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Speech of An Taoiseach Leo Varadkar T.D. Budget Debate in Dáil Éireann Wednesday, 10 October 2018

 

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Ceann Comhairle. Our country’s second Minister for Finance believed that the purpose of Government was to allow the greatest freedom for all - for what he called ‘the greatest possibilities for the good of all’.

Yesterday that message was at the heart of Budget 2019 presented by the current Minister for Finance, a Budget he summarised in his conclusion as ‘a responsible Budget for a modern and caring Ireland that aims to be at the centre of a changing world.’

Budget 2019 is our attempt to achieve the greatest possibilities for the good of this country – hardworking mums and dads, people starting out in work, those struggling to purchase a home, carers and the elderly, families.

Our message is simple.

1. This is a responsible Budget, balancing the books, and planning for the future in a prudent and sustainable way. Because we believe in securing our prosperity and avoiding the mistakes of the past.
2. We have put money back into people’s pockets through incentives – USC reduction, pension and welfare increases, pay increases and reduced costs for childcare and healthcare. We believe in rewarding work. We believe that people should have the freedom to make their own decisions about how to spend their hard-earned money.
3. This Budget is Brexit-proof because we believe in being prepared.
4. And we have invested in public services and infrastructure.

Budget 2019 ensures that we are in control of our destiny. It insulates us from uncertainty abroad, and enables us to lay the foundation stone for building a better, a stronger, and a more secure Ireland in the years ahead.

Economic progress is not measured simply in economic statistics. It is seen in the difference it makes to families, to the elderly, to hard-working parents, and to people struggling to make ends meet. So actions like reducing the cost of childcare, reducing the cost of medicines, reducing the cost of visits to the doctor, can make a big difference to people’s lives.

Budget 2019 is taking place at a time when we are seeing the benefits of the progress we have made. So we are determined to share those benefits as widely as possible.

However, it is also a time when the external landscape is becoming more challenging.

International developments in areas such as trade and tax have the potential to impact on our economic well-being as do rising energy prices and the possibility of higher interest rates.

We have also entered a critical time in the negotiations for the UK’s departure from the EU. Everyone in this Chamber knows that Brexit presents very significant challenges to our economy and society. This means we cannot deviate from the prudent path that has underpinned Ireland’s recovery to date.

In this period of uncertainty, we must avoid repeating the mistakes of the past and manage the public finances soundly.

The main economic indicators show an economy continuing to perform strongly.

In 2018 to date we are experiencing another year of very strong growth. GDP growth is now forecast as 7.5% for this year and 4.2% in 2019.

We all know, however, that in the Irish case GDP is not the best measure of real economic progress. So it is notable that other indicators such as consumer spending, tax trends and labour market developments, all confirm that Ireland's economic fundamentals are strong.

Unemployment has fallen to 5.4% and total employment is almost 2.3 million, a record high.
Over 360,000 new jobs have been created since 2012, mostly outside of Dublin, and that’s a notable achievement.

However, this success has also contributed to growing pressures on our economy, especially in terms of housing, traffic and labour shortages. So the economy requires careful management and choices if we are to avoid the mistakes of the past.

Every budget is about choices and we can also clearly see the choices that other political parties would have made courtesy of their published alternative budgets.

The choices this Government makes are founded in responsibility.

Yes, the economy is going well but that does not mean that you take your eye off the ball and take the growth being experienced for granted.
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Budget 2019 proposes an increase in current expenditure of 4% in line with the level of growth the economy is experiencing. In the past though, other Governments lacked this level of prudence.

Between 1998 and 2008 the average increase in current expenditure alone was 11% per annum. That is 11% more, every year, to cover the country’s day to day expenses.

When we look back at that period now, and we recall the utter devastation that the crash and recession caused to people across our country, it is deeply dispiriting that so many parties in this House have not learnt those lessons.

The pre-budget submissions from Sinn Féin, the Greens, the Social Democrats, Labour and People Before Profit all show that the competition on the left is to spend, spend, spend and spend some more. And then borrow some more.

Prudence is absent and profligacy is the order of the day.

It’s populism rather than socialism or social democracy.

Those same pre-budget submissions show that they don’t understand the importance of stable and consistent tax policies.

As the Government demonstrated yesterday, there is a role for increasing taxation in certain circumstances. But those circumstances must be clear and we should avoid multiple tax increases for no policy rationale other than money raising.

We reverted the special 9% VAT rate for tourism back to 13.5%. That was a tax initiative introduced in 2011 at the height of the recession, to create jobs. The rate was to have expired in 2013, but was continued until this year. Along with initiatives like the Wild Atlantic Way and scrapping the Airport Tax, the special VAT rate has worked.

However, it is now no longer needed. Employment in tourism has risen to 235,000 and Irish tourism has enjoyed a record summer, with visitor numbers reaching their highest figures ever.

It is now appropriate to end the incentive and use the additional money raised to fund investment in housing, healthcare and other public services where the money is most needed.

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However we are still investing in tourism long-term, because we recognise its value to the economy and in how we show ourselves to the world. We are also conscious of the employment it provides in rural areas.

So, Budget 2019 allocates an additional €35 million to the Department of Transport, Tourism and Sport for this sector, and it includes €4.5 million for successful initiatives across the country such as Ireland’s Hidden Heartlands and the Wild Atlantic Way. We are also going to invest nearly €10 million to further develop our Greenways.

When it comes to framing a budget, we believe increases in taxation should be thought out, and their implications understood. We must avoid large numbers of tax increases that would undermine economic confidence. Unfortunately appreciation of that is limited among these parties.

The Social Democrats alternative budget has over €1.25 billion in tax hikes, from 14 separate tax increases.

Labour’s alternative budget has over €1.6 billion in tax hikes, from 11 separate tax increases.

Sinn Féin’s alternative budget proposes an astonishing €2.9 billion in tax hikes from over 20 separate tax increases.

The Green Party’s alternative budget has an astounding €3.5 billion in tax hikes, from 13 separate tax increases.

However the prize goes to People Before Profit who proposed over €16 billion in tax hikes. That’s more than one for everyone in the audience.

That’s just one budget at a time when the economy is going well. Imagine what they all do in five or in less favourable times.

These policy initiatives would greatly undermine our economic performance and thereby limit our ability to meet the growing demands that we need our public services to meet.

In marked contrast to that irresponsibility, I must acknowledge the constructive and positive role played by Fianna Fáil, the main opposition party, in this the third budget under the Confidence and Supply Arrangement.

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When I travel around the country and talk to different groups about the work of Government and our plans for the future I usually explain our approach to the economy in terms of six principles. These six principles underpin our approach to this Budget.

The first is sound management of the public finances and reducing our national debt.

Once and for all to break out of the cycle of boom and bust.
Tax cuts one year, followed by tax hikes the next.

Pay increases given, only to be taken away again.

Stop-start investment in roads, public transport, healthcare and housing.

Instead of boom and bust, this Government wants Ireland to have what many other countries have, sustained increases in living standards and sustained improvements in public services and public infrastructure, year on year, for a generation.

Ceann comhairle, that must become our new normal.

So the Government has been determined to ensure that our strategy for Budget 2019 is based on steady increases in public expenditure underpinned by stable and predictable tax revenue.

Expectations have increased given the remarkable performance of our economy. That’s a good thing in the round. However, not all these demands can or should be met.

Budget 2019 will be the first budget with no deficit since 2007.

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And our prudent management of the economy to date has provided the scope to increase expenditure next year in a sustainable way.

We are also committed to maintaining a broad tax base that generates a sustainable revenue stream necessary to fund public services.

We cannot build permanent expenditure commitments on revenues that may not be sustainable.

For this reason, the Government is setting aside some of the historically high levels of Corporation Tax for the purpose of creating the Rainy Day Fund.

It will be set-up with €1.5 billion from the Ireland Strategic Investment Fund, and will be supplemented with an annual contribution of €500 million from the Exchequer starting from next year.
The second principle is to continue to raise living standards in a sustainable way for all our citizens.
• Better pay and pensions;
• Lower Income taxes; and
• Reduced costs when it comes to public services: childcare, GP visits, drug costs, prescription charges, and insurance costs.

At long last, we have fully reversed the cuts made by governments of the past in weekly payments to carers, people with disabilities, widows, the blind, and lone parents with young kids.

We have finally restored the 100% Christmas bonus to all social welfare recipients this year.

From March there will be a €5 increase in weekly social welfare payments.

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Budget 2019 will also help families. We have increased the home carer tax credit by €300, to €1,500.

This Government recognises the importance of those first few years in the life of a child and what it means for their proud parents.

So a new paid parental leave scheme will be introduced next year to provide two weeks’ extra leave to both parents in the child’s first year.

It will be in addition to maternity leave and paternity leave.

We believe in helping the most vulnerable and so we are increasing the Qualified Child Payment for the under 12s by €2.20 a week and by €5.20 a week for the over 12s.

And we have increased the Back to School Clothing and Footwear Allowance rates by €25. These changes will have a positive impact on child poverty in 2019.

A particular focus in our tax policy is on reducing taxes for those who earn middle incomes.

We’ve already taken the lowest paid out of the tax net. The 30% lowest paid in Ireland don’t pay any income tax anymore. That’s good.

However, people on very modest incomes, pay the highest rate of income tax. That’s not fair.
And it’s not the norm in other European countries and it’s damaging our competitiveness when it comes to attracting talent and good jobs to Ireland.

With Budget 2019 we are continuing to reduce the tax burden on middle-income earners.

For example, we have reduced the third rate of USC to 4.5 per cent. We have also increased the entry point to the higher rate of income tax for all earners by €750, that’s to €35,300 in the case of a single tax-payer and €70,600 for a double income couple.

We’ve provided for public sector pay increases and an increase in the minimum wage.

We are also seeing increases in private sector pay as a result of our growing economy.

The Earned Income Tax Credit (EITC) will increase consistently with our plan to equalise tax credits for the self-employed.

The third principle is achieving full employment, improving employment rights and ensuring access to a pension plan for everyone.

The fourth principle is our ambitious programme for investment in infrastructure.

Capital spending on public infrastructure will increase by 24% next year.

We are going from being a country that is relatively low spending on infrastructure to one that will be highest within the EU in a few years. And that is something we need to do.

So we are going to spend an additional €1.4 billion on schools, universities, roads, public transport and other important infrastructure projects.

We are a young country. We are a country with an expanding population unlike other countries in Europe. We expect to have another million people living in Ireland by 2040, our population hitting about 6 million.

We are also a country that’s just become wealthy in the last couple of decades, so in many areas we need to catch up.

In part, this is being achieved through our ambitious Project Ireland 2040 plan backed up by a ten-year €116 billion investment in modernising our public infrastructure. This investment in housing, healthcare facilities, education, transport, broadband and climate change will help bring economic opportunity to all parts of the country.

Under Budget 2019 we are allocating an additional €53 million in capital next year to fund the first round of projects under the new Rural Regeneration and Development Fund. We are investing in rural Ireland and we are ensuring that planned developments are ambitious and sustainable, and an additional €60 million for the Department of Agriculture.

As part of Budget 2019, we are also investing €286 million in new transport infrastructure including the completion of the runway overlay project at Knock Airport; and cycling and walking projects around the country.

A further €40 million will fund rehabilitation and repair of pavements on regional and local roads.

Other measures in Budget 2019 reflect this decision to invest in our future.

The Department of Education and Skills will have a budget of almost €11 billion next year, and that reflects our changing demographics and our belief in the importance of education in changing lives.

As part of that investment, we will create 1,300 new posts in schools next year.

We believe in helping children with special educational needs reach their potential.
So next year we are investing over €1.8 billion in their education, and this means we will be able to bring the number of Special Needs Assistants to a record high of almost 16,000.

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To prepare for the jobs of the future we are providing over 15,000 new places in higher education, including over 1,200 craft and earn as you learn places, 1,100 Traineeships, and 5,000 places to promote lifelong and flexible learning. We will also fund almost 3,500 additional undergraduate places as we invest in the building blocks of our future prosperity - the imagination, the creativity and the ingenuity of our young people and all those in higher education.

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We recognise that one of the greatest challenges facing this country is the area of housing and homelessness.

The problem is that these actions take time to have an impact given the lack of investment during the years of economic crisis.

We’ve all heard and been affected by the stories of those who are at the sharp end of this crisis, especially children.

This Government believes firmly that every family should have a roof over their head, a place to call home.

We are all concerned about the current levels of homelessness as well as the shortages in housing supply.

So under Budget 2019 we have allocated a total of €2.3 billion for housing, up 25%. We are also providing an additional €93 million in local authority funding for housing next year. We are determined to maximise and speed up delivery and help the people who need it the most.

We have also allocated €1.25 billion for the delivery of 10,000 new social homes in 2019.

Budget 2019 also allocates an extra €121 million for HAP next year so we can provide homes for almost 17,000 individuals and families for whom we don’t yet have social housing.

While these kick in, we are making an immediate investment of €60 million in capital funding so that we can help those in emergency accommodation right now, and provide additional family hubs.

We will also provide an additional €30 million for homelessness services next year.

In addition, €100 million is being dedicated to a Services Sites Fund to help local authorities make land available for subsidised affordable housing.

This will be increased to €310 million over the next three years. In 2019 alone, we are increasing the planned funding from €20 million to €89 million. This will facilitate the delivery of around 6,000 affordable homes over the lifetime of the fund.

As you all know, climate change is the greatest long-term challenge facing our world. Budget 2019 provides for an investment of €103.5 million for improvements in grant and premium rates for planting forests, and introduces a Beef Environmental Efficiency Pilot to further improve the carbon efficiency of beef production.

We are also allocating €70 million for the Targeted Agriculture Modernisation Scheme, and providing an additional €70 million for the Environment and Waste Management Programme.

VRT is being increased on newly purchased diesel vehicles as an environmental and health measure.

We’re extending support for the transition to gas-powered buses and trucks as an environmental measure as well.

Our policies in this area are informed by the work of the Climate Change Advisory Council as well as the Oireachtas Committee on Climate Change, and influenced by the ESRI report, and the Minister for Finance is committed to setting out the long term trajectory for carbon tax to 2030.

For those who may criticise our commitment to the green economy it is worth noting that Ireland is now a member of the Paris Collaborative on Green Budgeting and the NTMA is due to issue Ireland’s first green bond shortly. These measures are helping to integrate climate change considerations into our broader economic and social activities.

The fifth principle is reforming and modernising our public services. Better value for money for the tax-payer, for patients, for students, for families.

Reform of healthcare is our biggest public service challenge and so we have published our plan for the implementation of Sláintecare the all-party mission statement that will give us universal healthcare in the next decade.

Budget 2019 provides an additional €700 million to Health by way of a supplementary estimate. We will also increase the health budget to €17 billion next year, and this represents an increase of 15% in health spending. This is the highest in the history of the state, and we are determined to get value for money and better outcomes for patients.

By increasing the qualifying threshold by between €25 and €48 per week, we will make an extra 100,000 GP visit cards available in 2019. This is less than the 500,000 recommended by the Sláintecare report but is a step in the right direction.

Budget 2019 also provides for:
• a 25% reduction in prescription charges from €2.00 to €1.50 for all medical card holders over the age of 70; and
• a €10 reduction in the monthly Drugs Payment Scheme threshold.

For the first time ever in the history of this state we will be investing €1 billion in Mental Health. Again, it is crucial that this money gets to the patient.

We have also raised the income thresholds for the Affordable Childcare Scheme, because we make it easier for families to find childcare for their infants, and we also want to encourage people back into the workplace. In net terms the base income threshold is being raised to €26,000, and the maximum income threshold will now be €60,000; and we are also increasing the multiple child deduction to €4,300.

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One of the greatest services the state can provide is maintaining law and order, so people can feel safe on the streets and in their homes.


We have the roadmap for the most radical reform of An Garda Síochána since the foundation of the state with the Report from the Commission on the Future of Policing in Ireland and we are investing to make its recommendations a reality.

Next year the budget of An Garda Síochána will be increased by €60 million, meaning we can recruit an additional 800 Gardaí. We are also investing €220 million towards things like constructing the Forensic Science Laboratory; investing in Garda ICT and purchasing Garda vehicles; and developing Limerick prison.

An additional €29 million is being provided for our defence forces, funding an ambitious programme of equipment replacement and infrastructural development for our Army, Air Corps and Naval Service.

The sixth and final principle relates to our role internationally.

Earlier this year we launched our ambitious plan to double the scope and impact of Ireland’s global footprint over the next seven years – Global Ireland 2025.

Under this initiative, the Government is opening 26 new diplomatic missions around the world, representing the most ambitious renewal and expansion of Ireland’s international presence ever undertaken.

Crucially we have also reaffirmed our commitment to global justice, reducing inequality and promoting peace through a commitment to increasing ODA and continuing our strong track record as peacekeepers.

Under Budget 2019 we are increasing our international development budget by almost €110 million. As a result, our overseas development assistance will be at its highest level in ten years, at 0.31% of GNI*.

There are budget increases for our global-facing agencies: Enterprise Ireland; the IDA; Bord Bia; Tourism Ireland; among others.

Becoming leader of Fine Gael and Taoiseach I made a commitment to double spending on arts and culture and also sport within seven years. This equates to an increase of 10.5% per annum. I am pleased to confirm that the increases for arts, culture, heritage and the Gaeltacht and sport all exceed this figure. So we are on track to meet that commitment.

As a Minister and as Taoiseach, I continue to have a special interest in the self-employed.

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Given the close connections between the Irish and the UK economies, Brexit will inevitably have a negative impact on the Irish economy.

Ireland’s contingency planning is well advanced, and continues to be a central Government priority led by the Tánaiste.

Recognising the importance of East-West trade, we have introduced actions to help prepare our ports and airports to take account of a changed trading relationship with Britain post-Brexit.

This complements actions already taken including those announced in last year’s budget.

Over €450m has already been allocated for business, including a €300m Brexit Loan Scheme for Business and a €25m Brexit Response Loan Scheme for the Agri-food sector.

As part of Budget 2019 we are investing €300 million in a Human Capital Initiative. We are also launching a Future Growth Loan Scheme for SMEs and the agriculture and food sector, with another €300 million behind it. We are also providing over €110 million for Brexit preparations across a number of Departments.

€60 million in current and capital Brexit-related supports are being provided to improve resilience in the farm sector, and improve productivity in the food sector.


As part of the same long-term thinking, we are investing in:
• Integrating our transport, energy and communications networks;
• Providing new resources for tourism development and promotion; and,
• Helping Brexit-exposed firms to diversify international markets.

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In addition to Brexit, changes in the international tax landscape, increasing trade protectionism and rising geopolitical tensions all present challenges to our economy.

Automation, AI and other forms of technological innovation are rapidly developing and are expected to radically change many jobs, many enterprises, and entire industries.

Domestically, the principal risk relates to potential overheating as the economy approaches full-employment.

The best way to mitigate all these risks is to improve the resilience of the economy and to increase productivity.

The Government has decided that we need a new economic initiative for Ireland to tackle the challenges facing us. The Future Jobs Initiative will drive our development as a resilient, innovative, and globally connected economy, capable of coping with technological and other transformational changes ahead.

It is aimed at enhancing productivity; labour market participation; innovation; skills and talent; and the low carbon economy.

It will comprise a small number of impactful and deliverable actions in each of these areas.

Minister Humphreys and I are leading a whole of Government effort to develop this plan and it will involve extensive consultation.

To conclude, sustainable economic growth is not a goal in itself.


We prioritise it because this is how we ensure every person has the opportunity to succeed and have an equal chance to share in our nation’s prosperity. And that all parts of the country benefit from our relative prosperity.

Budget 2019 is prudent and responsible, striking the right balance between improving living standards, tackling our structural challenges, and securing our economy against the challenges we are likely to face in the near future.

I commend it to the House.