further.
We keep hearing the message over and over again that building is not viable. That is why we need a rigorous review of all the inputs that go into the cost of building. A more radical scheme of reducing development contributions would help to make construction more viable all over the country.
Fianna Fáil believes in home ownership. In our manifesto, we put forward a detailed deposit savings scheme, a more gradual and measured response to assist first time buyers to save and help them over time to reach the deposit needed on a house.
Our Spokesperson on Housing Deputy Barry Cowen is working on further supply side proposals.
Our Central bank submission highlighted the need for tenants to given some credit in the deposit calculation for the rent they are paying.
We have also argued that that the deposit requirement for non-first time buyers should be the same as the requirement for first time buyers.
Ceann Comhairle, every T.D. has come across cases of how unjust the social protection system can be for the self-employed.
The announcement today of the extension of social protection benefits to the self-employed is real progress. As a party, we are also committed to bringing the Earned Income Tax Credit up to the equivalent of the PAYE tax credit at €1,650 and we welcome today’s move in that regard.
Ceann Comhairle, the banks have been very quick to cut deposit rates but nowhere near as quick to cut variable mortgage rates.
Last May, this House unanimously passed a Fianna Fáil private members’ bill designed to tackle excessive variable mortgage rates being charged by banks in Ireland.
We remain fully committed to this legislation.
Under new standing orders, the Bill has been sent to the European Central Bank for consultation.
In the next couple of weeks, the Oireachtas Finance Committee will hold hearings on the Bill and will then start the formal Committee stage.
At a time when banks can access funds at record low rates, it is deeply unfair that customers in Ireland continue to pay way over the odds.
A number of banks continue to charge rates in Ireland that are way out of line with rates charged elsewhere in Europe and customers have had enough.
It is not acceptable that banks we bailed out continue to charge their existing customers 4.5% on a standard variable rate mortgage while offering better deals to new customers. The Oireachtas shouldn’t have to legislate if the Central Bank was properly fulfilling it consumer protection role.
It isn’t just mortgage holders who are paying the price, small businesses, farmers, community and sporting groups are all paying unjustifiable interest rates.
Under existing law, mortgage interest relief is due to expire for all recipients at the end of next year. Under the Confidence & Supply arrangement, we have secured a commitment that it will be retained on a tapered basis for a further three years. This will be a major boost for those benefitting from the relief and we will ensure it is delivered upon next year.
My colleague Deputy Dara Calleary will address key areas of public expenditure including Housing and capital investment.
Ceann Comhairle, Fianna Fáil has been consistently raising the issue of spiralling motor insurance premiums.
The state of affairs has reached a crisis point. This is not only an issue for individuals but also for a business where motor insurance is a necessity. This is not a recent development. Motor insurance premiums are up about 70% in the last 3 years. This is hurting people, jobs and businesses.
Insurance companies are citing high claims costs and fraud as principal causes of the motor insurance crisis. We accept that companies must make a profit to do business but the rate of increase we are witnessing is not sustainable for anyone.
The Government’s working group is set to bring forward proposals by the end of this month. With the challenges we face in this country, we cannot afford to ignore these issues any longer. This necessity is driving up the cost of living for many people who simply need a car for the day to day basics.
It is also increasing the cost of doing business substantially with many haulage companies reporting staggering levels of insurance increases.
I would urge the Government to make the task force a priority and to bring forward and implement the recommendations as soon as possible so that we can once and for all begin to rectify this serious issue.
Long term challenges
Across a range of issues that are crying out for long term action the government have shown itself to be bereft of ideas.
From pensions to infrastructure, energy security to research and development the government has floundered from the word go.
Private sector pension coverage
Nowhere can this be seen more dramatically than in its failure to make proper provision for future pension needs in the country.
Nearly 60% of private sector workers do not have an occupational pension. That is almost 1m workers who will have to rely on the old age pension alone. This is a particular problem as it will become increasingly common for people to be paying rent in to the older years rather than owning their home outright as was the norm.
Amongst OECD countries only Ireland and New Zealand do not have compulsory pension saving. The Minister for Social Protection has set up yet another consultation as to what to about the lack of adequate supplementary pension provision. When will see the report? Will it be allowed to gather dust like the 2012 OECD report on pension provision in Ireland presented to his processor Joan Burton?
Where the Minister and his colleagues could take action is in relation to securing the future of public sector pensions including the old age pension. Fianna Fáil fought hard to secure an increase in the State pension and were proud to do so.
If further increases are to be guaranteed in the long term, we need a clear approach to planning for State pensions including public sector employee pensions.
There are approximately 361,000 recipients of the contributory state pension. This is increasing at an average rate of 5% annually. There are 95,000 recipients of the state pension (non-contributory) and 100,000 public sector pensioners.
The impact of demographic changes will result in very significant changes in the balance between the numbers of people at work and pensioners. In simple terms this means more money will have to be put aside to make provision for pensions in to the future.
The national pension reserve fund provided a mechanism to ensure the viability of the State Pension and payments post 2025. It retains valuable investments in the banks and a discretionary portfolio of several billion euro but the strategy of investing assets in the real economy to provide the kind of returns that will meet future pension needs has been far too slow in getting off the ground.
The Ireland strategic investment fund is sitting on considerable cash reserves which could be put to use in the many areas of Irish society which are crying out for investment.
I will leave the issue of capital investment and infrastructure to my colleague Deputy Calleary, but again there has been a distinct lack of direction, lack of imagination in this area.
Energy security is a further issue on which the government have failed to display any long tern vision. The issue is all the more important now following the Brexit vote. Ireland imported €6.5bn worth of energy products in 2014, more than 90% of which came from the UK.
A hard Brexit could see energy import tariff imposed on the UK. If these are in turn be passed onto the Irish market unless Ireland would we be able negotiate a rebate from the EU. In any case our energy market dependence on the UK makes us extremely vulnerable to continued weakness in sterling. Ultimately we may have to consider an expensive electricity interconnection to France to guarantee long term energy security.
The lack of any form of coherent strategy become more apparent and more worrying by the day.
Multi-Annual Funding for Science & Research
This is also evident in the area of funding for high level scientific research. The government’s published science strategy is highly unambitious and fails to match its rhetoric with serious funding commitments.
In contrast, the last strategy for Science, Technology and Innovation published by Fianna Fáil set out very specific commitments and targets. Research requires a multi-annual commitment in order to secure staff and allow the time necessary to undertake breakthrough research. This is a government that seems to have a five day rather than five year horizon.
This is not the government we wanted following the general election last February. On three occasions, we offered Deputy Micheal Martin as nominee for Taoiseach, as the only candidate who could lead an alternative government to a Fine Gael-led one.
We all know the outcome.
It behoves us all now to work as best we can in the national interest and that is what we have sought to do since Election Day.
Ceann Comhairle, we look forward to the debating the Budget measures over the weeks ahead in the form of the Finance Bill and the Social Welfare Bill. There is a great onus on all of us to examine in detail all the measures contained in those Bills and we look forward to fulfilling our parliamentary duties.
All Fianna Fáil Deputies and Senators will more than play their part to ensure that Budget 2017 receives proper scrutiny.