Taoiseach’s Speech for Budget 2016 14th October 2015 Dáil Éireann

Budget 2016 to Keep the Recovery Going
A Cheann Comhairle,

The main aim of yesterday’s Budget is to keep the recovery going.

It is not just a Budget for 2016, but it is another step in our plan to sustain the recovery for the years ahead.

The past few years have been difficult for the people of Ireland, but their efforts have made it possible for Ireland to exit an international bailout, reduce our debts and to safely progress into recovery.

There is no denying that our country still faces many challenges arising from the economic crash brought about by the previous Government.

In addressing those challenges Budget 2016 mirrors the goals of this Government for now and into the future:
· To make work pay and to remove the barriers to work;
· To support more job creation and regional economic growth; and
· To rebuild a strong economy that can support better public services.

Budget 2016 represents another affordable and sensible step in addressing many of these challenges.

The Government that I lead will continue along the path laid out yesterday so that we can keep the recovery going.

Making Work Pay by Cutting USC
Our first priority is to continue to make work pay.

While Fine Gael in Government changed Fianna Fáil’s bailout agreement to avoid future increases in income tax, it was clear that the existing level of tax on work and jobs was a drag on our recovery.

Since the introduction of the Universal Social Charge by Fianna Fail, Ireland’s taxation system has discouraged work and effort and is a barrier to the economic recovery.

It is wrong that the Government took more than half of every extra Euro being earned by hundreds and thousands of low and middle income families.

Marginal tax rates on middle income earners in Ireland are much higher than the UK and other countries where many of our people have emigrated to, and for where we are in competition with for mobile talent and investment.

Making work pay more than welfare will also be an essential part of our plan to get Ireland working again. Today, there are too many families where work simply does not pay and it encourages an intergenerational cycle of joblessness and poverty.

We started the process of reducing the tax burden on work and jobs for low and middle income earners in the last Budget and we have continued with that strategy.

By reducing the Universal Social Charges rates and bands we are reducing the marginal rate of tax to 49.5% for all earners under €70,000.

This is a key milestone on the path to recovery. As Minister Noonan highlighted yesterday it is the first time since April 2009 that the marginal rate has dropped below 50% for middle income workers.
While we are continuing to cap the benefit at €70,000, those workers earning more will benefit on the portion of their income below this level.

These tax changes are only a step in our plan to progressively abolish the USC during the next term of office in order to secure full employment.

If returned, the Government will take another step each year towards the abolition of the USC by 2020.

Making Work Pay for those on the Minimum Wage
This Government is also determined to make work pay more than welfare.

We established a Low Pay Commission this year to make annual recommendations on the level of the minimum wage.

It recommended to the Government that a 50cent increase was justified and yesterday the Government approved the increase to the new level of €9.15 an hour to support workers.

This will have a positive impact for the 75,000 earning the minimum wage.

The Government will continue to listen to the annual recommendations of the Low Pay Commission to ensure that low income workers are not left behind as the economy recovers.

Making Work Pay for the self employed
The Government has also long signalled our desire to end the unfair tax treatment for our self employed workers.

This Government supports those who created their own jobs and have created jobs for others. They are the shopkeepers, farmers, and tradesmen who in many cases lead our recovery efforts in the domestic economy.

As a first step to end their unfair tax treatment the Government is introducing an Earned Income Tax Credit to the value of €550.

To support and reward their work and effort we will complete the tax equalisation for the self employed in the coming years along with other measures to support our job creators.

This approach is in stark contrast to other parties in this House who want to tax job creators out the country.

Making Work Pay for Parents
The Government will also prioritise more supports that will encourage and support working families.

Not having a job is the biggest source of inequality in our society today. Jobless households with children are at the greatest risk of experiencing child poverty and perpetuating a cycle of joblessness and welfare dependency.

It is clear that excessive childcare costs have become a barrier to work for some families.

It is for this reason that the Government is making another first step in this Budget to overhaul our childcare supports.

We will now offer every child from the age of 3 a free pre-school place until they begin primary school.

In addition, Minister Reilly will be extending the Community Childcare Subvention Programme to help low income families remain in work and will also develop new after school services.

I am particularly delighted that the Government is introducing a suite of supports, which will ensure children with a disability can meaningfully participate in, and fully reap the benefits of, pre-school education.

We have listened to the concerns of parents and in conjunction with these new services we will also be introducing a range of quality assurance measures for early education including audits, inspections and training.

We are also extending free GP care to all primary school children of working families.

These are steps in the right direction and in the years ahead we will do more to support working families and their childcare needs.

Supporting Job Creation and Regional Economic Growth

All the measures to make work pay are designed to help create more jobs and ensure that everyone has the opportunity to fill those jobs.

Since entering office we have prioritised measures to create new jobs so that people can get their lives back on track.

Since we launched our Action Plan for Jobs in 2012 we have seen the private sector add 125,000 new jobs. This recovery in jobs has accelerated in 2015 with over 1,300 new jobs created each week.

This Budget will keep the jobs recovery going.

As part of the Budget we have published our Capital Plan to ensure that all regions share in its benefits.

This €27 billion investment plan for Ireland is essential to restore all the jobs lost in the recession by 2018 and to get unemployment down to 6% by 2020.

It has been welcomed as an affordable and realistic plan that is also consistent with the Government plan to eliminate Government borrowing by 2018.

The new investment planned in roads, public transport, education, healthcare, flood risk, enterprise, and in policing are all designed to alleviate growing pressures in the economy which could hold back recovery.

But the recovery is still not complete and we must continue to manage the national finances carefully or risk falling back. We could not afford everything we wanted but this plan represents the best of what can be delivered with the available resources.

Supporting Entrepreneurs & Job Creation
New jobs will also be created from new business ventures. As a Government we need to support those who take the risks to start new business, create more jobs, and export to the world.

We are extending the 3 year corporation tax relief for new start up companies.

For those who are successful in creating a new company and wish to use their success to start another new business we are reducing the capital gains tax on a limited basis for those disposing of their interest in a business.

The very successful Home Renovation Scheme, which has supported thousands of construction related jobs during very tough times, is being extended until the end of 2016.

Our farming and food sector has been one of the main success stories of the recovery to date but there are still many structural challenging facing the sector. To reflect this we are extending the range of agri-tax reliefs until the end of 2018 and introducing a new succession partnership model to help pass knowledge and capital from one generation to another.

The tourism sector was in crisis when we entered Government in 2011. With the introduction of a suite of measures to support its recovery it has now reached new records levels. To keep the recovery going in the regions we will maintain the 9% rate of VAT on tourism related services.

Protecting our Corporation Tax Regime
In addition to supporting Irish business, we have also continued the strategy of attracting more foreign investment and jobs.

In the first half of this year, IDA Ireland won 110 new investments, and they expect to create 9,000 new jobs around the country by the end of this year.

The continuation of our transparent and statute based corporation tax regime remains an essential pillar of Ireland’s enterprise policy.

Ireland is competing with a low rate of 12.5% applied to a wide base.

Our success to date has been down to offering a best in class corporation tax regime that enterprise can rely on.

In continuing this strategy we are halving the rate of corporation tax on qualifying innovative products and services developed in Ireland.

To reflect Ireland’s positive international engagement with tax reform through the OECD, the Knowledge Development Box will be the first OECD compliant offering in the world. This will offer more certainty and stability to business in the long term.

Action Plan for Jobs 2016 & Enterprise 2015
There is still far more the Government needs to do to rebuild a sustainable economy with strong sectors that can support full employment.

Our flagship in this regard has been the Action Plan for Jobs, designed to support enterprise achieve its goals in terms of jobs, exports and start-ups, access to finance, market penetration, innovation, access to talent and efficient public sector interaction.

Its success can be seen in the jobs recovery to date which has been driven almost exclusively by increases in full time positions. The jobs recovery is also broad based – with increases in 11 of the 14 sectors of the economy.

To keep the recovery going the Government is already drafting a new Action Plan for Jobs for 2016.

We also need to take a longer term perspective to achieve our goals of replacing all the jobs lost by 2018 and to get unemployment down to 6%.

The Government has mandated the Minister for Jobs, Enterprise and Innovation, Richard Bruton, to bring forward a longer-term Enterprise Strategy to Cabinet shortly.

This new Enterprise Policy 2025 will set the strategic framework for a competitive, export orientated economy that can support full employment.

A Strong Economy Supporting Public Services
The Government’s plan of tax cuts and enterprise supports will help rebuild a strong, sustainable economy.

Reducing the high tax burden on low and middle income families helps to create jobs, put Ireland back to work, and generates the revenue needed to support vital public services.

It is not a case of one or the other. One supports the other.

In the last Budget we cut the USC and income tax rates, but the yield from these taxes was still up 6% in the first eight months because these measures have helped support the recovery.
As a result, we’ve been able to fund additional spending in health, transport and education.

In this sense, our plan is to deliver a virtuous circle of tax cuts on work, more jobs, and improving public finances and services.

As the economy recovers we are now investing more in vital public services.

In our hospitals, 880,000 day cases will be carried out by the end of the year – an increase of nearly 20% over five years.

The Government has also protected front-line staff numbers. Since the beginning of last year we have hired around 1,000 extra nurses. As our recovery continues, we will continue to support and expand our heath service.

Next year we will recruit 2,260 new additional teaching posts, including 600 new resource teachers. This will result in a reduction of the pupil teacher ratio at primary level from 28 to 1 to 27 to 1, and at second level from 19 to 1 to 18.7 to 1.

Next year we also plan to extend GP care without fees to all children under the age of 12.

To tackle crime we are continuing our recruitment strategy with 600 new Gardaí next year in addition to the roll out of vital crime fighting ICT equipment.

We are filling Templemore Garda Training College while Fianna Fáil closed it.

An Affordable and Sensible Budget
All of these new investments are essential to keep the recovery going, to support economic growth and job creation.

This Budget is an affordable and sensible step to secure the recovery.

It signals an end of the boom and bust approach of previous Governments that put our economy at risk for electoral advantage.

The Fianna Fáil Government increased gross spending by 139% between 2000 and 2008.

In the run-up to the 2007 election, between 2005 and 2007, public spending was ramped up by over 25%.

By comparison, in 2016, public expenditure will be just 4% higher than in 2014. Over this time, tax revenues are forecast to increase by over 14% while the economy is set to grow by 18%.

We are set to reduce the deficit to 2.1% in 2015, falling to 1.2% next year and to eliminate it altogether in 2018.

In comparison the opposition continue to make unfunded and reckless demands that would put our recovery at risk.

Conclusion
As we look forward and plan for 2016 and the years ahead, the opportunity now exists to secure the economic recovery, and to build an enterprise economy and society that deliver secure and well paid jobs, incomes and pensions, world class infrastructure, high-quality public services and certainty.

As we approach the end of this Dáil, we are facing, Ceann Comhairle, a fork in the road. One track points to continued stability and certainty about the future. The sign posts along the way are now clear.

· No booms, no busts but responsible increases in public spending within a reformed public service, built on a solid platform of steady economic growth;

· The completion of tax equalisation for the self-employed and other measures to support job creators;

· More realistic and affordable increases in the minimum wage to make work pay;

· The progressive abolition of the USC to reward work and effort and to make Ireland more attractive for mobile foreign investment and skills, including for our returning emigrants;

· Low interest rates for business and home-owners, underpinned by further deficit and debt reduction and rising domestic and international confidence;

· A robust defence of the 12.5% corporation tax as the linchpin of our jobs policy.

As we face this fork in the road, we can surely see that along the other track lies instability and chaos.

The siren songs of “ending austerity” and “fairer recovery” will, in fact, mean the exact opposite.

The stepping stones back towards the economic abyss are well laid out in alternative budgets published by the Opposition.

· An Oireachtas unable to pass coherent budgets, sapping confidence and undermining economic discipline;

· Job-killing tax increases on work and business to pay for reckless promises; and

· Confidence-destroying confrontation with our international partners, and higher interest rates.

We have all seen in recent months how quickly fragile economic recoveries unravel in the face of political instability and reckless economic management. The Opposition want the country to go backwards.

This Budget brings the country forwards and secures the economic recovery. I commend it to the House.