Budget 2015 Speech By The Tánaiste & Minister for Social Protection,

 

Dáil Eireann

Wednesday, 15th October 2014

 

 

Leinster house1This Budget marks a decisive shift.

The economy is growing. Unemployment is falling. Confidence is returning.

The first phase of the recovery is complete and we are now starting the second: restoring living standards for families, older people, and low and middle-income workers.

This Budget will cement the economic recovery by sharing the fruits of that recovery in an equitable manner.

This is a fair Budget.

Families, older people, and low and middle-income workers will benefit.

Businesses will remain competitive.

Through shared prosperity, all Irish people will begin to feel the recovery in their everyday lives and in their standard of living.

And we will not do anything to imperil the recovery.

The Government will continue to do what is right for Irish families.

There will be no return to the recklessness of the past.

The 2015 Budget is built on the foundations of economic recovery.

It is crafted to sustain that recovery, and to broaden it out so that it nurtures both social and economic renewal.

This Budget combines modest but focused increases in public expenditure to address clear and identifiable needs, with adjustments in taxation that give the greatest proportion of the gains to low and middle-income workers.

At the same time, we have ensured that the ongoing repair of our public finances is continued and that we exceed our targets for deficit reduction by a comfortable margin.

Budget 2015 ensures that the economic dividend from the recovery is used to invest in sustainable growth, communities and public services.

Compared to earlier ceilings which envisaged reductions in spending across Government departments of almost €1.4 billion next year, the Government has instead increased expenditure by €639 million.

This will allow for investment in priority areas such as housing provision, the health service, education and social protection, while maintaining overall expenditure levels within prudent limits.

Prioritising work:

Budget 2015 provides an additional €3 billion in resources for the domestic economy compared to previous plans.

This will help to sustain the already strengthening recovery in the domestic economy which will support an additional 50,000 jobs next year, with unemployment set to fall further to 10 per cent by the end of 2015.

Unemployed people need to be ready to take up these jobs and the recently launched Pathways to Work 2015 strategy maps the way forward in providing people with the necessary skills to get back to work.

To support the implementation of Pathways, €1.6 billion will be made available in 2015 to provide approximately 300,000 work and training places.

In addition, €12 million has been allocated for the JobPath initiative which will match the long-term unemployed with appropriate training and employment opportunities.

We are also doubling the number of JobsPlus positions to 6,000 with a focus on young unemployed people at a cost of €13.5m in a full year.

JobsPlus sees my Department pay monthly cash grants to employers to help with wage costs when they recruit long-term unemployed jobseekers.

It has been a tremendous success to date and I’m very pleased that we are expanding the scheme next year.

In addition, I am announcing a new incentive to help jobseekers with families return to work – the Back to Work Family Dividend.

Back to Work Family Dividend

Through this scheme, long-term unemployed jobseekers with children who leave welfare to return to work can retain the child-related portion of their social welfare payment on a tapered basis over two years.

This includes those who move to self-employment, such as back into the construction sector, and those on One Parent Family Payment.

The scheme will be worth €1,550 per child in the first year of employment or self-employment and half that amount again in the second year.

The scheme will cost €22m in 2015 and €46m in a full year.

The dividend will help increase the pace of the progress we are making in helping people back to work.

It will help boost the recovery, reduce welfare expenditure in the long-run, and, most importantly, help the families in question to build a better financial future for themselves.

This measure, taken together with employer incentives under JobsPlus and activation measures under the JobPath scheme, will ensure that people who have remained on the live register for a prolonged period can also benefit from the recovery in the labour market.

As these targeted measures gain traction in returning people to work they will in the long term begin to pay for themselves – a case of spending now to save later.

These measures highlight our unrelenting focus on helping back people into work.

In addition, to ensure that there is a focus on lower-paid workers and in line with the Government’s Statement of Priorities, the Government will establish the Low Pay Commission in 2015.

In the corporation tax system, a suite of measures including revisions to tax residency rules and adjustments to the R&D tax credit will maintain the competitive nature of the Irish corporate tax structure while ensuring a fair contribution from the corporate sector.

Finally, a number of small measures are targeted at start-ups and SMEs which form the backbone of employment creation in the Irish economy.

Tax reductions:

But we’re not just focusing on helping people return to work.

We’re reducing tax for low and middle-income earners to ensure that those at work take home more and begin to benefit from the recovery.

We’re starting small but this is just the start.

On the revenue side, additional taxation raising measures amounting to about €700 million have been set aside, and instead a modest and carefully targeted package of income tax reductions of approximately €500 million will boost disposable incomes of low and middle-income families.

All the available levers – including rates, bands and thresholds – have been employed to deliver a progressive income tax reform which targets relief at low and middle income earners and ensures that, proportionately, they gain the most.

The changes in the Universal Social Charge (USC) – including an increase in the entry point to €12,012, a broadening of the lower rate band and cuts to the two lowest rates by 0.5% – will be of particular benefit to lower-earning workers.

In the income tax code, the standard rate band has been increased by €1,000 for a single person and the top marginal rate has been reduced by 1%.

Taken together with the adjustment to the top USC rates, these changes cap benefits for incomes over €70,000.

It is an extremely progressive package that focuses the relief on those who most need it – low and middle-income workers.

Social welfare:

I know want to move to the 2015 budget for my own Department, which is an example of our wider approach.

Overall expenditure will fall, thereby helping to ensure the public finances remain strong.

But there is still room within the budget for almost €200 million of targeted increases in certain payments, and new incentives to help people back to work.

And it is precisely because of the surge in people returning to work that both objectives can be achieved.

The Pathways to Work strategy has helped ensure that unemployment has fallen from a crisis peak of 15.1% to 11.1% now.

Having a job is the single best protection against poverty.

The single best path to a better future for an individual and their family.

And the single best way of reducing welfare expenditure.

Objectives:

All existing welfare payments and supports will be maintained in 2015 – there will be no reductions.

Increasing employment has boosted PRSI receipts, while the decline in unemployment has reduced expenditure on unemployment supports.

This has improved the finances of the social security fund and released resources to fund a number of targeted measures to help other jobseekers return to work, increase child benefit and further protect vulnerable groups such as older people and people with disabilities.

I am, therefore, announcing a number of initiatives costing €198 million with four key objectives. These are:

–          Assisting unemployed families to return to work by providing continued financial support;

–          Helping all families in the State with the cost of raising children;

–          Recognising the additional pressures on pensioners and people with disabilities who are living alone, and

–          Helping vulnerable welfare households to meet the costs associated with water services.

Child Benefit:

I’ve already mentioned the Back to Work Family Dividend.

Moving to supports for children more generally, there will be an increase in the Child Benefit rate of €5, bringing the monthly rate from €130 to €135 per child.

This will cost €72m in a full year.

This recognises the sacrifices that families made during the economic crisis and the fact that families are continuing to face difficulties.

In the Statement of Priorities published earlier this year, the Government promised a new deal on living standards for hard-pressed families, and this increase is in line with that commitment.

Pensioners and People with Disabilities:

Looking now at pensioners and people with disabilities, there will be an increase in the Living Alone Allowance of €1.30 per week, bringing the rate up from €7.70 to €9.

This is the first increase in this payment since 1996, and will benefit over 177,000 people at an annual cost of €12 million.

This Government is committed to reducing the risk of poverty of marginalised groups including older people, those with a disability and particularly those who live alone.

People living alone can be more vulnerable to economic deprivation than two-person households where resources can be pooled.

The increase in the Living Alone Allowance will help address this risk and provide for a greater level of income adequacy for both pensioners and people with disabilities living alone.

Water Services Support:

In line with the Statement of Priorities, I am introducing a Water Support payment of €100 to recipients of the Household Benefit Package, to help older people and other vulnerable groups meet the cost of water services.

The payment will be €25 paid every quarter and will be paid directly to the beneficiaries, at a cost of €42m in a full year.

In addition, I am introducing a payment of €100 per annum to Fuel Allowance recipients who are not in receipt of the Household Benefits Package.

This measure will also work to alleviate the impact of the water charges, and will cost €24 million in 2015.

This will mean that 653,000 households will receive this payment to assist in paying their water charges.

A tax allowance for water charges at the standard rate for those in employment has already been announced by the Minister for Finance.

Christmas Bonus:

Christmas is a time that can put extreme financial strain on families who are dependent on social welfare benefits for financial support.

I am pleased to announce that this year a Christmas bonus of 25% will be paid to recipients of long-term social welfare payments.

There will be a minimum payment of €20.

This payment will benefit over 1.16 million social welfare recipients at a cost of €65.5m.

The social protection measures will:

–          help more people return to work, particularly families with children;

–          support all families with children as well as pensioners and people with disabilities living alone, and

–          assist low-income families on welfare to meet the costs associated with water services.

Throughout the crisis, this Government protected core welfare rates and maintained a massively strong social welfare safety net.

That was a political choice which this Government made very deliberately – it is not one that was followed in other bailout countries.

This is acknowledged by the ESRI, among others, which has pointed out that, unlike in other countries, income inequality has fallen in Ireland in recent years, largely because of the overall maintenance of the welfare system.

But we didn’t just maintain the system throughout the crisis; we transformed it in order to help people back to work.

And in so doing, we have created the room to announce enhanced support in this Budget for those who need it most, while continuing our unrelenting focus on reducing unemployment.

We are strengthening the springboard back to work.

We are strengthening the safety net for those who need it.

And we are strengthening Ireland’s recovery to ensure it will be a recovery felt by all.

Housing:

Housing is another key element in spreading the recovery to every community.

The coexistence of severe housing shortages in major urban areas with widespread vacant property in other areas of the country is a clear manifestation of the dysfunctional nature of housing policy during the boom years.

This is a social and economic problem which we must address and will address.

Our commitment to resolve this issue is clearly demonstrated by a commitment to a capital investment of over €2.2 billion for social housing provision over the next three years.

This capital investment is part of a multifaceted approach that has been adopted which combines a number of tax incentives to encourage supply, additional current and capital expenditure to provide additional social housing units in the short term and a number of off-balance sheet vehicles for the provision of affordable housing in the medium term.

Health:

Providing for the health of our citizens is a key priority for the Government.

The Government will provide some €13.1 billion for the delivery of health services in 2015 to ensure that core services will continue to be delivered and improved.

Education:

One of Ireland’s key assets is its educated workforce.

The importance of education to our economy cannot be overstated.

The Government is providing €8.3 billion to education in 2015 and this will include funding for 1,700 additional full time posts, comprised of 920 mainstream teachers, 480 resource teachers and 365 special needs assistants.

Agriculture:

Additional resources in the region of €30 million have been found to address real needs in the agriculture sector such as the smooth transfer of land from older farmers who wish to retire to younger farmers in need of that land.

Concluding section:

These are just some of the very progressive measures in this Budget.

The resources for this Budget represent the combination of difficult adjustments that are no longer necessary due to the strong recovery, together with some modest but considered additions to expenditure and taxation reliefs which will nurture and sustain the recovery, making it real and tangible in the pockets of ordinary people.

This Government will not return to the reckless abandon which was the calling card of the previous administration and is currently favoured by many on the opposition benches.

We have made real and substantial progress in repairing the enormous damage that has been done to the Irish economy and to our society.

But our work is not done.

The aim here is to sustain the economic recovery, not to undermine it.

Budget 2015 is evidence of an Irish Government shaping a vision not about our past, but about our future.

It is evidence that Ireland, battered as it was by misfortune and mismanagement, is rising again, growing again, charting a course towards a stronger, more sustainable and more compassionate future – the kind of future our people deserve.