My Budget's principal aims are: to sustain a vibrant economy; to maintain social inclusiveness; to effect major personal tax reform; to plan for the longer term.
Budget Strategy
There is of course no denying that our present economic position is indeed satisfactory. However, success brings its own problems. I am lucky enough to be the first Minister for Finance in over 50 years to bring in an overall Budget surplus. I suppose it is not surprising that the very mention of Budget surplus has disturbed the discipline and restraint which underpin the conditions that led to the budget surplus in the first place.
Fairness demands that we would use this opportunity to benefit those who have not done as well as most of us in recent years; in particular, the old and the lower paid. However, in delivering fairness, we must not abandon prudence. We must remember that the world economy is in a volatile state. The open nature of our economy and the high level of foreign investment here are reminders that economic booms do not last forever.
Neither should we allow our success to blind us to the fact that we still have a large national debt. It would be foolish in the extreme not to use this opportunity to reverse our previous habit of simply adding to it, year after year.
We must maintain low inflation and competitiveness in the new policy environment that EMU will bring when the Euro starts next month. As a society we have to accept that this will be a new world. We must maintain social partnership - the co-operation between all sections of the community for the common good.
We have to expand our capital investment to meet the considerable infrastructural needs of a rapidly growing economy. We must take advantage of our current favourable economic and budgetary conditions to reduce the net debt burden further and to prepare for challenges that lie ahead in the next century.
The proportion of our population in the older age groups will rise steeply in the decades ahead. We have to consider how we should be making provision now for all the obligations arising from this which will face us in the next century. We have time to prepare for this now. In this regard I look forward to considering the forthcoming reports of the Commission on Public Service Pensions and the Working Group on the Pre-Funding of Social Welfare Pension Costs.
We have an obligation to plan ahead in the long-term national interest and I have been very conscious of this in preparing my Budget.
Developments in 1998
This has been the fifth successive year of very strong economic growth. The General Government budget surplus will be close to 2 per cent of GDP compared with the Budget target of 0.3 per cent. This reflects additional tax receipts of £900 million on foot of the improved economic activity. It also reflects, as regards the Central Fund, an out-turn for 1998 at £3,436 million or £33 million more than the Budget estimate. This forecast out-turn includes provision for an additional £107 million contribution to the EU budget and an increase of £149 million in the assets of the Capital Services Redemption Account going into 1999.
There are clearly some pressures in the economy that we have to watch closely and make sure that they are tackled.
Firstly, I am concerned at the acceleration in pay increases this year;
Secondly, I am unhappy at the scale of domestic price increases. Maintaining low inflation has been a key factor in the strategy underlying this Budget;
Thirdly, labour shortages are emerging in certain sectors; and
Fourthly, the very rapid increase in house prices continues to be a cause for concern.
1999 Budget Targets
On the basis of the taxation and expenditure measures I am proposing, the 1999 Budget targets are as follows:
A current budget surplus in excess of £2.3 billion;
A capital budget deficit of over £1.4 billion;
An Exchequer surplus of £925 million;
A General Government surplus of 1.7 per cent of GDP.
Public Service Pay
The Exchequer Pay and Pension Bill increased by over 10 per cent in 1997 and is expected to increase by a further 9 per cent in 1998. By the end of this year it will be nearly double what it was in 1989. Increases in pay rates have added 60 per cent to the pay-bill, whereas aggregate inflation over the same period was 30 per cent. This rate of increase cannot continue.
The Taoiseach raised this problem in his address to the social partners last July and he has recently invited ICTU and its Public Services Committee to commence discussions on the issues involved. I expect these talks to get underway in the near future and I believe that the outcome will be extremely important in terms of negotiating a possible successor to Partnership 2000.
Control of Public Spending
The Government's Programme includes a commitment to limit the growth in net current spending to 4 per cent a year over the lifetime of the Government. The over-riding aim of the Government's consideration of current expenditure in 1999 has been to ensure that this 4 per cent limit is respected.
Taking account of the additional spending I am announcing today, the average annual increase in total net current spending is 4 per cent.
Social Inclusion
In Partnership 2000, the Government agreed to allocate, over three years, an additional £525 million for current spending on social inclusion. Taking the announcements I am making today into account, the total amount delivered over the three years 19971999 will be close to £1 billion in full year terms.
The economic success that we are currently enjoying does not benefit everybody in our society equally. As I have made clear, the Government is committed to creating conditions to ensure that this success continues. At the same time, real progress has to be made on social inclusion.
My philosophy regarding social exclusion and poverty is quite simple.
To be in a position to make progress means the Exchequer having adequate moneys, distributing these resources to the most deserving and ensuring that the resources applied are effectively used for those who need them. The overriding goal must be - the services are for those who need them.
The social welfare improvements which I am about to announce will cost £155 million in 1999 and over £287 million in a full year. This is the biggest social welfare package ever granted by a Government of this country and includes special provision for low income farmers. In addition to this package, I am happy to announce arrangements to pay pensions for certain previously ineligible self-employed persons and to pay arrears for certain late contributory pension claims costing about £23 million in 1999.
I am also announcing other social inclusion measures which will cost £58 million in 1999 and £91 million in a full year.
Social Welfare
Older People
In last year's budget, I announced substantial increases in the personal social welfare rates for all older people. Today, I am delivering a substantial additional instalment on this Government's pensions commitment. I am happy to announce an increase of £9 per week for a pensioner couple. This is made up of an increase of £6 per week in the full personal rate of old age and related pensions and of £3 per week for qualified adults. As a result, the weekly payment to a couple both aged over 66 years getting a contributory old age pension will increase to £148.90 next year, an increase of £15.50 per week in my two Budgets.
Welfare Payments
In general, other personal social welfare rates will be increased by £3 per week and qualified adult allowances will be increased by £2 per week. Additional increases are being provided on the personal rates for those in receipt of Short-term Unemployment Assistance and Supplementary Welfare Allowance thus bringing social welfare rates for all categories up to at least the minimum recommended by the Commission on Social Welfare. These improvements also reflect undertakings given in the context of Partnership 2000.
Child Benefit
Another priority of this Budget is to assist families with dependent children. From September next, Child Benefit rates for first and second children will be increased by £3 per month, and by £4 per month for third and subsequent children. These increases will result in monthly payments of £161 for four children families.
It is part of Government policy to increase the support for those who care for family members in the home. Accordingly, the Carer's Allowance Scheme is being improved as follows:
an additional payment of £s3] 200 will be paid each year to recipients as a contribution towards respite-care;
the Free Telephone Rental Allowance will be extended to all recipients;
the scheme will be extended to cover carers of children in receipt of the Domiciliary Care Allowance;
the scope of the scheme will be extended to include care recipients between the ages of 16 and 65 years who are not in receipt of a qualifying social welfare payment;
the absolute requirement that carers have to live in the same house as those being cared for will be modified as will the full-time care and attention conditions.
Family Income Supplement
Family Income Supplement has been recognised as a valuable support for families in low-paid work. In my budget last year, I honoured a commitment in Partnership 2000 to calculate entitlement to FIS on a net as opposed to a gross income basis. On this occasion, I am increasing the weekly income limit by £8.
Farmers
In recognition of the fact that many farmers' incomes have been badly affected this year by a combination of bad weather and falling prices, I am providing for a revamping of the Smallholders Unemployment Assistance scheme at a full year cost of £15 million. The details of the new arrangements will be included in the 1999 Social Welfare Bill.
I have also provided substantial additional funds for farming in the 1999 Estimates. An additional £25 million was allocated for On-Farm Investment Programmes. I am allocating £110 million for headage payments next year and I have also allocated £2 million to allow the reopening of Installation Aid.
Other Improvements
Various other improvements within the social welfare code relating to voluntary, community and family services, as well as in relation to employment and education supports, are set out in the Summary of 1999 Budget Measures.
Live Register
A little over two years ago, the Live Register was heading towards 300,000 despite the improving economic climate. The numbers now stand at less than 210,000. There is little doubt that more active management of the Live Register has made a significant contribution. Furthermore, the Employment Action Plan initiated by my colleague, An Tanaiste and Minister for Enterprise, Trade and Employment, is proving very effective. Although the plan is only operating for a relatively short period, the initial results are, to put it mildly, quite dramatic. The Government is concerned that only those available for, capable of and genuinely seeking work should appear on the Live Register.
Total Social Welfare Spending
As a result of the measures I have just announced, total spending by the Department of Social, Community and Family Affairs next year is estimated at about £5.1 billion, an increase of 6.6 per cent on expected spending in 1998.
Labour Market Social Inclusion Measures
There is no reason why we cannot achieve further substantial employment growth. But to do so, we must ensure that the unemployed have adequate skills, training and assistance to gain employment.
I am proposing, therefore, a number of measures at a cost of £11.75 million which take account of these factors; the details are in the Summary of 1999 Budget Measures. These changes seek to get the long-term unemployed and lone parents onto skills training courses, which have the best results in gaining employment. These measures, along with the Jobs Clubs for which I am also making provision, amount to over 8,000 additional labour market programme places.
I am also allocating an additional £15 million capital spending for the provision and upgrading of FAS training and community enterprise facilities in areas of significant urban unemployment bringing the total to £21.7 million.
Health and Children
Taking account of today's measures, total gross expenditure on Health in 1999 will be £3.549 billion compared with £3.215 billion in 1998 - an increase of £334 million. This compares with health spending of £2 billion as recently as 1993.
The Government has already responded to the pressures on the health services in the provision made in the Abridged Estimates Volume published last month. I allocated an extra £264 million for gross spending including additional provision for various medical services such as the acute hospitals, the cancer and cardiac strategies, the opening of new hospital theatres and wards, the improvement of the safety of blood products, nursing home and other services for older people, childcare, mental handicap (bringing the total spending in this area to over £275 million), physical disability programmes and dental services.
In today's Budget, I propose to increase health spending even further. An additional gross current spending allocation of £45.5 million is being provided for further improvement in services including the hospital waiting list initiative, services for the elderly and mental handicap services. Details will be announced by my colleague the Minister for Health and Children.
Together with the impact in 1999 of the 1998 Supplementary Estimate this will bring the increase in spending over the Abridged Estimates Volume allocation to £70 million.
I have also allocated a total of £525 million for a capital spending programme in the Health area for the next three years. This compares with spending of £400 million in the three years 1996-1998.