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year, for which a further £4 million will be allocated, bringing the total in 1997 to £8 million.
People with Disabilities
For too many years, Irish people with disabilities, and their families, were either ignored or forgotten. The Report of the Commission on the Status of People with Disabilities, which was requested by the Minister for Equality and Law Reform, at last opens the door to the way forward.
In order to help the important work in this area, I am allocating an additional £500,000.
Total Cost of Social
Welfare and
Health Package
The total cost of the social welfare and health package which I have announced is £139 million this year and £245 million in a full year. Nearly £600 million has been provided in full year terms in the last three Budgets for social welfare improvements.
Sport
The role of sport in the health and life of the nation has always been important. Many outstanding sportswomen and sportsmen have inspired us all with their achievements. It is important that we make the best use of the existing facilities throughout the country, so as to enable all of our people to have access to the sports arenas and resources which they need.
The report of the Sports Strategy Group, which was established by this Government, is due to be completed shortly. I am allocating an additional sum in 1997 of £1.6 million to enable their recommendations to begin to be implemented over the next three years.
Modernising Access to our Laws
The Irish Statute Book, comprising all the laws enacted by the Oireachtas over the last 75 years, now runs to over 35,000 pages and occupies about 4.5 metres of shelf space. The conversion of the whole statute book to an electronic format would allow all the laws of the State to be stored on a single standard size CD ROM disk, portable and instantly searchable by modern electronic search techniques.
Extensive work has been carried out on a project to achieve this and it is now ready to go for tender and implementation.
The project represents a recognition by the State of its obligations to make the laws, including the statutory instruments, as accessible as possible, not just to the legal profession, but to the public as well. The project also is a good investment by the State, where one of the primary requirements of incoming investors is ready access to all legislation, including financial, in electronic format.
I am allocating a sum of £750,000 this year to enable the first phase of this project to commence.
The James Joyce Centre
This year is the 75th anniversary of the publication in Paris of Ulysses. This famous literary work celebrates the diversity of Dublin during the course of one day, Bloomsday, June 16th, 1904. Being familiar with James Joyce's definitive work, you may know that a central character, Leopold Bloom, was also involved in constructing a Budget. His careful Budget for Bloomsday included the following:
. lunch - 7 pence;
. a copy of the Freeman's Journal - 1 penny;
. a postal order and stamp - 2 shillings and 8 pence;
. banbury cakes - 1 penny;
. bath and gratification - 1 shilling and 6 pence.
The total for the entire day's expenditure came to the enormous sum of 2 pounds, 19 shillings and 3 pence!
In recognition of Joyce's tremendous contribution to the world of literature and in particular to mark this anniversary, I am allocating £100,000 to the James Joyce Centre in Dublin to secure the future of this literary heritage centre for generations to come.
Local Authority
Expenditure
Last month, the Minister for the Environment announced a radical reform of our local government system. His proposals, which I strongly supported, include a new system for the financing of local government. The new funding system involves the abolition of local authority charges to domestic consumers for water and sewerage facilities. In fairness to those who paid their charges, the local authorities wilt of course continue to collect outstanding service charge arrears. I should mention here that I am making no change in the tax relief for service charges this year.
The proposals also involve the assignment of motor tax revenue to local authorities, partly offset by the abolition of the Rates Support Grant. For 1997, there will be transitional arrangements, with part of the motor tax revenue being transferred and a reduction of £98 million in the allocation for the Rate Support Grant in the Abridged Estimates Volume, a provision which was calculated on the basis of the previous funding arrangements. This is a technical change; it does not affect local authority spending. Local authorities will receive in 1997 at least the same amount through Motor Vehicle Duties and the reduced Rate Support Grant as they would have got with the original grant.
The cost to the Exchequer in 1997 will be £60.5 million. Details of the effects on the position of local authorities and the Exchequer are given in the Principal Features.
Total Cost of Current and Capital
Expenditure Measures
The Abridged Estimates Volume provided for Gross Current Supply spending of £12,874 million this year. The gross cost in 1997 of the current expenditure increases I have announced is a little under £200 million. Taking account of these and other changes, in particular the change in the arrangements for funding local authorities, the revised 1997 spending total is £12,950 million.
I announced a post Budget target for Gross Current Supply Services of £13,014 million when publishing the Abridged Estimates Volume last month. The principal changes to this figure are an additional £24 million pay costs and the reduction of £98 million in the Rate Support Grant which I referred to earlier.
The capital measures have a gross cost of about £12.8 million, which is mainly offset by savings. The net impact of the capital adjustments, which are also summarised in the Principal Features, is that 1997 spending is now £2.4 million above the target of £1,574 million which I announced last month.
OTHER ITEMS
I turn now to revenue raising measures.
Tax Changes - Excises
With effect from midnight tonight, I propose to increase petrol and diesel excises by a VAT inclusive 1 1/2p per litre for diesel and unleaded petrol, 2p per litre for super unleaded and 2 1/2p per litre for leaded petrol. I also propose to increase tobacco excises by 7p per 20 cigarettes, including VAT, and pro rata for other tobacco products, also from midnight tonight. This will raise £52 million in 1997 and £57 million in a full year and add an estimated 0.2 per cent to the CPI in 1997, bringing the post Budget CPI forecast to 2.2 per cent.
Environmental Tax Policy
Last year I announced that my Department, in conjunction with other relevant Departments and Agencies, would establish a special group to examine the strategic impact of taxation on environmental policy for the 1997 Budget. I have already announced one measure in the farming area for pollution control, while the proposed excise duty increases on petrol and diesel take account of environmental considerations. The extension of the £1,000 VRT refund scheme for scrapping 10 year old cars to December 31st, 1997, which was given effect to last month, also has clear environmental advantages.
The issue of environmental tax policy is one of growing relevance and importance worldwide. The EU Commission will be bringing forward proposals to apply a framework for an energy tax regime across the Community. For that reason I will be asking the group to continue its work with a view to a complete examination of possible initiatives which might be taken up in subsequent Budgets.
Residential Property Tax and Stamp Duty
The Government announced last month the abolition of Residential Property Tax from April 5th, 1997. This has a full year cost of £16 million. As with arrears of local authority service charges, the Revenue Commissioners will continue to collect outstanding Residential Property Tax.
At the same time, it was announced that, in order to recoup this loss in revenue, the existing 6 per cent stamp duty on transfers of certain residential property valued in excess of £150,000 would be increased to 9 per cent with effect from midnight tonight, subject to certain transitional provisions.
The Financial Resolution to be moved later sets out the full details of the application of the new 9 per cent rate of stamp duty and the definition of residential, property for the purpose of this new rate. The Financial Resolution provides for a number of intermediate rates to increase the duty from 6 per cent to 9 per cent. These are 7 per cent for relevant property valued between £150,000 and £160,000 and 8 per cent for property valued between £160,000 and £170,000, with the 9 per cent rate applying thereafter. This stamp duty increase will raise £13.5 million in a full year.
Dublin Docklands
Last year I announced the establishment of a Task Force which would lead to a Master Plan for the regeneration of the Dublin Docklands. I am pleased to say that great progress has been made in achieving what I set out to do.
The legislation to establish the new Docklands Authority has passed second stage and should be enacted by March. The preparation of the Master Plan by the multidisciplinary team of consultants is on target and wilt be completed by March 31st. I intend to facilitate the implementation of the Master Plan with a range of selective tax reliefs based upon the recommendations which will be set out in the report of the consultants. This project will transform the heart of Dublin over the next 15 years, providing new jobs, homes and amenities for the next generation of Dubliners.
IFSC
The International Financial Services Centre will be 10 years old this year. The centre has been a remarkable success by any standards, and I will be including certain measures in this year's Finance Bill to help ensure that it continues to expand and provide more jobs for our young school leavers and graduates well into the next century. The Custom House Docks Development Authority which has provided the infrastructure for the centre will be subsumed into the new Docklands Authority when it is established.
Valuation Office and
Ordnance Survey
The Valuation Office is a great national resource providing a specialised expertise vital to public administration which has largely gone unrecognised. That office has endured, for far too long, an archaic system dating back 150 years which is completely out of date. Work has now been completed on the Heads of the Valuation Bill which will totally modernise this valuable agency's operations. I hope, with Government approval, to publish the Bill later this year.
I am giving serious consideration to the establishment of an Interim Board to oversee the transition of the Ordnance Survey to independent status. A new form of organisation could well strengthen the commercial focus of the Survey.
Multi Annual Budget
Protections and Strategy
In last year's Budget, I announced my intention of moving to a multi annual budget presentation this year.
This new presentation of the Budget allows the Government to examine policy changes on spending and taxation in a more systematic way in the light of their future impact.
As part of this process, I am publishing today projections for the main economic and budgetary aggregates for 1998 and 1999 as well as for 1997. These projections are given in "Economic Background to the Budget" and further details of the budgetary projections are set out in the Principal Features. They take account of the full year cost of the 1997 budgetary measures announced today. They also include the cost in 1998 and 1999 of maintaining the existing level of services and take account of the pay, tax and social inclusion commitments envisaged in Partnership 2000, including in particular:
- tax reductions of £1 billion on a full year cost basis representing real reductions (on average) of over 0.5 per cent of GDP per year and an action programme for social inclusion and equality involving expenditure of £525 million.
A major start has been made today in implementing these Partnership 2000 commitments in this 1997 Budget. In preparing the multi annual projections for 1998 and 1999, it has of course been necessary to make some working assumptions as to how the balance of these tax and social inclusion measures could be spread over the subsequent two years.
The multi annual projections are based on a forecast that GNP growth will be about 5 1/2 per cent in 1997 and average 4 1/2 per cent in 1998 and 1999. It is also projected that employment growth will average about 38,000 per year over the three years 1997-99. Inflation is expected to be moderate at just over 2 per cent per year over the period.
Based on these assumptions, the underlying General Government Deficit is projected at 1.2 per cent of GDP in 1998 and 0.9 per cent of GDP in 1999.
However, recent experience shows that we should budget for the unexpected. I think it is prudent when making plans over several years, to provide a reserve against factors outside the control of the Government that may impact on the Budget but which cannot be foreseen at this stage. Examples are variability in tax buoyancy and exceptional costs across all areas of public expenditure. While such variations are likely to be both positive and negative, it is appropriate to allow in the projections for a modest negative net impact on the EBR and GGD.
I have, therefore, made a net provision against all budgetary contingencies of £175 million in 1998 and £325 million in 1999. This would increase the projected General Government Deficit to 1.5 percent of GDP in both 1998 and 1999.
In framing the medium term target set out in Partnership 2000 of keeping the GGD in 1999 to no more than 1.5 per cent of GDP, the Government were mindful not only of the need to keep the Debt/GDP ratio on a progressive downward path, thereby increasing overall budgetary flexibility, but also of two important factors bearing on the future budgetary position:
(1) Economic and Monetary Union (or EMU) which will provide for the Single Currency (to be known as the Euw), will commence on the first of January 1999. Ireland intends to continue to meet the conditions of entry into EMU. We are obliged, under the Maastricht Treaty, to avoid an "excessive deficit". This was further reinforced with the adoption of the Stability and Growth Pact at the Dublin European Council. This means that we must make provision in our future budgetary planning to maintain sufficient headroom to deal with the impact of economic shocks without exceeding the 3 per cent ceiling on the deficit.
(2) There is uncertainty regarding the level of EU Structural and Cohesion Funding after the current Financial Perspective expires in 1999. The Government will, in the forthcoming negotiations, argue that Ireland needs continuing substantial support. We will point to our recent economic progress as evidence of our effective use of EU funds. However, it is only prudent to recognise that there is no assurance that EU funding will continue indefinitely at present rates.
Because of factors such as these, the Government have adopted a strategy that will keep our General Government Deficit at no more than half of the 3 per cent Maastricht ceiling by 1999.
Public Expenditure
Reviews
Constraining the growth of public expenditure will be central to achieving the Government's medium term budgetary goals. To date, we have not been as effective in this area as we would wish. It is essential that we improve our performance.
The step in that connection will be the wide ranging programme of financial management reforms set out in "Delivering Better Government". The objective of these reforms is to underline the primary responsibility of spending Departments for managing their expenditure programmes within settled allocations and to take account ability for the results achieved. A key element of the new system will be agreements between the Department of Finance and spending Departments on a rolling programme of expenditure reviews under which the objectives and the rationale for the continuation of all major departmental spending programmes will be subjected to systematic evaluation over a period of three years or so. This process will begin this year.
It is also my intention to reflect on how the relationship between my Department and the spending Departments should develop in the context of a devolved, medium term approach to expenditure management, the main aim being to improve the effectiveness of overall control over Government spending.
Pre Budget Submissions
Last year, I announced a change in the forum for presentation of pre Budget submissions from various organisations and representative bodies. The new forum for the presentation and hearing of these submissions was the Finance and General Affairs Committee of the Oireachtas under the chairmanship of Deputy Jim Mitchell.
This new arrangement has worked well in its first year. One hundred and seven submissions were received. Twenty one groups appeared before the committee and a comprehensive report was submitted by the committee which helped to shape and form this Budget. In the process, the various organisations who presented themselves to the committee had an opportunity to advance their case. In turn, the members of the committee could probe and evaluate the various proposals and clarify why any particular group's proposal should benefit from a specific tax or budgetary consideration.
The entire process has improved the democratic accountability of the Budget preparation system. I am indebted to the work of the various groups and the members of the committee.
I am therefore proposing that the same process should operate this year in time for the next Budget.
Timing of the
1998 Budget
This brings me to the date of the 1998 Budget. Last year I announced that, in future, the budget formulation would be brought forward by about two months. In effect, the Budget for 1998 will be prepared and presented to the Dail well before the end of November this year. This in turn will advance the timing of the annual Estimates campaign.
This will improve the efficiency of our budgetary practices It will also enable subsidiary organisations to be informed of their exact budgetary allocation, before the commencement of the calendar year. At present, such organisations can be as much as three months into the year before they know the total amount of their allocations for the year. This is unsatisfactory as it does not enable proper budgetary planning. That is why it is now being changed.
Progress Made 1995-97
I have now completed my third Budget. It is useful to stand back and took at what progress has been made taking these three Budgets into consideration. Sometimes it can be difficult for individual citizens to appreciate fully the changes that have taken place. So let me give some illustrative examples.
. First, take the case of a family of parents and three children with one spouse working at around the average industrial wage. Taking account of the pay increases in the last two years and those for 1997 envisaged in Partnership 2000, together with the income tax, PRSI and child benefit changes in my three Budgets, such a family will be better off in terms of take home pay by about £32.50 per week, an increase of about 15 per cent or 8 per cent in real terms.
. Second, take the case of a family of parents with two children, both over 18 and in full time third level education, again, with one spouse earning say twice the average industrial wage. Their annual disposable income will have risen by about £2,350 as a result of pay increases and the tax and PRSI changes in my three Budgets, even after taking account of the standard rating of certain discretionary reliefs. This represents an increase of 13.5 per cent or over 6.5 per cent in real terms. They will also gain by say a further £3,000 per year as a result of the abolition of undergraduate third level education fees.
. Third, an elderly person will be £7 a week better off from the increases of almost to per cent in the old age contributory pension in my three Budgets.
. In addition, nearly 25,000 car owners throughout the community have benefitted so far to the tune of £1,000 each from the scrappage scheme for cars at least 10 years old which I introduced in my first Budget and recently renewed for a further year to December 31st next. The take up on this scheme has been more than 1,000 perk month.
Inevitably these examples are a snapshot - as all such examples must be. But there is no doubt that as a result of our three Budgets, the standard of living for many people has been dramatically improved.
However, not everyone has benefitted in the same way. There are still too many people who are long term unemployed. There are some people who are excluded from the gains which this society has made in the last few years. We cannot move forward as a nation unless, and until, all of our people move together. That is why this Government are committing so much of our resources to promoting social solidarity.
CONCLUSION
The world is now changing rapidly and we must adapt to that change as well. We are very much a part of the change within Europe, as our successful Presidency of the European Union has Just demonstrated. We must both move with it, and shape it, in the coming years.
Partnership 2000 is a programme to accommodate change and growth which will take us to the start of the next century. But we need to look further ahead in order to manage the present and secure our future. Our success in recent years gives us the experience and the courage to embrace the future with confidence.
In my first Budget two years ago, I set out five goals which this country could aspire to and plan to achieve by the year 2010. They were the following. Ireland could have the average per capita income of the European Union;
- provide full employment for those seeking work;
- have the best managed and best preserved environment in the European Union;
- possess the most effective public administration in the European Union; and
- be perceived outside of Europe as the best place in which to invest and do business within Europe.
Since 1994 we have made good progress towards all of these goals.
- First, this nation is becoming richer. Real wealth is being created by our continuous economic growth which has been four times higher than the European average. In fact, if we achieve the progress which I have set out in this Budget over the next three years, then, we will, by the end of the new programme, Partnership 2000, be very close to the EU average per capita income.
- Second, employment has grown by 100,000, but of course we still have too many people unemployed. However, for the first time in our modern history we are seeing a sustained net increase in jobs, net emigration has stopped, and some people are coming home. We have more to do, but we are doing it better now than before.
- Third, our environment continues to present a real challenge as we grow and prosper, but policies are now being put in place which will protect and enhance it through to the next century.
- Fourth, the Strategic Management Initiative provides the basis for the transformation of our Public Administration system. It may take time to do it but I am determined to push ahead on this front.
- Fifth, last year the IDA found that Ireland was the number one location for US investment seeking to locate within Europe.
The challenges which we will face in the future may be greater than those which we have overcome in the past. But today we are much better placed to meet those challenges.
This Budget lays the foundation for continuing, strong, non inflationary growth until the beginning of the next century. It demonstrates clearly our commitment to social solidarity and the elimination of inequality and poverty.
It makes a clear statement of our economic and fiscal goals over the next three years. As a result, it will enable us to qualify to participate in EMU from the beginning.
The tax changes which it contains will encourage both personal and corporate initiative and so strengthen our economy and our society.
The celebration of success should in no way be confused with the contentment of complacency. We have much more to do, and we are going on together to complete our task.
Seventy five years ago, our nation established a new fledgling State, leaving the strength and wealth of a powerful country, to pursue a destiny and a vision of its own. We are today the inheritors of that vision.
This Budget will, when implemented in full, bring us closer to achieving that vision.
I commend it to this House.