Speech by An Taoiseach – Budget 2015 15th October 2014 Dáil Éireann

A Cheann Comhairle,

Yesterday this Government delivered its fourth Budget to the House.

This is a Budget to secure our recovery and to get Ireland working again.

A recovery that many in this House said was impossible.

When we were elected into office the outlook was very uncertain.

Unemployment was rising rapidly, the deficit was out of control, and the financial system remained at risk.

In response this Government laid out its clear plan to rebuild our economy, to create jobs, and to get our national finances under control.

The Budgets since were all stepping stones on this path to recovery.

The sacrifice and understanding of the Irish people has been essential as we grappled with the serious challenges facing the country.

I understand that for many people that these times are and, for some, remain tough.

Many people lost their jobs. Some sectors of the domestic economy were devastated by the economic mismanagement of the last Government.

Others who were lucky enough to keep their jobs saw their efforts being taxed at very high levels.

After seven years of economic crisis for this country, we can now say with confidence that the country is in recovery mode.

This time last year we were still in an EU/IMF bailout.

And while fragilities still exist, we are now in a very different and much better place.
We fulfilled our commitment to the people of Ireland to successfully exit the bailout last December.

Confidence – both home and abroad – has returned.

We have cemented our return to the international markets.

Just last week the NTMA auctioned a further benchmark 10-Year Irish Government bond at a record yield of just 1.63%, and have raised a total of €8 billion this year.

In recent weeks Minister Noonan secured agreement on the early repayment of portions of our IMF loans.

Recent figures show that economic growth is strengthening and we project 4.7% growth for 2014.

Having hailed the country back from the edge we now face a choice on how we shape the recovery.

I want to make it very clear that the decisions we made in this Budget will secure and embed recovery.

Like all our decisions to date and in the future they will not threaten it.
We have introduced targeted tax and welfare reforms that will help create new jobs.

Taxation Reform
We are using the welcome flexibility available to us to incentivise work and our workers.

We want to change things so that work – not welfare – will always be the attractive and viable option.

I believe that the 52% tax rate on low- and middle-incomes introduced by the previous Government is anti-employment and anti-enterprise, and is dangerously out of line with the marginal tax rates on middle income workers in other countries with which we compete for investment and talent.

It undermines the incentive to work, to do over-time, to start a business. It makes it harder to attract home the 350,000 people who have left our shores because of the recession.

In its Statement on Government Priorities published in July, the Government committed to delivering better living and working standards to our people. Among other measures, we committed to developing a considered and focused tax reform plan that will reduce the 52% marginal tax rate on low and middle income earners in a manner that maintains the highly progressive nature of the Irish tax system, to be delivered over a number of Budgets.

This Budget was the first step of a multi-annual plan to reduce the 52% rate on low- and middle-incomes. It will improve the competitiveness of our tax regime in a way that strengthens the economic recovery.

Delivery on that commitment began yesterday. Minister Noonan has announced a 1% cut in the 52% rate of tax for the 635,000 middle income earners earning between €33,800 and €70,000 to take effect on January 1.

For a working family of 2 middle income public servants, such as a guard and a nurse, each earning around €50,000 these changes will result in an extra €100 per month.

As the Minister has confirmed, this is the first instalment of a plan to progressively reduce the tax rate on low and middle income earners. We now have a formula for targeting tax rate reductions at low- and middle-income earners without giving disproportionate benefits to those on the highest incomes.

The tax rate on middle income families will be lowered further in Budget 2016 – to at most 50% – while ensuring those on higher incomes continue to pay their fair share.

If the Government is re-elected, we will deliver a further rate reduction in the 2017 budget.
All taxpayers will be better off after this Budget, and the reductions we have delivered to the Universal Social Charge are designed to make sure that work pays for those on lower-income.

The increase in the threshold at which USC becomes payable to €12,000 will take a further 80,000 out of the charge altogether, on top of the 330,000 that were removed by this Government in 2012.

That’s 410,000 people on low incomes whose earnings are now better off under this Government than the last.

It is estimated that the extension to the income tax standard rate band will remove approximately 33,000 taxpayers from liability to the higher rate of Income Tax altogether.

The Department of Finance has estimated that a series of reforms, along the lines announced yesterday, delivered over the next three year period, will boost employment levels by as much as 15,000 jobs, over and above existing projections, when the full impact of the changes have taken effect in the economy.

Making Work Pay
The taxation changes are designed to incentivise work and help create jobs. These reforms are matched by further changes to our welfare system to ensure that those currently unemployed can get back to work and start enjoying the kind of fulfilling life a job allows.

We cannot – and will not – be relying on economic growth alone to reduce the dole queues, as was, perhaps, habitually and historically the case.

Why? Because we regard the psychological and social exclusion that comes from not having a job to do to have decent work to go to, as intolerable to the human and social experience in our country.

That’s why we published Pathways to Work.

Since its launch in 2012, the strategy has seen the rollout of 44 Intreo one-stop-shop centres.

The roll-out is to be completed with the opening of a further 16 centres by the end of the year.

The biggest change has seen the introduction of a new case management approach to helping jobseekers return to work whereby jobseekers receive scheduled one-to-one interviews with case officers based on their profile.

Budget 2015 provides funding to decrease the jobseeker to caseworker ratio to 200:1 which is more in line with international norms than the current 500:1.

With these new services in place we are targeting the roll out of this case management approach to 100,000 long term unemployed by the end of next year.

Changes are also being introduced to help families return to work. Analysis by the ESRI suggests that 60% of unemployed men and women with children face significant financial disincentives to return to work, and some are actually better off staying on the dole.

How soul-destroying this is for the men and women involved mothers and fathers who are anxious to rear their children by their example.

So to help them get off welfare and back into work we’re introducing a new Back to Work Family Bonus.

This will allow families to retain the full Qualified Child increase of €29.80 per week per child for 12 months after their return to work and 50% of the payment in the second year.

To replace another welfare trap caused by rent supplement we are now rolling out the Housing Assistance Payment after a successful pilot in Limerick.

The recently introduced scheme, JobsPlus, which is designed to incentivise employers to hire long term jobseekers has helped to change the lives of up to 3,000 people already.

I’m delighted that funding has been set aside to double the number of places to 6,000 and we continue to work to reduce the number of long term unemployed as quickly as possible.

Last week the Tánaiste and I launched Pathways to Work 2015.
This builds on the progress made in recent years.

More than 50,000 people who were long-term unemployed at the start of 2012 have found work since the strategy was launched, and we will exceed the 75,000 target we originally set.

We have also launched an Employment and Youth Activation Charter; Employers who sign this Charter commit that at least 50% of candidates considered for interview will be taken from the Live Register.

We will continue the rollout of Youth Guarantee initiatives to support young jobseekers.

We acknowledge that we still have enormous challenges ahead and our plan for 2015 specifically addresses long-term and youth unemployment.

We have set aside more than 60,000 places in the education and training system especially for the long-term unemployed on the Live Register.

Jobs
To reduce unemployment further we have to create more jobs.
As a result of the success of previous policies, such as the reduction of VAT for tourism services, we have seen the creation of 70,000 additional jobs since early 2012.

Building on this progress, Budget 2015 has introduced a number of new measures to accelerate job creation.
The Strategic Banking Corporation of Ireland, which is expected to be formally launched by Minister Noonan shortly, will increase the availability of loans of longer duration coupled with more flexible conditions and potentially at lower cost.

Changes to be introduced will also see the amount of finance that can be raised by a company under the Employment and Investment Incentive to €5m annually subject to a lifetime maximum of €15m.

Jobs are being created across most sectors of our economy – not just the so-called “high-tech” sectors.

Exports are continuing to perform strongly, both for indigenous and multinational companies.

Through Enterprise Ireland we have a range of supports to help our indigenous businesses target export growth. Next year the Government will roll out an integrated export finance strategy.

To help Irish businesses win more business abroad the Foreign Earnings scheme will also be improved.

We have also allowed for the extension of 3 year corporation tax relief for new start-ups which is in line with our recently launched national entrepreneurship policy.

In addition, given the importance of the agri-food industry to the rural economy the Government has decided to introduce a range of measures to incentivise the transfer of additional land available to young and active farmers in advance of the abolition of milk quotas.

Corporation Tax
The contribution of foreign direct investment has been essential to our efforts for job creation.

Since entering office we have defended our transparent 12.5% rate which will remain a cornerstone of industrial policy.

The Government believes that international reform in this area offers more opportunities for Ireland than risks.

At 12.5%, Ireland has the lowest general corporate tax rate in the OECD and this Government, and I as Taoiseach, are committed to maintaining it.

As international tax loopholes progressively get closed down, our low general corporation tax rate will become even more attractive to business.

Ireland’s package of tax, skills, and the reputation for being business friendly is a huge advantage that other countries will struggle to match.

Yesterday we outlined our Road Map to secure Ireland’s place as the destination for the best and most successful companies in the world.

The Road Map responds to a changing international environment and ensures that we continue to attract and retain companies of real substance offering real jobs.

Minister Noonan has outlined how we intend to improve the R&D regime, enhance Ireland’s existing intangible asset tax provisions to develop more intellectual property, and changes to the special assignee relief programme to attract in more senior talent.

In relation to these positive changes coupled with the phased ending of the Double Irish regime, I note the welcome to the Government’s announcement from the American Chamber of Commerce, the Irish Taxation Institution, IBEC and companies such as Google.

Management of the National Finances
A Cheann Comhairle,

I note that Fianna Fail, the party which dreamt up the disastrous decentralisation programme, the promissory notes and the bail-out for Anglo Irish Bank and led the economy off a cliff, is questioning the prudence of our plans to secure the recovery.

You fear for the future.

There will be no repetition of your mistakes. This Government will not let the country slip back. While conscious of the challenges still ahead, I am optimistic about our country’s future, and am confident that the policies announced in this Budget will serve to reinforce and secure the recovery that we are now witnessing.

Exchequer borrowing will fall by €1.45bn in 2015 compared with 2014, reflecting tight control of spending and economic growth.

There is almost no spending growth projected next year as compared with the likely out-turn this year.

Government is targeting a deficit of 2.7% of GDP in 2015 – below the 2.9% ceiling under the EU Stability and Growth Pact – to act as a buffer to allow for any unexpected developments.

Government is also forecasting that our gross debt ratio will drop below 100% of GDP in 2018, also ahead of the reduction required by the EU Stability and Growth Pact.

Conclusion
A Cheann Comhairle,

Ireland is emerging now from a torrid seven years.

While we have made much progress there are too many people who don’t have jobs there are too many men and women struggling to make ends meet.

In framing this Budget our goal is to copper-fasten the recovery, and to make sure people see the recovery not in the headlines but in their lives day to day.

Our goal is to fix the economy, help create more jobs, and to make work pay.

But we are not blind to the serious risks we face as a country.

Progress is hard won and can be easily lost.

But just as we mind our progress we must also mind our people and our society.

Because the economic recovery no matter how essential was and can never be the end in itself.

I know there are times when many of our people particularly those who are fragile, and living on the edge, must wonder if recovery in their lives will ever come.
But today, I want to assure them that the recovery we’ve worked so hard to achieve is about giving them the kind of life they deserve as citizens of this still-young republic.

Recovery from the economic crisis means we can look further than the existential and start to examine now the kind of Ireland we want to build and be part of in our recovery.

And today as part of our national journey I commend this budget to the house.