BUDGET SPEECH: This Budget comes at a turning point in our economic prospects, when international growth is on the mend. As such, it will set the strategic direction which this country will follow for the next few years. Ireland has come through the recent international economic downturn better than most. This is in no small part due to our sound budgetary policies.
It is easy to forget the progress we have achieved - the defeat of unemployment as an economic scourge, the doubling of real income in the economy, the massive investment in infrastructure, and the substantial enhancement of social benefits for the welfare of all our people. Today many tend to take these achievements for granted.
Even if we sometimes forget the progress we have made over recent years, other fair-minded and reputable international organisations have no difficulty in reminding us. The IMF report last August commended the Irish authorities for their "exemplary track record of sound economic policies". The IMF referred to our enviable achievements:
unemployment reduced from 16 per cent to 4 per cent;
huge gains in competitiveness; and
public debt reduced from over 100 per cent of GDP to 33 per cent.
The IMF also praised not only our prudent fiscal management and our tax reforms but it also commended our sensible incomes policies and our investment in education.
All of these policies have laid the foundation for a virtuous circle, reinforcing growth and strengthening the resilience of our economy.
Budgetary and strategic objectives
This Budget has the following basic objectives:
to foster employment and growth;
to continue a prudent approach to our public finances;
to invest more in infrastructure; and
to secure competitiveness by keeping inflation low, thereby giving us the resources to meet our commitments on social inclusion.
The strategic elements of delivering on these objectives involve:
action to keep public spending within a sustainable growth range;
an initiative on capital investment;
action to sustain our public service pension capacity;
a balanced growth strategy for all areas of the State, which can be progressed through decentralisation.
Economic outlook
As I have reminded the House before, Ireland is part of a monetary union with a low inflation target. Competition worldwide is exerting downward pressure on prices and incomes. As an open economy we are more exposed than most and we face intensifying competition for international investment and the jobs that go with it.
These facts mean that there is an urgency attaching to getting our costs and prices back into balance with the rest of the EU. In doing so, we must keep the rate of increase in public spending in line with how we expect revenues to grow. In 2004, I am providing for Exchequer borrowing of €2.8 billion. I believe that this is the appropriate level to set for Exchequer borrowing in the current circumstances. This is equivalent to over 50 per cent of our capital budget for the year.
This time last year, I pointed to the high degree of uncertainty surrounding the economic outlook. My caution was well placed, as the pick-up in the major world economies has been slower than expected.
The current improvement in the international economy is a welcome development. However, there are still significant risks. For example, Ireland is particularly vulnerable to sharp falls in the US dollar exchange rate against the euro.
On balance, the short-term prospects for the international economy have now improved. We need to ensure that we can capitalise on that improvement.
At this point in time, GNP in 2004 is projected to grow at 3.0 per cent and GDP at 3.3 per cent. We also expect to see GNP growth rates increasing in 2005 and 2006 to about 4 per cent and 4½ per cent, respectively.
Employment is expected to grow next year by 23,000 with unemployment to average around 5 per cent. Taking account of the changes in this Budget, consumer price inflation should average 2½ per cent in 2004, half the rate we experienced at the start of this year.
Decentralisation of Government Departments and agencies
It is important that the growth we expect should be regionally balanced. In this regard, I am today announcing details of decentralisation of Government Departments and agencies as promised in Budget 2000.
For the first time ever, decentralisation will involve the transfer of complete Departments - including their ministers and senior management - to provincial locations. A total of eight Departments and the Office of Public Works will move their headquarters from Dublin to provincial locations, leaving seven Departments with their headquarters in Dublin. All Departments and Offices will be participating in the programme.
Ministers with headquarters outside of Dublin will be provided with a centralised suite of offices, close to the Houses of the Oireachtas, for a small secretariat so they can conduct business while in Dublin and when the Dáil is in session.
The previous decentralisation programme involved the relocation of some 4,000 public service jobs. The programme I am announcing today is far more radical. In total, it will involve the relocation of 10,300 civil and public service jobs to 53 centres in 25 counties.
Details of implementation
Full details of the decentralisation programme are outlined in the Budget summary.
The programme will be implemented through the transfer of staff on a voluntary basis. There will be no redundancies and, as on previous occasions, the payment of removal or relocation expenses will not arise.
For the reasons outlined in the summary, decisions on location have yet to be made in relation to over 1,300 of the 10,300 jobs being decentralised. I also believe that the final total can be closer to 12,000 jobs and I intend to examine options in this regard once the new programme is well under way.
The Government has also decided that, save in exceptional circumstances, any new agencies or bodies being established in future should be located in areas compatible with the new programme of decentralisation.
I am establishing an implementation committee to drive forward implementation of the programme, with the chair of the committee reporting to a Cabinet sub-committee.
I am also providing an additional €20 million capital in my Department's vote for 2004 to meet any up-front investment required.
Benefits for all
I believe that, over time, decentralisation will lead to a radical change of culture in terms of policy formation in this country. No longer will policy be made entirely in Dublin on the basis of a Dublin mindset.
I am convinced that decentralisation offers considerable benefits for the Departments involved, the communities to which they will be relocated, the staff that will transfer and the country as a whole.
The Government has sought to ensure that the units being transferred are large enough to provide career opportunities for staff either within their own Department or in another Department within a reasonable distance. Indeed, the radical nature of this programme means that capable civil servants who are interested in decentralisation can look forward with confidence to good career prospects outside Dublin in the future, something which has been much less a feature of decentralisation in the past.
Decentralisation can bring very significant benefits for the staff involved. These benefits will include reduced commuting times and lower house prices outside Dublin. Discussions will be held with the public service unions on the programme.
National Spatial Strategy
The locations which have been selected take full account of the National Spatial Strategy, the existence of good transport links - by road, rail and/or air - and the location of existing decentralised offices. The aim has been to establish viable clusters of work units within a region, either in the form of self-contained locations or clusters of sites located geographically close to each other or to existing decentralised locations. This will help to avoid the pitfalls of fragmentation, and protect service delivery.
Although Dublin remains vital to economic development, the Government's National Spatial Strategy recognised that Ireland also needs a more even spread of development. Unbalanced development is not sustainable in the longer term, economically, socially or environmentally. More balanced regional development will contribute to sustainable long-term economic growth to the benefit of all our citizens.
Budgetary projections
The 2004 Budgetary targets are as follows:
an increase in gross spending on public services of just under 7 per cent, bringing it to a total of €41,117 million;
a current Budget surplus of €2,989 million;
a capital Budget deficit of €5,795 million;
an Exchequer deficit of €2,806 million;
a general Government deficit of €1,635 million, or 1.1 per cent of GDP; and
a debt ratio of 33 per cent of GDP, the second lowest in the EU.
Sustaining Progress
One of the provisions agreed in Sustaining Progress was that the report of the independent Public Service Benchmarking Body would be implemented. The Government will honour that commitment. If we wish to deliver quality public services we have to pay the salaries necessary for their delivery. The key to this agreement is the fact that there will be gains for both sides.
We now have a pay determination system which rewards public servants by reference to the market value of their work and does not depend on historical links with other public service groups. Furthermore, payment of the increases is conditional on industrial peace and progress on modernisation across the public service. Failure to deliver on these requirements will mean that payments will not be made.
A further national pay agreement is due to be negotiated in the first half of 2004. These negotiations will have to take into account the facts that:
the competitive challenge is more intense than ever;
inflation has halved since the present agreement was negotiated; and
in the case of the public service, significant increases are being paid under benchmarking.
As a consequence, we need a significantly lower outcome in pay terms than was the case the last time.
Public spending
Public spending is at an all-time high. Since 1997, this Government has dramatically expanded public spending on social welfare, health, education and infrastructure. We were able to do this when very high levels of growth delivered strong revenue flows. Now lower economic growth means lower revenue growth. Going forward, we are locking in the gains we have made, but future growth in public spending must match available revenues. Accordingly, future annual public spending increases will have to be kept very close to this year's level. This will mean annual expenditure growth in the range of 5 to 7 per cent, depending on the actual level of economic growth at the time.
Infrastructural investment
I am determined to get more and better value for the funds tax-payers are providing. A more focused and planned approach to spending is required to deliver this extra value. A coherent, strategic and cost-efficient approach to capital spending on infrastructure is key to our future growth potential.
Between 1997 and 2003 we will have spent almost €28 billion in capital spending. In 1997 we spent €2 billion on capital. Next year we will spend €5.6 billion. This is close to 5 per cent of GNP - double the rest of Europe. As a result, dramatic strides have been made in tackling our infrastructure deficit. The Government will continue the existing high level of capital investment, building on the progress we have made over the last seven years. The future success of our economy depends on investment made now.
Capital envelopes
The overall level of capital spending must be maintained consistently. We need to avoid sudden spurts driving up contract prices, followed by lulls in activity. The objective should be an even flow of investment projects, getting real value for money as they roll out.
With this end in view, I am announcing today a major change in the financial treatment of capital spending. In recent years I have committed to a rolling investment programme or financial envelope in public transport. This has allowed for a structured, planned approach to spending that has delivered results. I am today extending this approach through the introduction of rolling five-year multi-annual envelopes for all investment areas.
The envelopes include a commitment to keep the level of Exchequer-funded capital investment at close to 5 per cent of GNP over the period 2004-2008 - a total of €33.6 billion.
In implementing the new envelope system I intend to allow Departments to carry over to the following year any unspent Exchequer capital allocations, up to a maximum of 10 per cent of each annual capital subhead. This carry-over facility, which will take effect from financial year 2004, should significantly assist in the better planning and execution of those projects which span a number of years.
The Government will monitor the implementation of this initiative for capital spending with a view to considering its wider application in time.
Further details of this initiative and the relevant capital envelopes are set out in the Budget summary.
Public-private partnerships
The inclusion of a significant provision for public-private partnerships in the five-year envelope will provide a strong incentive to Departments and agencies to pursue the PPP route on a value-for-money basis. The national development finance agency will have an important role to play in advising Departments and agencies in this regard. I want to see an increasing proportion of public investment undertaken by the private sector, increasing from 3 per cent of total spending in 2004 to 15 per cent by 2008.
Public construction contract measures
To complement the new capital envelope system I also intend to introduce significant changes in the areas of public sector contracts for construction and construction-related services.
There will be greater use of contracts in which more of the risks of inflation and other cost increases will be borne by contractors and this will ultimately give better value for money to the State.
I also propose to get away from the traditional approach to hiring consultants on construction contracts. Currently, fees escalate with project costs and this does not give good value to the taxpayer. Greater use of the design, build and transfer model is necessary. I will be bringing forward more detailed proposals in this area in due course.
Local government fund
I am providing an additional once-off contribution of €30 million to the Local Government Fund in 2004 to assist the management of local authority finances next year. This will bring the total 2004 Exchequer allocation to the Local Government Fund to €453 million.
The budgetary targets announced today for 2004 include a significant provision for borrowing by the local government sector. As we have done at central government level, it is important that local government adjusts its expenditure ambitions to the resources available.
Education capital
I have also decided to allocate a further €30 million for school buildings in the primary and secondary sectors, to bring the total capital allocation in those sectors next year to €387 million.
Public service pensions
Anyone who has followed events in Europe will be aware of the major upheavals there have been in several member-states in addressing the pension crisis. Those states were unwilling in the past to plan for the demographic consequences of ageing. This failure to act in good times leaves them with no option now but to make substantial changes to the pension entitlements of everyone in the public service, and not just to those of new entrants.
I want to build on the initiatives I have already implemented in the pensions area, by addressing the issue of public service pensions today.
Principles for public service pensions
The public service pensions issue was looked at by government as early as 1996, when a commission was set up to examine and report on all aspects of the matter. The Government approved the commission's report in principle in September 2001 and its recommendations have been discussed since then in various joint union/management fora. However, the time to act is now.
The Government has decided to implement the bulk of the commission's recommendations in the light of the following guiding principles:
the minimum age for receiving a pension should generally be 65;
there should be no compulsion in the pensions system for people to retire at a particular age if they are fit and willing to stay on; and
full account should be taken of the special nature of the duties undertaken by certain categories of public service employees, as recommended by the commission.
Measures affecting new entrants to the public service
I will be introducing the following measures for new entrants with effect from April 1st, 2004, except in those cases where, for legal or technical reasons, a later commencement date is required:
the minimum pension age will be increased to 65 for most new entrants to the public service;
this includes new-entrant civil servants, teachers and staff in local government, the health services and non-commercial State-sponsored bodies;
the present compulsory retirement age of 65 will be removed, enabling staff to remain longer in work should they wish, subject to suitability and health requirements;
the minimum pension age will be increased to 65 for members of the Oireachtas and office holders elected or appointed on or after April 1st, 2004;
the minimum pension age will be increased to 55 for new-entrant gardaí and prison officers and, in the case of new-entrant gardaí, the compulsory retirement age will be increased to age 60, subject to annual health and fitness certification after age 55;
a minimum pension age of 50 will be introduced for new-entrant Defence Forces personnel;
the current minimum pension age of 55 for fire-fighters will be retained for new entrants.
The public service unions will be fully informed about the implementation of the reforms in advance of their introduction for new entrants on April 1st, 2004.
I would emphasise that these changes do not in any way affect existing staff or pensioners.
This is underlined by the fact that the Government has decided not to accept the commission's recommendations in relation to the introduction of an additional 1 per cent pension contribution for all public servants, or to the use of a new index for the purpose of determining pension increases.
Pensions of serving staff
I am also proposing changes to the pension terms and conditions of serving staff, including amending the formula used for integrating public service and social welfare pensions to make better provision for current and future staff on lower pay levels. Such a change will also be of benefit to some existing pensioners. I will also be proposing a scheme to provide for a new, single additional voluntary contribution-type scheme for the public service as well as the possibility of optional early retirement on the basis of actuarially reduced benefits, as recommended by the commission.
The details of these and other proposed pension changes for existing staff are also set out in the Budget summary.
Taxation
I now turn to taxation. The resources available for tax reductions are limited this year. However, there are a number of issues which need to be addressed.
Indirect taxation
I propose to make only limited changes to indirect taxes in this Budget. The goal of keeping inflation low takes precedence on this occasion. In addition, excise revenue has under-performed this year. There is also more uncertainty on the prospects for excise revenue in certain sectors during 2004. Therefore, a prudent approach in this area is warranted.
I propose to increase the VAT-inclusive excise duty on cigarettes and other tobacco products by the equivalent of 25 cent per packet of 20 cigarettes.
The VAT-inclusive excise duty rate on petrol and diesel will be increased by five cent per litre.
These excise duties increases will take effect from midnight tonight and will bring in €243 million in extra revenue next year.
The effect of these indirect tax changes will add less than 0.4 per cent to the Consumer Price Index. We have been clear that increases in public spending have to be financed either by tax measures in general or by charging the users where this is reasonable. The alternative is unsustainable borrowing. Such borrowing is the ultimate hidden tax on the public, as we all found out to our great cost 20 years ago.
VAT anti-avoidance
I propose to put beyond doubt the VAT law as it applies to the site element in transactions involving the construction of new houses and apartments. This will deal with an unacceptable interpretation of VAT law being propounded by some tax practitioners and will safeguard the revenues of the State in such transactions. The measure will take effect from midnight tonight.
Income tax
Considerable progress has already been made in reforming our direct tax system in the past six years and in adapting it to the changing needs of our society. Lowering the direct tax burden has in particular produced positive results in our increased ability to create and protect employment.
Some may think that they can reduce unemployment by high tax-and-spend policies. However, any such reduction would only be temporary and would in any case be reversed as the tax increases damage our competitiveness. We, on the other hand, have got unemployment down and kept it at low levels by keeping tax rates low.
This lesson should be learned by those who mistakenly call for us to increase our tax burden towards the levels of some other states in Europe. Such calls are misplaced and those who make them fail to see that job creation is the appropriate goal if we are to achieve real social inclusion. High direct tax rates destroy jobs sooner or later. This Government has no intention of going down that route now or in the future.
Employee tax credit
To keep the income tax burden low, especially for the lower paid, I propose to increase the employee tax credit by €240, to €1,040 per annum. This will continue to ensure that tax is not payable on 90 per cent of the minimum wage and will remove 39,200 taxpayers from the tax net. I also propose to increase the income tax exemption limits for those aged 65 or over by €500 single and €1,000 married, bringing them to €15,500 single and €31,000 married. This will remove an additional 2,200 taxpayers aged over 65 from the tax net.
The combined cost of these two measures is €287 million in a full year.
Tax reliefs
Last year I announced the termination of a series of major tax reliefs from the end of 2004. Since then, I have been bombarded by demands to revisit that policy, especially in the case of one particular relief. Whatever one's stance on the merit of any particular relief, there are a number of inescapable facts about their impact.
Firstly, they narrow the tax base and make it harder to pursue the goal of lower tax rates for all. Secondly, they raise issues of equity, since not everyone has the disposable income which is necessary to avail of them. Finally, tax reliefs reduce the tax bill of those in the higher income brackets. This is equally true whether the tax relief is granted for film relief, or for urban or rural renewal. Those who both simultaneously decry this fact and at the same time campaign loudly to retain certain reliefs should recognise the inherent contradiction in their position.
Business Expansion and Seed Capital schemes
For my part, I have always made it clear that I favour targeted reliefs which produce clear economic benefits. One scheme that meets these criteria is the Business Expansion Scheme, which is due to expire on December 31st, 2003. Accordingly, I propose to extend that scheme, and the associated Seed Capital Scheme, for a further period until December 31st, 2006. I also propose to increase the maximum amount that can be generally raised by a company under these schemes, from €750,000 to €1 million.
Film relief
I have reviewed the case made to me by my colleague Mr John O'Donoghue,the Minister for Arts, Sport and Tourism, and I have decided as a result that film relief will be extended for a further period until the end of 2008, and that the ceiling per film will be increased to €15 million from 2005. Future decisions will depend on there being no further abuse of the scheme. There should also be clear evidence that the film industry can develop on a firmer footing throughout the country and not just close to Dublin.
Other tax incentives
A number of other reliefs were also due to expire at end-2004. I am aware that there is a range of construction projects either in the pipeline or under way which will be seriously affected by this termination date. As the end-2004 deadline approaches, pressure on construction resources will mount to deliver these projects. Accordingly, I propose to extend the termination date for all of these area-based schemes until July 31st, 2006, as set out in the Budget summary. I am also renewing the relief for corporate investment in renewable energy sources until end-2006.
R&D tax credit/stamp duty on patents
In line with my approach of favouring targeted reliefs that can produce economic benefits, I propose to introduce a tax credit for incremental R&D expenditure by companies. Under this proposal up to 20 per cent of such expenditure will be permitted to be set against corporation tax in any given tax year. The scheme will be reviewed after five years. Full details of the scheme, which is subject to clearance by the European Commission, will be set out in the Finance Bill. I also propose to exempt transfers of intellectual property from stamp duty in that Bill.
Headquarters and holding companies
I propose to exempt the disposal of subsidiary companies from capital gains tax and to expand the scope of our double taxation relief provisions for dividend income paid to parent companies in certain cases. Details are set out in the Budget summary. I am confident that this measure will help Ireland compete internationally for headquarters and holding companies and will create additional high-quality employment in the years ahead.
Dental insurance relief
I propose amending the relevant provisions in the Finance Bill to provide tax relief at the standard rate for all insurance premia in relation to non-routine dental care. This will encourage dental insurance providers to enter the Irish market to meet the demand for such cover.
Trade union subscription relief
I also propose to increase the tax allowance for subscriptions to trade unions, from the current €130 to a new rate of €200.
Rural economy measures
Arising from the recent EU decision regarding the Mid-Term Review of the Common Agricultural Policy, I am improving the income tax relief for certain farm leases so as to encourage better utilisation of our agricultural land resources. The exempt annual threshold for leases of five to seven years is being increased from €5,079 to €7,500. For leases of seven years or more, the exempt annual threshold is being increased from €7,618 to €10,000. In addition, the age limit for qualifying lessors is being reduced from 55 to 40 years.
The scheme of capital allowances for investment in farm pollution control measures is also being extended for a further three years to end-2006.
The farmers' flat-rate VAT addition is being increased from 4.3 to 4.4 per cent.
I propose to provide an income tax exemption in respect of income received by Gaeltacht households under the summer college student scheme. Such income is already disregarded for social welfare means-test purposes.
My colleague, Mr Joe Walsh, the Minister for Agriculture and Food, will make an announcement later today in relation to animal disease levies.
New rural social scheme
The Programme for Government proposed the establishment of a rural social programme to provide secure, community-related employment opportunities for persons in families eligible for the Farm Assist Scheme. I am pleased to announce today that my colleague, Mr Éamon Ó Cuív, the Minister for Community, Rural and Gaeltacht Affairs, is now proceeding to establish a new rural social scheme to help improve rural services in a more efficient way and at the same time to provide an income for small farmers with a working week compatible with farming.
It is estimated that the net cost of the new scheme would be relatively small given that participants will be in receipt of an existing payment from the Department of Social and Family Affairs. Net new funding of €10 million, to include the additional payments to individuals and the cost of materials, is planned for the scheme, and the Dormant Accounts Fund will be asked to fund this. It is estimated that this could provide for up to 2,500 places. Details of the scheme are set out in the Budget summary.
Social inclusion
Since 1997, this Government has substantially reduced consistent poverty and improved living standards for all. In this Budget there will be substantial additional funds for those who are most in need.
Persons with disabilities
I am today providing an additional €25 million current expenditure in 2004 to support persons with intellectual, physical or sensory disabilities. This funding will be used to provide additional emergency residential placements and extra day services - especially for school-leavers - and to enhance health support services for children. My colleague, Mr Micheál Martin, the Minister for Health and Children, will be allocating capital funding for these services from within his 2004 allocation.
Social welfare
The improvements in social welfare payments that I am announcing today will amount to an additional €630 million in a full year, €100 million greater than last year. Despite all the talk after the publication of the abridged Expenditure Estimates Volume, the fact is that total social welfare expenditure will be €750 million higher than in 2003, an increase of over 7 per cent.
As my colleague, Ms Mary Coughlan, the Minister for Social and Family Affairs, has previously explained, expenditure on various social welfare payments is evaluated on an ongoing basis. Arising from this process, the Government decided for the 2004 Estimates to implement a number of measures to ensure that the different schemes continue to meet their objectives.
This Government is prepared not only to evaluate public expenditure but also to make such changes as are necessary. The resources which are freed up as a result can then be used for more effective social welfare spending. This is precisely what I am doing today.
Increases well ahead of inflation
All the increases in the social welfare adult personal weekly rates I will announce today are well ahead of the rate of inflation. They range from 6 to 8 per cent and in the case of the lowest social welfare payments are more than three times the expected rate of inflation.
Old-age pensions
Today I am increasing the full personal rate of old-age and related pensions by €10 per week. This will bring the Old Age Contributory Pension to €167.30 per week. The new rate for the Old Age Non-Contributory Pension will be €154 per week.
Widows and widowers
I am providing a total increase of €11.50 in the weekly rate of the Widows' and Widowers' Contributory Pension for those aged 66 and over, to bring the rate of payment up to that of the Old Age Contributory Pension. For widows and widowers aged 80 or over, the new weekly rate will be €173.70.
Child benefit
This Government has significantly increased the rates of Child Benefit in recent years. In 2004, the monthly rate for the first and second child will increase by €6 on the 2003 rate and the rate for third and subsequent children will increase by €8.
Other weekly welfare payments and qualified adult allowances
All other personal weekly social welfare rates will be increased by €10 per week. This will bring the lowest full personal social welfare rate to €134.80 per week. The full qualified adult allowance rates will increase by at least €6.60 per week. I am also providing for a special increase of €16.10 per week in the Invalidity Pension qualified adult rate, where the qualified adult is aged 66 or over, to bring it to the Old Age Contributory Pension equivalent.Proportionate increases will be paid for all persons in receipt of reduced-rate weekly social welfare payments.
Other social welfare measures
The Budget summary contains a range of other social welfare improvements, the full details of which will be announced by the Minister for Social and Family Affairs.
Among these measures are:
an increase of €28 per week in the Family Income Supplement income thresholds and a €7 increase in the minimum payment;
an increase in the weekly income disregards for means assessment of the Carers' Allowance scheme;
a further increase in the annual Respite Care Grant provided to carers, bringing it to €835 per annum;
an increase in the Widowed Parent Grant to €2,700. The increase in this grant will come into effect today and the effective payment dates for other increases in 2004 will be the same as this year.
The very substantial real increases in social welfare rates which I have just announced are a considerable down-payment on the implementation of our commitments under Sustaining Progress.
Concluding remarks
Ireland has survived the economic downturn better than most other countries. This has not been without cost in terms of falling incomes and job losses for some, and disappointed expectations for many. The Government acknowledges this and the pain that this has involved.
But the future is now more hopeful and economic recovery worldwide offers a more optimistic prospect.
The Irish public has accepted the need for fiscal restraint. We should all understand the need to avoid excessive borrowing. Borrowing is the real stealth tax. We need to limit our spending to what we can afford.
We took decisive action on the public finances which was not without political cost. This is the correct thing to do, even if it is not politically popular. We intend to see this principle through. But we will do so with responsibility and concern, as we have shown today.
We have in this Budget protected the weaker sections of the community through substantial real increases in welfare payments.
We have improved the tax position of the lower paid.
We have consolidated the gains of low inflation.
We have introduced measures to foster enterprise and to protect our jobs base for the future.
We have sought to spread the fruits of growth on a regionally progressive basis, especially through our programme of decentralisation.
We have unveiled a scenario for a sustained and prolonged level of significant capital spending to bring our infrastructure up to the mark.
We have taken decisions on pensions which will help lower-paid public service pensioners.
We have also taken decisions on pensions for new entrants to the public service, which will safeguard pensions for all in the longer term.
All this means that, given no major external shocks, we can look forward to:
more growth and more jobs in our economy;
a better deal for all in society;
better public services focused on delivery;
a quantum leap in the quality and extent of publicly provided infrastructure; and
a better jobs balance through decentralisation.
This Budget is a key step in achieving all of this.
I commend the Budget to the House.
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