Ladies and Gentlemen,

Thank you for your kind invitation to attend this event.

As you are no doubt aware, last Tuesday I co-presented Budget 2016. This is the Government’s fifth budget and against the backdrop of this country’s hard won economic recovery, it is, as I said on the day, a budget for the future. It is a Budget which builds on stability, fairness and growth, integrating taxation and public expenditure measures, paving the way for a balanced and sustainable economy.

Of course, as happens every year, the Budget has been the subject of commentary and debate. I welcome such debate.

It can offer new insights to the Government on economic and fiscal policy, building appreciation of how different sectors and groups in our society are affected by Government decisions. However, in the context of sectoral demands, Government must also keep sight of the overall public good and, in the process, balance the immediate and longer term interests of this country.

Following on from this, the 2016 Budget has been framed against the background of a growing economy and the strengthening of public finances. Let’s looks at the facts.

• Economic growth is forecast to be 6.2 per cent this year, while growth of 4.3 per cent is forecast for 2016.
•  Unemployment has fallen from a peak of 15.2 per cent in 2012 to a rate of 9.4 per cent in September of this year. The Budget Day forecast is for an 8% rate in 2016.
• The forecast deficit for 2015 is 2.1 per cent of GDP. This is well within the excessive deficit requirement of less than 3 per cent of GDP. In 2016, we forecast that the deficit will be just 1.2 per cent of GDP.
• The HICP inflation forecast for 2016 is 1.2% – indication in itself of the level of additional capacity within the economy.
• General Government Debt, which peaked at over 120 per cent of GDP in 2012, is forecast to fall to 97 per cent of GDP in 2015 and to decline to 93 per cent of GDP by end 2016.

This latter point is particularly interesting. As the Minister for Finance pointed out on Budget Day our net debt position at the end of this year is 80% of GDP. And this does not take into account our banking assets, which at an assumed value of approximately €17bn, would take a further 8% of that GDP ratio. At the time we exited the troika programme, commentators expressed concern about out debt sustainability.

We need to be continue to be prudent but there is now no reason, given expected growth levels next year and beyond, why we can’t continue to make solid progress in this regard.

In framing this Budget, our aim has been to maintain our economic recovery and to provide better services to our people. There will be no return to austerity. Sustainable economic growth is our clear focus.

As I said in my Spring Economic Statement, an economy is not a society. A functioning society is a fair one, where the fruits of economic growth are shared among all the people. Our aim is to ensure that the recovery is felt in every home and in every community across the country.

At the National Economic Dialogue in July, we had the benefit of the views of business groups – including representatives from this Institute, trade unions, and community groups in relation to a wide range of economic and social issues. This helped to identify the critical areas which needed to be considered in the context of the Budget and to target available resources where they would have greatest impact.

The Budget should be assessed alongside the Captial Plan. That Plan, which my Department published in September, is the Government’s €42 billion framework for infrastructure investment in Ireland over the period 2016 to 2021. This involves €27 billion direct Exchequer investment which will allow for large scale investment in our Education, Health, and Transport sectors.

We envisage that Current Expenditure will rise moderately in 2017 and 2018, in line with economic growth and within the parameters of the fiscal rules. Between 2014 and 2016 expenditure is estimated to grow by just over 4%.

In 2015, economic growth and greater than expected tax receipts have allowed the Government to improve services in a number of key areas. While remaining within our fiscal parameters, we have an opportunity to plan for the long term by directing resources towards areas with demographic and demand pressures. In 2016, gross current expenditure will be over €51.4 billion, while capital expenditure will be over €3.7 billion.

As I stated in my Budget speech, the best form of social protection is a job. One of the underlying objectives of Budget 2016 is to make work pay. In order to reward work and incentivise participation in the labour market, the Government has decided to accept the Low Pay Commission’s recommendation that the minimum wage be increased by 50c, that is from €8.65 per hour to €9.15 per hour.

The resources available to us next year have enabled us to undertake a number of initiatives in relation to children. Children will now be eligible for free pre-school from three years of age until they are five and half or start their primary education. This is of benefit to our children and parents and should be of particular support to women in the workforce or women planning their return to work. In relation to fathers, we will legislate for two weeks statutory paternity leave. These developments recognise the important dynamic between our society and the economy. The Government is also providing for over 2,260 additional teaching posts, including 600 new resource teachers in recognition of the importance of education, socially and economically.

My colleague, Minister Noonan, has announced taxation changes in Budget 2016 which are also aimed at making work pay. For instance, the entry threshold to USC has been increased from €12,012 to €13,000. It is estimated that as a result of this change, some 700,000 income earners will not be liable to USC from next year. The three lowest rates of USC have also been reduced in Budget 2016. The consequence of these changes is that the marginal rate of tax for all earners with an income under €70,044 will fall to 49.5 per cent – the first time since April 2009 that the marginal rate of taxation has fallen below 50 per cent for middle income earners.

Efficient public services are essential to a modern society. Considerable reforms have been implemented in the Public Service since 2011. As economic growth resumes and as private sector wages increase, it is reasonable that public servants see improvements in their take home pay through an orderly unwinding of the financial emergency legislation. This I regard as a prudential measure. The FEMPI measures constitute €2.2bn worth of savings to the State.

To expose the state to a legal challenge from an affected party, on the basis that the financial emergency underpinning these measures no longer existed – an emergency that has to be recertified on an annual basis – would be a particularly risky way to proceed.

We have also introduced a number of important developments in the Health Service. This year, free GP care for the under 6s and over 70s was put in place. In 2016, subject to successful negotiation with the medical profession, it is planned to extend GP care without fees to all those under 12. This marks the next phase in the implementation of Universal GP Care.

For the first time since 2009, pensions paid to our older citizens are being increased by €3 per week in 2016. Other payments such as the Respite Care Grant and the fuel allowance will also be increased next year.

Housing is a priority area, given current accommodation demands, particularly in urban areas.

Significant funding has been provided in this area. Budget 2016 is providing a further €69 million for social housing, bringing the total allocation to €414 million in 2016. This funding will enable Local Authorities to secure accommodation for an additional 14,000 households. Other initiatives have also been announced, for example, 500 modular houses for homeless families and an increase of €17 million in the allocation for emergency accommodation for homeless people. Total spend this year on Social Housing including rent supplement will amount to €1.2 billion.

The improvements in the services and assistance available to our citizens which I announced on Budget Day would not have been possible without the support of the people and the economic and fiscal policies which have been pursued by this Government over the past five years. The success of those policies has been manifested, not only in key economic indicators that I already mentioned but in more tangible ways, such as the number of people of work.

130,000 more people are now in work than at the unemployment low point in 2012. The 53,000 new jobs to be created this year will bring the number in employment to 1.97 million people by the end of this year. By end 2016, the total number of people at work is expected to be just over 2 million. The unemployment rate is expected to fall to 8.0 per cent by the end of 2016. While this rate is still too high, and we are anything but complacent, it will mark a significant improvement compared to recent years.

The Government has adopted a number of taxation measures in Budget 2016 which are designed to promote the growth of new enterprises and to help sustain existing ones. For instance, over 28,500 commercial vehicles will benefit from the reductions in commercial motor tax. Other taxation changes will benefit a range of business sectors such as the Agri-Food sector, Tourism and Film sectors. A revised Capital Gains Tax relief is being introduced from 1 January 2016 under which a reduced capital gains tax rate of 20 per cent will apply to the disposal in whole or in part of a business up to an overall limit of €1 million in chargeable gains. This will benefit individuals who propose to sell their businesses.

The three-year tax relief for certain start-up companies has been extended in its current form until end 2018. This tax relief has supported 1,038 companies which employ 11,750 people.

An Earned Income Tax Credit to the value of €550 is being introduced in 2016. It will be available to those with earned income who do not have access to the PAYE credit. This measure is a first step in reducing the disparity which currently exists whereby an employee will take home a greater proportion of his or her income than a small business owner or entrepreneur on the same gross income. This will benefit small business owners such as small retailers, publicans, farmers and tradesmen.

As I have already said, the Government’s aim is to ensure that the benefits of economic recovery are felt in every home and in every community across the country. Over the past number of years, we have implemented many difficult measures because we were convinced that they were essential for economic recovery. We all knew that such recovery was essential to the welfare of our citizens.

This recovery will provide our people with a better life and provide resources for investment in essential public services.

I believe that Budget 2016 translates the statistics of economic progress into tangible benefits for all our people, for those at work or seeking work, for entrepreneurs and business people who are critical to the business life of this country, for the younger generation who need to be provided with the best start in life, for those who need to avail of our health service and for the elderly who rely on the benefits of our social protection system.

Budget 2016 helps to secure the foundations, such as education and infrastructure, on which economic prosperity is built. The spending increases in the Budget are moderate, sensible and commensurate with our economic requirements.

I believe that the economic recession has taught us important lessons in relation to the management of our economy.

Armed with that experience, painfully acquired, of successfully managing the country out of recession, I believe that we can confidently conduct our economic affairs in a manner which will address the future with optimism.

Thank You.