Deputy Seán Sherlock has 11 minutes remaining in his slot.
Finance Bill 2008: Second Stage (Resumed).
There are measures in the Finance Bill that are laudable, such as the welcome measures to encourage companies to invest in environmentally-friendly equipment. The measures under the save as you earn scheme are also a step in the right direction. The health measures, such as the VAT reduction on non-oral contraceptives, including condoms, do not go far enough. It is our contention that the Minister should have further reduced the rate to 5%, in line with the EU VAT directive.
I will specifically refer to the research and development tax credit. The Minister should fix indefinitely 2003 as the base year for availing of the tax credit. The Bill, as I understand it, extends the base year of 2003 for the purposes of the research and development tax credit for a further four years to 31 December 2013. However, the Bill provides that the subsequent years' expenditure, for calculating the incremental spend, will be the ten years before the end of the relevant accounting period. For example, 2014 will have a base year of 2004. One can compare this to the UK position, which is based not on an incremental position but on all research and development spend. This gives the UK a comparative advantage so we should consider adopting this approach.
If there is a new Minister of State responsible for innovation policy, I assume the Government is giving the notion of intellectual policy and innovation some degree of stature. A gesture such as this would assist many companies and enterprises throughout the country which are increasingly endeavouring to heighten research and development spend.
Considering the matter vis-à-vis foreign direct investment and its current unstable nature, we will have to rely on many indigenous industries. Much work is being done within universities and third level institutions, and many spin-off companies are established from that and through venture capital. Research and development will increasingly be a component of this process so we should incentivise it where possible. Fixing 2003 as the base year rather than just limiting the credit to 2013 would have provided increased certainty and would have been a more favourable measure.
I will comment on my constituency of Cork East and the relevance of this Bill to such a constituency, where unemployment figures are rising. It has been proven that in towns such as Mallow, Fermoy, Mitchelstown, Cobh and Midleton, the figures are going up year on year. The current Amgen issue——
I question the Deputy on that statement.
I have an answer to a parliamentary question which clearly proves the unemployment figures are rising. I can make them available to the Minister of State if he so wishes.
The figure is less than 3% in Cobh.
Deputy Sherlock, without interruption.
We are currently losing jobs in Cork East.
We must get the facts.
We have lost traditional industries and, for example, the food industry is not what it once was and is going into decline. Irish Sugar is no longer with us and Dairygold is downsizing its operation. There is increasing uncertainty about Amgen. In trying to be positive about how we proceed economically and taking north and east Cork as a region, if a similar situation becomes evident, we will have to rely on indigenous industries. The Government must proactively seek to upskill those people working within existing industries and introduce some measures for employers to enable them to upskill and grow existing companies. There are many family-based companies in these towns and I am sure they could do with some incentivisation to grow. The Government should consider the issue given the current global economic climate. I am not advocating looking inward but we can start thinking more locally about how to provide incentives to grow jobs.
These are the essential points I have sought to cover. I would have liked the Finance Bill to provide for some composite scheme like the town renewal or urban renewal schemes. Towns such as Mitchelstown, Mallow and, to a lesser extent, Fermoy are still characterised by certain areas where development has not kept pace with corresponding development on the outskirts of towns. The Government could be in a position to consider some urban renewal scheme or an adjunct to the existing programme. I realise a Goodbody report on the performance of the urban renewal schemes was published which indicated a slow take-up in some aspects of the schemes. The climate is right for towns such as Mallow, Fermoy and Mitchelstown to benefit from those schemes so we could get rid of some of the dereliction still existing within the towns.
I have probably used much less than 11 minutes but I do not believe in filling time for the sake of it. I have covered the points I wished to make and others which I could expand have been expounded upon by our finance spokesperson. I hope the Minister will take my comments on board. I will be very happy to make the figures available to the Minister of State which prove beyond any doubt that unemployment figures have increased exponentially in these towns.
I welcome the Finance Bill introduced by the Minister and I welcome the Minister of State from Cork East. He may give a different picture of Cork East later in the debate. This is the fourth Finance Bill introduced by the Minister, Deputy Cowen, and it demonstrates the consistent policy of the Government to make the tax system simpler, fairer and effective in lessening the burden on lower and middle income taxpayers. Simplicity should always be a goal with the tax system.
I was surprised last week when the Leader of the Opposition asked the Taoiseach for a stimulus package similar to that introduced by President Bush in America. The American stimulus package amounts to approximately 1% of GDP and the tax changes alone in this budget would be substantially in excess of 1% of GDP. I may be corrected on that but when one adds increased social welfare spending, the budget adds up to more than a stimulus package as we are still in a strong period of growth compared with the United States. We have continued to look after low and middle income earners, unlike President Bush, whom Deputy Kenny admires. President Bush's tax changes appear to have benefited higher earners.
There are some small provisions that may affect people. There is an increase in the specified rates for preferential home loans and other loans. Bank and financial services employees may have to pay for a small increase, which is probably fair enough because of the way interest rates have risen. I would have thought those changes could be done by ministerial order as interest rates change to help those people to have a consistent tax payment.
I welcome in particular the changes in the rent-a-room scheme. Many of my constituents have bought new houses in recent years. I have also done so and have had rent-a-room tenants. It is a great system where, subject to submitting tax returns, one can take income from rent tax free up to a limit, formerly of €7,620, which was increased in the Finance Bill to €10,000. That is a significant benefit because it was the position that if one earned €1 over the limit one could be taxed on the total. It encourages tax compliance because people can earn up to €10,000 per annum which is a substantial rent for a room or even two rooms. I welcome the increase because rents are going up, particularly in Dublin. People letting rooms in my constituency, Meath East, might not be at that threshold.
I welcome the increased allowance on trade union membership because it is equivalent to a tax credit of €70 per annum. We should encourage trade union membership because the unions have a long and valued history. They continue to be of value, particularly in explaining their rights to, and standing up for, foreign workers. Some seafarers were recently helped out in this way. It is good that the tax system recognises this benefit.
It is wise and sensible of the Minister to increase tax credits generally, for employees, one-parent families and home carers.
The transfer of a site to a child rarely gets publicity but has an impact especially in rural Ireland. A parent can transfer a site to a child, generally to build a house, without capital gains tax, or stamp duty and it is usually under the limit for capital acquisitions tax. The limit on the site used to be €254,000 which until recently would have been quite acceptable, certainly where I come from. In Dublin, however, if people were hiving off sites from city centre properties it might have been low but €500,000 is a good limit. The anomalies in this scheme have been rectified. It is important that the tax system helps children to build property on family land. The Minister for the Environment, Heritage and Local Government and the county councils should also encourage this practice.
People who transferred sites before these rules were brought in, when this party came into Government, may not have paid capital gains tax when they should have. It happens too that a bachelor uncle with no children may transfer sites to nieces or nephews and while there may be some relief from capital acquisitions tax there may be a capital gains tax liability. The Minister might consider this in future Finance Bills.
The increase in the VAT registration threshold for small and medium sized enterprises is a good move. Many people in my constituency work from home and while they are not yet millionaires they may be in the future. I know several stay at home fathers who run very small businesses and staying below the VAT exemption limits or registration thresholds has a significant impact on their business because they can make a certain amount of money without worrying about getting into the VAT net.
I am glad to see changes being introduced in the VAT regime for commercial property transactions. I do not claim to understand them all but never understood them before now. The same is true for many solicitors, tax practitioners and accountants. Nobody was ever willing to take responsibility for advising on VAT because they were afraid they would get sued if they were wrong. I have not studied the changes in depth but I hope they allow professionals to make their own judgments on VAT.
Solicitors often rang accountants for the answer and finally went to the Revenue Commissioners.
How will that go down with the Minister?
It is not acceptable for highly paid professionals routinely to rely on opinions from the Revenue Commissioners. They may need to do so in respect of a complicated transaction but anything that simplifies that process is welcome.
I have a bone to pick with the Minister because I bought a car recently and am affected by the proposal on vehicle registration tax, VRT, which is not to take effect until July. This may be hard on people who bought cars with lower emissions before the changes were announced.
I represent part of the town of Drogheda and in the bad old days there were cases when the gardaí ripped out vending machines for non-oral contraceptives. How will the VAT change for these contraceptives impact on vending machines? The only impact will be greater profit for the vendors. I encourage pharmacists and manufacturers to pass on this VAT decrease. It will be interesting to see if it works. Reducing VAT on condoms is fashionable but while it is worthwhile it runs the risk of not being passed on to the consumer. There is no way to reduce VAT at a vending machine to take or 25 or 23 cent off the price. It is important that those who have called for this measure make sure that the consumer benefits and that there is a health benefit. Whenever someone calls for a reduction in VAT there is the danger that it will not be passed on.
There is some reduction in stamp duty on leases and renting of residential property. Many vulnerable people rent from private sector landlords and it is important that they comply with all the legal requirements. If stamp duty is paid and legal formalities completed the tenant's rights are enforceable in court. Many letting agencies do not put in place rental agreements, which is a breach of the law, and rarely arrange for them to be stamped. Few would pay €30,000 per annum in rent and anyone paying that much would pay stamp duty but is probably aware of his or her rights and obligations.
The Revenue Commissioners have already implemented the stamp duty changes for first-time buyers but this Bill legislates for them. They could do a great deal more about, and there should be greater public awareness of, reporting of foreign rents received, and rents in general for landlords who live abroad. If a solicitor sells a property on behalf of a client resident abroad he or she is personally liable for the capital gains tax if the money passes through his or her hands. Solicitors take that obligation seriously and the Revenue Commissioners have forced some to pay over capital gains tax for their clients although they have not received the money from the clients.
However, I am unsure whether letting agents, who may be in receipt of rents from landlords living abroad, are aware of their obligations to make returns on the rents received from those clients. It would be worthwhile for the Revenue Commissioners to publicise this obligation. I note that one proposed change in the Finance Bill is that an Irish letting agent who manages a foreign property on behalf of an Irish resident client must provide details of the rent accrued to a Revenue inspector. This is a highly positive move because in so far as is possible, Revenue should collect tax from everyone. Over the years, professionals, including solicitors, have been more than happy to pay over and certainly are aware of their obligations. At present however, a considerable amount of money passes through the hands of letting agents that pertains to landlords living abroad or, on foot of the proposed change, to Irish residents with property abroad. The Revenue would do well to make it as clear as possible to agents and landlords what are their obligations in respect of rents received. However, this measure is positive.
That all professionals are becoming enforcement officers for Revenue is to be welcomed. Everyone co-operates and with lower tax rates and a much simpler tax system, no one minds. Nowadays people do not mind paying tax. Members are aware of what transpired in the 1980s when extremely high rates of tax applied and there was a huge disincentive to pay tax. In general, people now are more than happy to comply with their obligations and only a few try not to do so. While professionals have a role to play in this regard they must be made fully aware of what is their role, because I am unsure whether all understand it.
Economic prospects are good in my constituency, which in general enjoys very high rates of employment and, conversely, low rates of unemployment. A certain number of people are employed in manufacturing in County Meath, much of which, certainly within Meath East, is connected to the construction industry. The construction industry employs many people in Meath East and while matters are definitely looking up, some of those who had been employed in that sector are now looking for work. When such people attend my clinics I tell them what they should be considering. Apart from trying to get back into their own jobs, the first priority of those who left school at a young age or before acquiring qualifications at school and who now, unfortunately, have time on their hands, is to retrain and to acquire the qualifications they may not have got before entering employment. Major manufacturers of buckets and steel equipment, which is indirectly connected to the construction industry, are located in my constituency and provide good jobs to people.
While the farming industry is up and down, much farming activity takes place in my constituency and many farmers have other jobs. In general however, people are happy with matters as they are and do not want Members to talk down the economy. They understand the times——
It is declining on its own.
They understand the times are no longer as heady as heretofore. However, growth rates are still high.
The Deputy did not mind talking up the economy.
Members should always talk up the economy.
They have good reason for it.
There are good reasons for talking it up.
The Government did not mind talking it up.
Members have good reasons for talking up the economy, both in recent years and this year.
There is talk in the United States of recession, which is defined as being two quarters of negative growth. This year, Ireland will achieve rates of growth of which the United States would be highly jealous. One must acknowledge this point. There is cause for concern and some people from my constituency, especially those connected to the construction industry, will lose their jobs. However, the country is not going down the Swanee but is progressing extremely well. People are highly educated and highly qualified.
I follow developments in the United States with great interest and one of its features is the large number of the working poor. While this phenomenon also exists in Ireland, the minimum wage here is much higher and it offers far greater opportunities for educational advancement. This is the key to lifting people out of poverty and thereby growing the economy. People in Ireland have good opportunities to receive education. Ireland has free third level fees and low costs associated with education when compared with the United States and other countries. Any major employer that enters the country will consider this to be an enormous bonus.
Some third level courses operate in my constituency and in County Meath. In general, they are connected to various universities and third level institutions. However, County Meath is fortunate in that Dundalk Institute of Technology, Institute of Technology Blanchardstown, Institute of Technology, Tallaght, as well as the Dublin universities of DCU, Trinity and UCD are within reachable commuting distance. Consequently it is a good location if one wants an education. At present, County Meath does not possess a university. While a university was proposed for the County Meath side of Drogheda before the establishment of Trinity College, that was too far in the past. Nevertheless, ample opportunities for education exist. I refer to those in the construction industry who may have lost out temporarily. They should consider training, getting the leaving certificate and other qualifications. It is important to bear in mind that matters are looking up.
I wish to share time with Deputy Tom Hayes and the Acting Chairman should let me know when my ten minutes have expired.
Is that agreed? Agreed.
Deputy Thomas Byrne has great confidence in the legal profession and in accountants. While many people have much respect for, and great confidence in, solicitors, the trouble is that some have run off with their money. They fled to other countries and left the people in question in a bad way.
Was it a Mayo man?
I will not go into details. However, the position is similar in respect of accountants in that the Revenue Commissioners will take them at their word. While there are some excellent accountants and solicitors, every profession has its rogues. Although checks and balances are required, the Law Society does not appear to have had many, given the manner in which an individual could run off with so much money.
While the Finance Bill is under discussion, the law does not appear to operate in Ireland any more. I refer to a man who is running around the world against whom, to date, no prosecutions have been brought. Moreover, there does not appear to be a plan to have him extradited back to Ireland. I cannot understand how a man could do this given the existence of professional bodies such as the Law Society. Innocent people, some of whom had small accounts arising from the Government's saving scheme have been affected and will never see their money again,
The Finance Bill is the subject of today's debate. People accept that a major downturn has taken place in the economy. As I remarked earlier, while the economy was doing well, all Ministers got the credit for the wonderful economy. Even civil servants received praise for the great job they were doing. However, as soon as problems arose in the economy, the problem lay not with the Minister but with the civil servants and everyone else. Ministers do not take responsibility for the manner in which they have led in the past ten years.
I was disappointed by the recent budget and the Finance Bill because I had expected to see major initiatives to try to revitalise the economy and restore Ireland to its former competitive state. Ireland is no longer competitive. The Minister of State at the Department of Enterprise, Trade and Employment, Deputy Michael Ahern, is present in the Chamber and has responsibility for small business. Small businesses will state that they are being crucified by inspectors of all kinds, be they tax, VAT or health inspectors. As soon as a downturn occurs in the economy, everyone is inspected. Mayo County Council has just adopted water rates in a move that will put people out of business. The day is over when one can expect local authorities or the public to be able to pay for benchmarking or to keep such people in jobs.
I will provide an example. I recently visited a premises in a town in County Mayo. I do not wish to identify the person concerned because he is a small business man. He showed a letter to me that was left by two health inspectors. It was deemed necessary to send out two inspectors rather than one. The businessman asked me whether I could discern any problems with his premises and I replied that it was so clean that one could eat one's dinner from the floor. However, the inspector stood on a chair, checked underneath a container for hot water and found some dust. Were anyone who wished to find dust to enter my house, or those of the Minister of State or Cathaoirleach, he or she would do so. However, the problem is that we are paying for this. The problem is that the inspectors annoyed that man for two weeks and sent him letters threatening legal action. Small businesses are over-regulated and if this does not stop, the Minister of State and the Government will see more people going out of business. Who does the Government blame?
We do not blame anybody.
It blames Europe. When decisions are made in Europe, our Ministers are supposed to protect our country but they and civil servants sometimes do not understand the directives. It is only when legislation must be introduced at a later stage that they realise what they have signed up to. Small businesses are sick and tired of being over-regulated. Instead of helping and encouraging them and trying to increase employment, we are trying to drive people out of business.
We have every kind of authority and office in Ireland, each with a complement of staff. The problem is that not one of them is producing anything. All they are doing is creating problems for the people who are trying to generate revenue and employment. There is no initiative to benefit small business or to encourage businessmen to employ people and that is why the economy is now in some difficulty. We believed we could keep employing health inspectors, veterinarians, etc., with the result that every kind of person now has a job in an agency in this country.
As a Dáil Deputy, one receives reports from State bodies. Those sent to me built up over a few weeks and it was only then that I realised how many agencies are in existence, each of which has a chief executive and staff. They are creating problems for people who are just trying to make a living, create employment and keep their businesses open. The latter get no support or help from the State; all they get is total hassle.
The HSE has taken over the health service and the only time a Minister is answerable is when there is a tape to be cut. When there is good news, the Ministers for Health and Children, Enterprise, Trade and Employment or Finance are available, but when there is bad news the chief executive of the HSE or some other agency is deemed responsible.
A businessman who owns a private nursing home contacted me today. The people in this home are there because the State failed to provide one for them. They receive subventions in some cases and pay a contribution towards their care, yet the latest development is that when they go to hospital for appointments, be it for physiotherapy or otherwise, the hospitals send bills to the nursing home to collect money from them. They should be in State care in the first place. They are entitled to a bed but a bed cannot be found for them.
As Deputy Flynn will confirm, there are patients in north Mayo with hospital appointments who cannot be brought to hospital any longer. I have raised this matter in the Dáil and said I would not be able to sleep at night if I had to make decisions such as those being made by the HSE. I met an employee of the HSE recently and the first point he made was that he had a good sleep the night before. I said, "Fair play to you. I certainly could not sleep if I made decisions like you make every day so that the sick, weak and elderly cannot be brought to hospital for their appointments." His answer was that he needed more money.
I went outside the door and saw a jeep he had done up which had cost hundreds of thousands of euro. It was equipped with machines that can film from the back, front and both sides. The jeep is for national emergencies but when I asked the man how many emergencies there have been in recent years, he replied the only problem that arose necessitating its use was a bus accident on the day of an all-Ireland final. The jeep is sitting outside the man's office and he probably brings it up and down the road every day for a spin to justify having it. In spite of this, he cannot bring people to hospital for appointments and is running them out of his office every day and saying he wants more money.
I tabled parliamentary questions in this regard and was told by the Minister that there was never as much money invested in the health service. I was told that administration, rather than money, poses the problem and that the service is not being run properly. This Government must be made answerable in the Dáil.
The Deputy has one minute remaining.
That is pity because I did not even start on some of the issues I had intended to address.
When considering the forthcoming referendum on the reform treaty, in respect of which everybody wants a "Yes" vote, one should remember that people are annoyed. I do not know whether the authorities in Brussels are gone mad or whether they do not have enough work. They throw a proposal into the bin one day and pick it up the next, saying they need to think up another to justify their salaries or expenses. On Monday, a man entered my clinic and referred to the spraying of cars. Those who spray cars in garages are to be subject to an inspection and will have to have a licence to operate. I have tabled parliamentary questions to determine whether this is on foot of a new EU directive. At the meeting the other night, I was not sure whether it was laid before the Dáil — I do not remember it. What has gone wrong? Have the authorities in Brussels and Dublin gone mad? Do they not want people to work? Do we want to have everybody in offices in the Civil Service so they can get their salary every Friday evening? Such people do not care because their cheque is available every Friday evening and they do not have to go out and try to make a living.
The discussion of the Finance Bill in the House is always very important and significant issues arise over expenditure. There has been a considerable debate for some time on the economy and reference was made to talking it down or up. I am not one who likes to talk anything down. I do not like that kind of politics and have never subscribed to it, but the reality is that everybody knows the economy is not as strong as it was and that this has repercussions. A very simple example is the decrease in the number of applications for planning permission submitted to local authorities over the past year. The figures for this January and February will point to the biggest drop ever, at least in my constituency. This will have major repercussions for local authorities and those engaged in certain activities but we must all work together to ensure the economy is kept as strong as possible, particularly for the next generation. People trying to buy houses could not afford to do so and in this regard the slowing down of the housing market will benefit many young people. If circumstances were to remain the same, there is no doubt that most would not be able to afford a house, even if they had very good jobs.
The budget presented in December highlighted many issues that one would like to address, one of which is broadband. Reference has been made to how essential broadband is and there is nothing more scandalous than the delay in rolling it out. Reference has been made to creating jobs in rural economies and in this regard Deputy Thomas Byrne mentioned the many people, including fathers, who want to work from home. There are many such people but the reality is that broadband is not available to the vast majority. Let me cite an example. I downloaded an item in my constituency office in Cashel last week and it took a minute and a half to do so. The same information had to be inputted into the computer in my own home, where there is no broadband, but this took 27.5 minutes. There is no broadband in my locality. How can people compete in this kind of environment? How can we create jobs if we are to ignore the roll-out of broadband on such a considerable scale? The reality is that a significant number would work from home if there was improved broadband provision. We hear every day, particularly from the Green Party, about our responsibilities in regard to energy conservation, reducing emissions from motor vehicles and so on. The reality is that the Government, because it has failed to provide for adequate broadband provision, is driving people in every town, village, parish and townland who wish to work at home into their cars. We are promised day after day and week after week that there will be access. Private operators are advertising the availability of broadband throughout the State but people who try to connect to it find they cannot do so. Is the Government in charge when it comes to ensuring access to broadband? It is time people had access to a facility they so badly need. I call on the Minister for Communications, Energy and Natural Resources and his Green Party colleagues, in particular, to ensure this is done.
There are other issues that will have an impact on people's lives. I will focus on those relevant to my own constituency of Tipperary South. Before Christmas, 150 jobs were lost at the Bulmers cider-making operation in Clonmel. This was a long-established, successful operation but the company found it difficult to overcome cost and overhead issues. Last week, 91 jobs in a radiator manufacturing plant were transferred to Wales. No Minister visited south Tipperary to see at first hand what the workers and their families were enduring. I did not even see a Minister making a comment on the issue on television. Why have these jobs been transferred across the water? Is the Government tuned in to what is happening? It cannot sit idly by and allow such developments.
A new educational facility for Clonmel, the Tipperary Rural and Business Development Institute, TRBDI, was promised some ten years ago. A small facility was put in place and proposals are before the Department to follow through on this project, but nothing further has happened. I ask the Minister of State to communicate to the relevant Minister the benefits that could arise for the local community from the TRBDI development. We will knock on the Minister's door to ensure the college is developed. I listened to Deputy Byrne speak about all the third level institutions in Dublin which can be accessed by people in County Meath. People in County Tipperary, however, must travel hundreds of miles to avail of third level education and are then faced with accommodation costs. Does this represent fair and balanced regional development?
The figures prove that Tipperary town is one of the poorest in the State. It is crying out for a bypass. We were promised by successive Ministers that this project would be included in the roll-out of infrastructural developments. It is necessary to sift through all the press releases, launches and meeting reports before one discovers this project is only at design stage. I urge the Government to ensure it is implemented under the next transport plan. The town badly needs a bypass to assist with its development.
In view of the job losses in Clonmel, I submitted a parliamentary question last week asking whether the IDA had brought any potential investors to visit sites in County Tipperary in the last 12 months. I was amazed to discover that the answer was no. Despite all the meetings in which Government agencies have engaged and the addresses to urban councils and various bodies and authorities, no potential investor has been brought to County Tipperary. The IDA has 50 acres of land in Clonmel ready to be developed. In the meantime, jobs are being lost. Will the Minister invite the IDA to come and see what the people of County Tipperary need?
I am pleased to have had an opportunity to speak on the Finance Bill. We should focus in the next 12 months on ensuring there will be access to broadband for those who desperately need it. People are spending an inordinate amount of time logging onto network connections because broadband is not available to them. Progress is urgently required.
I propose to share time with Deputy Flynn.
I am pleased to have this opportunity to add my voice to the debate on the Finance Bill 2008 which brings into law the main provisions of the Minister's Budget Statement of last December. No Finance Bill operates in a vacuum but rather within the economy as it pertains. There has been much commentary to the effect that the economy of 2008 will be very different from the economy of 2007 which was itself different from that of the heady years of the Celtic tiger. However, we should note that growth last year was in the region of 4.5% and is predicted to be in the region of 3% this year. Many economies would be extremely satisfied with growth rates of 3%. Our economy has grown by some 7% annually, on average, since 1997; a stunning performance. Some commentators contend that this has been achieved by somehow pumping the economy with money we do not have. The opposite is the case. I understand the National Treasury Management Agency reported in recent weeks that the national debt as a proportion of GDP had declined in 2007 from 24% to 23%. In a year where there was 4.5% growth, therefore, our level of indebtedness decreased by 1%. This is a level of national debt without parallel throughout the world, with the possible exception of Norway, which is outside the European Union, and Luxembourg.
In broad terms, therefore, our economy is in extremely good shape. However, I caution against complacency. There have been some job losses and there will be further losses in some areas. Unfortunately, it is an aspect of the global economy that jobs come and go at a quicker rate than heretofore. That is why it is all the more important that people have access to training and upskilling at every opportunity in order that they can be adaptable and flexible. The old notion of a job for life may no longer be relevant. In many of the more developed countries people change jobs with greater fluidity. There is a greater willingness in this country, especially in the public service, to employ people from different sectors and for people from the public service to move into the private sector. There are serious competitive issues, which I will address later.
By and large, we should acknowledge that the Irish economy is in very good shape, although we should not be complacent. There are, however, many media pundits who seem to make a perpetual living out of talking down the economy. I have no problem with serious constructive criticism and with people pointing out that the glass may be half empty and not half full. However, to state that by the end of the year, the glass will be entirely empty is almost irresponsible. These are peddlers of pessimism and they seem to operate with impunity day in, day out in order to sell their newspaper or to increase the ratings of their radio or television shows. If they are proved wrong by the end of this year, will they write articles and make television shows admitting that?
I am prepared to live with the forecast the Minister for Finance gave in his budget speech. He said that GDP growth this year would be 3%, that we would create 24,000 new jobs and that inflation would be at 2.4%. I am prepared to predict that will happen this year and to come into this House and eat humble pie if it turns out not to be the case in December.
Not during Lent.
My constituents will also have the chance to hold me accountable.
There is no doubt that one of the main issues in regard to this economy is competitiveness. I join forces with those on both sides of the House who have urged the Government to address this issue with even more vigour than it has done heretofore. I refer to some areas in which this needs to be done. The cost of services is unacceptable, whether for communications, broadcasting or energy. I agree with the remarks of Deputy Tom Hayes in regard to broadband. The simple solution is competition. It is time we broke down the barriers. We still have restrictive regimes in regard to broadcasting, energy and communications. Let us shake away those shackles and bring real competition to those sectors. The only future for Ireland as an economy is as a competitive one operating at the top of the food chain and not at the bottom.
I also support further and deeper regional development. For too long the attitude of the IDA and other agencies has been that Dublin is the only show in town, and I say that as a former Lord Mayor of Dublin. That is a recipe for disaster and we need to further develop all of the regions. In that regard, the case Waterford Institute of Technology makes for full university status should be supported. I would like to see more institutions from Dublin being sent down the country. I am happy that the regionalisation programme of this Government is succeeding. I have tried on behalf of several constituents to get their jobs moved out of Dublin, although unsuccessfully because many of the projects have been oversubscribed. I found the comments of Deputy Richard Bruton a little disappointing in that he failed to acknowledge the success this programme has been.
I agree with some of the comments of Deputy Michael Ring on semi-State agencies, quangos etc., although not with the way they were made. However, he forgot to say that the Minister indicated in his budget speech that there would be an efficiency review of all Departments, which should report back by 1 March. I ask the Minister that the efficiency review is published and sent to a joint Oireachtas committee to see which of the State agencies can be amalgamated and which are absolutely essential. I have no doubt that some of them have duplicative functions, some can be amalgamated and some may be beyond their sell by date. We must do all we can at all stages to reduce the taxation burden on this economy so that we can remain as competitive as possible.
This year will probably be a difficult one on the international economic horizon but whatever we do, we must not raise taxation because that would only hinder our competitiveness. We should encourage entrepreneurs from all over the world to come to Ireland, which we have not done very successfully so far. One way to make that happen is to make our visa system quicker and more transparent.
I support what the Minister has done in regard to stamp duty. We also need education reform. However, if the Government stays within its programme as outlined in the budget and in this Bill, we can have much prosperity in this country for many years to come.
I thank Deputy Mulcahy for sharing time. I wish to take up the point he and the previous speaker raised in regard to economic commentators talking down our economy. From my recollection, some economic commentators have been doing that for the past five years. I suppose if one keeps trying to talk it down every year, at some stage along the way one will probably be at least partially right.
While we are experiencing a slow down in our economy, it is a slowdown from a situation where we experienced growth of 4.8% in 2007. This year the Minister for Finance has forecast growth in the region of 3%. It is very important that we put this into context. Watching many programmes on the economic outlook for 2008 over recent weeks, one would think this country was on the verge of a recession which is far from the reality. There is no point, however, talking up the economy if the fundamentals are not there to support it. The success we have achieved, particularly over the past ten years, is acknowledged by other European countries and further afield, although for some reason we are not prepared to do so. Ireland as an economy is the envy of all other European countries. That has not happened by accident.
Other speakers said the Government is quite willing to take all the praise when the economy is booming but is not prepared to take on the responsibility when it is moving into a slowdown. The Opposition has never acknowledged the fact we have enjoyed wonderful economic growth for the past ten years because of the sound economic polices brought forward by the Government, which I applaud.
We are seeing a weakness in the property market. There have been significant losses, particularly in the area of construction, not only in my constituency but throughout the country. It must also be borne in mind that over the past number of years, we have relied on thousands of people coming from abroad to satisfy the demand for workers in this sector. We are coming from an all-time high and we are now seeing a slowdown in that area.
However, other areas and sectors in the economy are performing extremely well, particularly in the area of service exports, which continues to expand and shows great potential for the years ahead. As I said, this is down to sensible economic policies being practised by the Government and also a pro-business attitude.
I am delighted that this week we are focusing on what the people want us to focus on, that is, the economy and building confidence in it. These issues are relevant to the people and not some of the nonsense which has been discussed in this House over the past week.
Over the years Ireland has built a reputation as being a very attractive location for foreign investment. I am particularly conscious of this in my constituency in Mayo, where a number of major international companies employ 3,000 people and have more than €3 billion in exports every year. I am referring to companies like Allergan, which has just celebrated 30 years in the county, companies like Baxter, which has just announced an investment of €150 million, and other companies like Coca Cola. However, it is important that the economic environment is conducive to protect these jobs for the future. For example, Allergan announced the loss of 350 jobs in Wicklow recently. It is critically important that we do not take for granted the jobs that have been there for more than 30 years.
The Government should respond to the needs of these industries. While it is our job to try to attract new jobs into the country, it is critically important that we try to hold on to existing jobs. These jobs will only be supported by improved infrastructure in the regions. I have been critical in the past about the underspend on the BMW region, especially under the last national development plan. While some improvements have been made in this area, I am very conscious that over the next five years, massive investment in the regions along the west of Ireland must be put in place to address this imbalance that has occurred and to protect the growth and the jobs there against the odds. The Government must be responsive to the needs of these industries.
The types of projects I am talking about include the development of the N5. While there have been improvements in that road in the past few years, there is a 25 km stretch going through County Roscommon that is absolutely outrageous in this day and age. While I acknowledge that the motorways in the country are important, we cannot tolerate the starving of some parts of the country of valuable road infrastructure and thereby affecting industry. The money must be found. The N5 from Castlebar to Westport was a priority with the NRA seven or eight years ago, but it has slipped off the radar completely without even a date for construction. The N26 has a date for construction of 2010 and is the only national road in Mayo with a date for construction. There is nothing for the next three years, which is unacceptable. When we talk about balanced regional development, it affects all the counties in the region. We should not be leaving some of the counties untouched. The Ballinrobe bypass is not even on the radar of the NRA at the moment.
I am delighted that the western rail corridor has found favour with the Government, but it should be fast-tracked even further. The train service to the west is not acceptable. It is not acceptable that there are no canteen facilities on many days on the trains. It is not acceptable that the train from Westport comes into the worst platform in Heuston Station, where people, many of them elderly, must walk the length of a long platform to get on to a train. All the trains to other parts of the country go from the immediate platform within the station. Why has that been the case for the past ten years? Why can they not be rotated? There are obviously not enough platforms for all the trains, but this is not good enough.
I acknowledge the successes of our economy. In the past ten years there has been an average growth rate of 7%, which is one of the best performances of any country throughout the world. Employment has grown by 4% per annum over the past ten years and we are now in a situation where we have immigration into the country rather than emigration from it. It resulted in a great economic success and allowed the Government to increase public spending without putting a strain on public finances. We have seen major developments in the export sector, especially in the area of financial services, IT and chemicals.
I agree with the Minister's speech that the key areas to be addressed are human, capital, infrastructure, regulatory and public service reform, the maintenance of stable public finances and a pro-business tax system. These are the areas on which we must focus. I know that the Government is investing in third and fourth level education and I welcome that. However, I draw the Minister's attention to two projects I would like to see advanced in my constituency. Davitt College needs a sports hall and it is important that we look after the sporting activities of our education sector and not just the academic interests, especially given the fight against obesity. Davitt College has been looking for a sports hall for 30 years. The school was promised the hall 18 months ago. A commitment was given by the Minister, but it did not appear on the list of schools undergoing construction projects. I am confident it will appear on the list later this year, but it is a project that must be prioritised, as does the project for Gaelscoil na Cruaiche in Westport, which was also expected to be on that list. From speaking to the Minister, I am optimistic that it will appear on the list after Easter. These are priorities because education is critical if we are to maintain a skilled workforce in the future.
I mentioned the issue of infrastructural investment and I ask that the regional balance be upheld. I welcome some of the measures in the Bill, especially the changes to corporation tax aimed at small and start-up companies. These changes will make life a lot easier and there will be a smaller administrative burden for many businesses. I acknowledge the increases in the VAT registration thresholds, especially for small businesses in services and goods. I also welcome the extension of film relief. The Minister has increased the cap from €35 million to €50 million for investments in films, but it is a very valuable measure and will hopefully encourage further investments in films in this country. There is also a valuable individual relief for people who invest up to €31,750 — they will get 80% relief.
Section 41 of the Finance Act has brought in new measures on petroleum. This is for gas and oil explorations and it introduces a new resource rent tax on companies that received licences after 1 January 2007. This is particularly relevant in my constituency, where we had a very valuable find in the Corrib gas field off the Mayo coast and where many complained that the Government take in this kind of exploration was not as good as it should be. I acknowledge the measures introduced last year by the then Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey, and the fact that these measures have been given effect in the Finance Bill.
I am sharing time with Deputy Ó Caoláin.
The Finance Bill is the most important Bill that is debated in this Chamber. It is about how the Government decides to spend taxpayers' money and it affects everybody. There are very few Bills about which one can say that. I listened to the Government Deputies and while I agree with some of what they said, I would probably place a different emphasis on the Finance Bill and how we approach it as public representatives. Deputy Mulcahy stated that the economy is the envy of the world and is much admired. I cannot disagree with that and we have had enough delegations from different countries asking us how exactly we did it. I do not think anybody knows exactly how we did it, but I feel it was a combination of factors and things coming together at a particular time in the world economy that gave us our boom.
The electorate played a big part.
I am not certain that anybody knows. Maybe the problem with this Government is that certain Ministers believe that they actually do know everything. Maybe the Minister, Deputy Power, is right and he does have all the answers. He is a unique individual if he has them all, but if he believes that, I wish him the best of luck.
I did not say that.
He does not have it on the racecourse, I can tell the Deputy that.
Exactly. While many of those people admire the economy, the same people are taken aback at what we have done with the boom and the fact that we still have an education system that is less than half way up the OECD table. I have heard that if someone were to land from Mars and walk into one of our overcrowded school prefabs or trolley-ridden accident and emergency departments, he or she might believe it was a Third World country. What has been done with the enormous boon that landed in the Government's lap is abysmal. We will regret it and the people will not be as forgiving as the backbenchers in Fianna Fáil.
This Government has been in power for the past ten years. It should have presided over an economy that created the type of services the country deserves, which, in fairness, we did not have the resources to put in place for a long time. However, we have had the resources for the past ten years, yet we have a health service that is not just inefficient and ineffectual but in some instances downright dangerous. One would be reluctant to have a surgical procedure in some hospitals. The register of people dying from hospital acquired infections in time will show us how reluctant we should have been and that should be taken into account.
People now decide where they are going to live based on what they can afford, not on where their families or the best services are located. Again, that is something the Government could have controlled, but it did not do so. They allowed matters let rip with the former Minister for Finance, Mr. Charlie McCreevy, effectively saying "party on". We have been brought to this state because of a lack of control over the economy and how services were put in place. There are now areas in the country that do not have sufficient spaces for children to go to school, despite the fact that young people get married and housing estates are built. It does not take a rocket scientist to realise that after children are born, they will need to go to school within a few years, yet we put enormous housing estates in place with no facilities and no transport systems, features normal developed communities expect. This did not happen at a time when the money was available to do it and that is outrageous. We can talk about a 3% growth rate being something the rest of the world envies. That is absolutely correct, but what they do not envy is our scandalous provision of services.
I want to tell the House what I was doing today for an hour and a half. I went from Billy to Jack in every Department that could possibly have anything to do with the provision of house alarms for the elderly. The Finance Bill is about growth rates, the super-economy, job creation, etc., but equally it is about the provision of services to the people. There are niggardly little cuts during budgets which are never seen until we go looking for something. The Government no longer funds alarms for the homes of the elderly, who now feel more insecure in their communities than they did five years ago. A scheme was in place, which was administered by the Department of Social Welfare, now the Department of Social and Family Affairs, but it has gone. It was hived off to the Department of Community, Rural and Gaeltacht Affairs and we all know what happens when things go there. They tend to disappear into the mire, off to an island somewhere or into the mists of time. It no longer exists. Elderly people are looking to have their houses alarmed and they cannot get this done now because that is one of the cuts.
As in all debates in this House we must always talk about our individual constituencies. Cork North Central lost a seat in the last reshuffle by the commission because its population is down. Everyone accepts this; that is the way of the world — it is how the Constitution is written. It lost that seat because the population does not exist to support five Dáil Deputies and because it does not have the infrastructure to support the population. It is as simple as that. Cork North Central and Cork South Central have always been extremely good to Fianna Fáil. However, Fianna Fáil in this Government has not been good to Cork and particularly to Cork North Central. It does not have a ring road, which is needed for access. It does not have the rehabilitation unit which was promised for the site of St. Mary's orthopaedic hospital nearly eight years ago. Every public representative can confirm that he or she gets phone calls at least three times a year from people whose loved ones are waiting on a bed at Dún Laoghaire rehabilitation hospital but cannot get one because they are not available. We desperately need another unit, in the south of the country, but it has not happened.
There is not a penny, paragraph or bullet point in the Finance Bill about the future of the docklands project in Cork. The Dublin Docklands Authority has been in place for the past ten years, and longer. I believe the rainbow Government put it in place, but there is nothing for the docklands in Cork, which is pivotal as regards how the city develops. There is no light rail system to the airport. Indeed, there is no relief for the airport in fulfilment of the promise made by a Minister in writing — which is quite unusual for this Government. He promised that when Cork Airport disconnected from the Dublin Airport Authority, it would be debt-free. All of a sudden that could not happen, but by that time the election was over and there was a change of Minister. It is pivotal for the development of Cork Airport that it disconnects from Dublin Airport Authority, but it cannot do so with the type of debt it now has to carry, yet there is not one word. Surely the Government must realise that the imbalance that has occurred in this country is the result of lack of development and investment in areas outside Dublin.
I thank Deputy Kathleen Lynch for sharing time.
This is not an innovative Finance Bill by any stretch of the imagination. To my mind, it does not signal that the Minister for Finance is up to the challenge presented by the current economic circumstances. There have been a number of significant worrying developments since the budget was announced at the start of December, some of which I will outline.
The Central Bank has predicted that the downturn in construction will mean the loss of 23,000 building jobs this year alone. The Exchequer surplus was a mere €630 million in January, down from €1.7 billion in January 2007. The number of people claiming unemployment benefit rose in January at the fastest pace since 1980. The International Monetary Fund, IMF, has warned that a recession in the US would inflict significant damage on the Irish economy. There has been a string of job losses over the past two months, including most recently 350 at Allergen, based in Arklow, County Wicklow, 200 at the Jacob Fruitfield factory in Tallaght, 240 at Dawn Meats in Ballaghadereen, County Roscommon, and just last week it was announced that 130 jobs at Grove Turkeys in Smithborough, County Monaghan, in my constituency, were also to be axed.
Repossessions are rising while falling house prices push those who borrowed at the height of the boom into a negative equity scenario. Recent rises in interest rates have also made it difficult for many homeowners to meet repayments. All of that paints a very gloomy picture indeed in this, the first week of February 2008.
As economic growth forecasts are revised downwards, the challenge for the Minister for Finance and the Government is to ensure the revenue is there to provide for public services and that necessary interventions are made to stem job losses while creating alternative employment. This can and must be done but what is required is the political will at Government level to do it.
The economic difficulties which we now face were, at least in part, avoidable. The Government failed to address the issue of declining competitiveness. Indeed, some of its actions significantly contributed to the loss of competitiveness, including the failure to roll out needed infrastructure fast enough and the privatisation of Eircom which detrimentally retarded the roll-out of broadband. In relation to that, may I say that, like many other Deputies I have been contacted by a whole raft of people from different walks of life for whom their particular job, function, whatever, is seriously impaired by the absence of broadband accessibility in their respective areas. I have had representations from County Cavan and County Monaghan in recent weeks and I know that is replicated in other parts of the country. That is a hugely important issue. What has happened in terms of the failure to roll out broadband, as promised, is absolutely criminal because people have made commitments to work from home, something that was encouraged for years. Now they find the situation untenable and cannot continue.
The construction sector was allowed to become over inflated and the economy over-reliant on that sector. There has been a clear absence of intervention to retrain vulnerable workers, particularly in the construction sector where, according to the Higher Education Authority, 80,000 workers have only a second level education. The Government sleep-walked into this situation. While others were recognising the serious vulnerabilities in the Irish economy, this Government and this Minister for Finance were insisting that everything was going fine. They deemed those who raised legitimate concerns about the state of the economy to be merchants of doom and such a charge was thrown back at us across this Chamber repeatedly in recent years.
Despite repeated warnings that the boom could not last indefinitely as the State slipped down competitiveness rankings and as trouble brewed in the US economy, this Government did nothing. Despite numerous calls from the trade union movement and others for action on training and upskilling, nothing was done to protect vulnerable workers who are now losing their jobs. Nothing was done to fast track the roll-out of infrastructure and to stop the decline in competitiveness. The provisions in this Bill will not be enough to address the extent to which this State continues to lag behind other EU states in terms of research and development capacity within enterprise.
The poor state of public services after more than a decade of this Government, in particular in the health system, has also contributed to the erosion of competitiveness. Our public transport system is totally inadequate with Dublin and other urban centres suffering from crippling gridlock that is hurting business, undermining competitiveness and leading to a very negative quality of life situation for so many people and destroying the quality of life of those forced to commute.
The Government's failure to plan for the future of the economy will have serious consequences for the Exchequer. Tax revenue across a range of taxes is down while the burden on the social insurance fund is set to rise as a consequence of the increased number of redundancies and a growing level of unemployment. The social insurance fund needs to be able to cope with these increased demands and for that reason it is crucial that there are no cuts in PRSI contributions into the social insurance fund. Neither has there been any measure to address the expansion of low-paid employment, something which has serious long-term consequences for the tax take, both in terms of income tax revenue and revenue from spending taxes.
We are still waiting for the proposed commission on taxation to be established. What is the delay? Perhaps we might get some indication of that in the Minister's response to Second Stage of the Finance Bill. The proposed commission on taxation must be established now and set the task of determining the best way to fundamentally restructure the tax system to create a progressively distributive tax system through which revenue is raised in a fair, transparent and accountable manner in order that the Exchequer has the revenue needed to reduce inequalities, improve public services and deliver infrastructure. That is the task of Government first and foremost.
It is time the Minister for Finance outlined what action the Government is to take to put the economy back on a solid foundation and ensure we regain competitiveness. This Bill should have set the tone for the Government's approach but it does not. A further challenge arises from the fact that decisions on interest rates and exchange rates are now under the control of the European Central Bank. Never has a state been so limited in its ability to respond to its individual economic situation. Considerable economic sovereignty has been ceded to the European Union and what the ECB does in the best interests of the EU as a whole or in the interests of larger states such as Germany and France may not be in the best interest of Ireland. With our particular vulnerability to developments in the United States, we may find ourselves in a different economic situation from the states of mainland Europe with different approaches needed but none possible because we have ceded the opportunity to respond appropriately and in our patent interest.
There are measures in the Bill that are to be welcomed. Sinn Féin welcomes the new measures to tax the profits of exploration companies exploiting our natural resources, although these do not go far enough. We are also concerned that this tax will not apply to exploration licences granted before 2007. Sinn Féin welcomes the overdue reduction in the rate of VAT on non-oral contraceptives from 21% to 13.5%. We also welcome the fact that those on the average industrial wage are to be kept within the standard tax band and that unsustainable tax cutting proposals have not been implemented.
At a time when Irish pension funds lost €9 billion in value between the end of June and the end of November 2007, we would have liked to see reform of the excessively generous tax incentives for private pension savings which disproportionately benefited a wealthy minority. The cost of tax breaks has soared in recent years and has not been effective in ensuring full pension coverage, particularly among the least well off.
While this Bill contains measures to promote energy efficient technology among businesses, we would have liked to see the inclusion of an innovative scheme to assist the low income households to insulate their homes and to install sustainable heating alternatives.
On the other issues, on amendments and proposals that we may be able to put forward that might not be disallowed on the basis of affecting the Exchequer returns, we look forward to the opportunities presented on Committee and Report Stages.
I wish to share time with Deputy Curran.
I am delighted to have the opportunity to debate the Finance Bill, which is welcome. It introduces supports for business, makes the tax system fairer and lightens the burden on low and middle-income earners. The principal aims of the Bill are to support enterprise and innovation, to advance sustainable development and ensure a fair tax system.
As a member of the Joint Committee on Enterprise, Trade and Employment and the Joint Committee on Finance I welcome these moves. In particular, I welcome the continuing trend of supporting small and medium sized business. Small and medium sized businesses account for up to 40% of the Irish workforce and represent a vital component of the economy, but not just the economy. It is also important to the social infrastructure in the communities across Dublin and the country. Operating both domestically and internationally, small and medium industries provide invaluable goods and services in support of larger industries.
Today, Dublin City Enterprise Board came before the Joint Committee on Enterprise, Trade and Employment. One of the biggest challenges facing the enterprise board was the lack of space for its start-up businesses. One way of solving the problem of lack of space for start-up businesses would be to let entrepreneurs listen to the Opposition because that would certainly deaden any enthusiasm an entrepreneur would have for starting a business. Thankfully, entrepreneurs do not listen to the Opposition, which is why we have a healthy and strong economy.
They do not listen to the Government either.
They do not have much to listen to from the Deputy.
Only today, the Minister, Deputy Martin, announced a €60 million growth fund operated by Enterprise Ireland which will help secure new jobs in Irish firms. The fund will support investments in staff, equipment and technology in order to increase competitiveness and encourage new exports. Such supports are to be welcomed, particularly in a more competitive environment.
The Finance Bill helps SMEs by reducing the administrative burden and making doing business easier. The Bill provides for measures to assist small businesses which the Minister for Finance, Deputy Cowen, introduced in last year's budget. It includes a number of business-friendly measures such as revised preliminary tax payment arrangements for corporation tax aimed at small and start-up companies and an increase in VAT registration thresholds for small business to €37,500 in the case of services and €75,000 in the case of goods.
This Bill represents a range of business-friendly measures which will support continued growth and job creation in a climate of economic uncertainty. Within Europe, Ireland is third in a league of countries that encourage start-up businesses, which shows that Irish people embrace challenges and change, and are adaptable to change. This is why we have continued to progress so well. The Bill will support those who want to take a chance to improve their lives and the life of the community in which they live and work.
One of the ways in which the Bill protects the less well-off in society is by creating a fairer tax system. The Social Welfare Bill made significant improvements to social welfare payments, including pensions and carer's allowance, among other measures. The Finance Bill aims to reward those at work. It does so by giving increases in personal tax credits and tax bands to ensure that low income earners are kept out of the standard rate band and average earners are kept out of the higher rate band. Tax credits have been increased for the elderly, lone parents, widowed persons, including widowed parents, and those with a disability or those who care for a person with a disability.
Those who wish to get their first step on the property ladder should now find it considerably easier due to the changes, which include further increases in the ceilings up to which first-time buyers can claim mortgage interest relief and substantial reform of the stamp duty regime for residential property.
They cannot get a mortgage.
The old system has been replaced by an exemption of €125,000, a 7% rate on the next €875,000 and a 9% rate on sums above that. A measure which is often overlooked but which will create more flexibility for individuals is the reduction in the stamp duty claw-back provision for new residences and for first-time buyers from five to two years.
The Bill also prioritises the environment. Practical measures are necessary to help protect our economy and environment. A new tax initiative for energy efficient equipment will allow companies to claim the full cost, in the year of purchase, of specified energy efficient equipment against their taxable income. The purpose is to assist in improving cost competitiveness while helping to reduce overall energy demand and carbon emissions.
The Bill provides for a fundamental reform of the vehicle registration system. It will provide the opportunity for people to make choices to help the environment and provide financial incentives to do so. The VRT system is being revised to take greater account of carbon dioxide emissions, with VRT exemption for series production electric cars and up to €2,500 VRT relief for certain series production hybrid and flexible fuel cars. Over time, this will have to change and become more finely tuned. This is the first step in having the economy and the environment work more closely together. People recognise the benefits. The green agenda has moved to centre stage. Fianna Fáil and the Greens have recognised this and we are now putting it into practice.
Who was the first to recognise it?
It was the Mercedes.
No more hand-brake turns for the electric cars.
The Opposition would have been only too glad to have been able to court the Green Party but, again, they were unsuccessful. They have not come to terms with that fact.
The Bill will make the business expansion scheme more accessible for recycling companies and also provides for a reduction in the VAT rate applicable on certain supplies used for the agricultural production of biofuels from 21% to 13.5%.
In summary, I welcome the Bill because it supports small and medium enterprises, which are and will continue to be the linchpin of our economy. It provides a fairer tax system, which benefits lower income earners, and it provides financial incentives to protect the environment, which will provide for future generations. In an uncertain world economy, it is vital that we continue to strive for a balance that encourages enterprise and protects the less well-off in society. This is exactly what the Bill does, which is why I support it.
I welcome the opportunity to contribute to this debate on the Finance Bill, which gives legislative effect to many of the announcements made on budget day by the Minister for Finance. I listened to Opposition Members on the television monitor and in the Chamber. If one listened to them, one would wonder where they had been for the past decade. The average man in the street will say honestly that the Ireland of today has improved significantly from just ten years ago.
If he has a job.
The Government is destroying it again.
People are working where they previously may not have had opportunities. They have more disposable income and more choices.
Tell that to those paying mortgages.
For Opposition Members to suggest to the House that the country is going down the tubes and that we are in a terrible situation is incorrect. I acknowledge that the challenge we face this year is different from what we have faced in recent years but I do not believe the spin being put on events by Members on the opposite side. If they continue in this way, they are in danger of talking us into a recession, which is what is happening.
The Government has enough spin doctors to talk us out of it again.
The Opposition should stick to the facts. If it continues to act as it has, it will talk us into a recession, discourage investment and discourage everything for which we have worked for the past decade and beyond.
The economy grew last year by 4% to 4.5%. A previous speaker suggested the Minister missed an opportunity and did not pay attention to the real situation but he did precisely that. He was fully conscious of the new and changed environment and it was in that light that he set the budget and Finance Bill. He recognised that in 2008 the economy would not grow as it had grown in previous years and his target was a gross rate of 3%.
This is a change.
That was his announcement on budget day but my specific point is that his recognition in advance of 2008 that the economy would not grow meant he set his budget and Finance Bill accordingly.
We were telling him that 12 months beforehand.
We are a small island nation with an open economy. We do not have a destiny in which we can ride the waves and buck the trend, yet our growth rate is one that many of our European partners and others would strongly envy. We are anticipating a growth rate of 3% this year and it is in that context that the budget and Finance Bill were framed.
Members have spoken of redundancies, which are regrettable. However, in the next 12 months we are planning for a real growth in employment.
At a time when he was facing a tough budgetary challenge, the Minister should be complimented that he did not do what some commentators and others might have done in taking the easy option by cutting back on the capital budget. Capital investment during the current year is at €8.6 billion and at a time when there are real challenges to other industries our investment programme must be delivered not only for employment, but also to ensure the necessary infrastructure is delivered. The Minister made that commitment and, while running a deficit in Government spending this year, is maintaining the necessary roll-out of investment to provide that infrastructure. When other industries may be struggling, he will also provide the employment opportunities that come with an expenditure of €8.6 billion.
How many jobs does the Deputy have in mind?
The Finance Bill as presented does a lot to facilitate business. I am pleased to see some aspects which will help to encourage the establishment of small businesses in particular. One specific change concerns corporation tax whose threshold has been raised from €150,000 to €200,000 for small companies. The VAT rate increase thresholds have also been raised to €37,500 for services and €75,000 for goods. When times were good and things were booming here, nobody needed to take a chance in establishing their own businesses, and these types of supports were welcome. A former Deputy from Tipperary, Noel Davern, was always a strong advocate of assisting and encouraging small indigenous business by cutting red tape as far as possible. The Minister has proceeded along those lines in this budget by removing bureaucratic red tape to enable individuals to establish small businesses. Some of the moves the Minister has made in that regard are to be commended because they will help such businesses to get up and running.
It is worth noting that before the general election——
Before the Deputy saw the Green Party.
——the Minister gave a commitment that there would be a substantial change in vehicle registration tax. A change of that nature requires a review process to ensure it will be effective and equitable.
He did not do it.
It could not be introduced overnight but he signalled it well in advance.
He passed it on to the next Minister.
He had been talking about it for ten years.
We now have a system that allows people to make environmental choices when purchasing and driving motor vehicles. That is to be welcomed as there is a financial incentive involved.
Some of the Ministers did not make much of a choice last week.
The Minister did not just stop there when it came to environmental choices and green issues. It is easy for people to pick snippets from the budget and praise the provisions concerning cars, but the Minister also changed business practice by encouraging that sector to invest in equipment. The specific change there is that the purchase of environmentally friendly and efficient equipment can be written off in one year whereas normally it would take five or seven years. The figures vary according to the type of equipment but the green environmental issue is fairly dominant in the Finance Bill.
It is amazing how green the Deputy has become in a short time.
The Minister of State should watch them.
I also want to mention the changes that were made for first-time buyers both in mortgage interest relief and stamp duty. Not alone did the Minister reduce costs for first-time buyers but he also brought certainty to the stamp duty issue. I acknowledge that interest rates have risen. However, anyone who is considering purchasing a home to live in, rather than an investment property, given the current reduction in house prices and stamp duty, it is probably cheaper to buy a house now than it has been for a long time. Opposition Members may talk about negative equity and the fall in property values over time, but if one can afford to buy a house as a home over the longer period, now is probably as good a time as any to do so.
If one could get a loan.
I am not disputing that but I said if one could afford it, it is probably a good time to purchase and people in that position should be encouraged to do so. People often say that house prices will drop but that is a sentiment and in the meantime they are paying rent. However, affordability is now better for first-time buyers due to lower stamp duty, mortgage interest relief and the fall in property prices.
I do not want to avoid the question of inflation which has been an issue of concern. In the budget, the Minister made specific changes in that regard. On budget day, the issue of tobacco tariffs and smoking arose, and we should seek to achieve a consensus on this matter not only in this House but among the social partners also. Many people argue on health grounds that the price of cigarettes should be increased significantly to act as an effective deterrent. However, there is a problem in doing that because cigarettes still form part of the consumer price index so if we increase their price to a deterrent level it would adversely affect the inflation rate. We should examine how our inflation rate is measured and what is in the basket of goods that determines the CPI. That system has been in place for a long time but I am not sure if it is exactly the same as that used in other countries.
Representatives of the Revenue Commissioners are frequent visitors to the Committee of Public Accounts where we have interesting debates on a range of issues. The budget concerns Government expenditure, including social welfare spending. One of the concerns I have as a public representative is that there is still a lack of joined-up thinking between the Revenue Commissioners and the Department of Social and Family Affairs. People still attend my constituency office who are paying tax but are in receipt of an inappropriate social welfare payment. I would like to see an automated system whereby people could not inadvertently accrue significant debts.
I compliment the Minister on the Finance Bill.
I wish to share time with Deputy Ulick Burke.
Listening to Deputy Curran one would think that there was no recession.
There is no recession.
If the Deputy and the Government think there is no recession, God help the country.
Is 3% growth a recession?
The Deputy's head must have been in a bag for the past 12 months if he cannot see what is happening. People are losing their jobs every day. Is that a recession?
People are not able to buy houses. Is that a recession?
People are buying houses.
Is our economy growing?
It is time for a reality check in this House.
Is our economy growing?
Deputy Curran can have that conversation afterwards but Deputy Connaughton must be allowed to make his contribution without interruption.
We will follow your ruling, a Cheann Comhairle. The budget of 2008, which we discussed here last December, missed the target on many aspects. Like every other budget, and I have been around for many of them, it was like the curate's egg, good in parts. There was one overarching aspect of the budget that everybody thought they knew about. Nobody told the Minister for Finance in December 2007 that we were in for a hard year in 2008 because not an economist in Europe could see it coming. The problem goes back to the Celtic tiger. I was in this House in the late 1970s and 1980s when it was not an inspiring place to be because we did not have the Exchequer resources that became available in the late 1990s and afterwards. The Government stands indicted, however, because no provision was made for a rainy day, good, bad or indifferent.
For a while, the Government thought the sun would shine all the time. It is very easy to be a good Minister for Finance when the Exchequer returns for the current year are greater than the previous year, which was the case for the past seven or eight years. However, the problem is every commentator who appeared on television over the past 12 months following the closure of a factory's gates and people losing their jobs said the reason is Ireland has lost its competitive edge. They cannot all be wrong. We must whip our costs into line to ensure job creation. For example, the costs of haulage, electricity and broadband and port charges must be managed much better than in the past. Other countries can do so and their cost base is lower as a result. At the end of the day, we can have all the argy bargy we like in the House but I will judge this year's budget on whether Ireland can compete where it counts most, which is in the jobs market.
The Bill contains nice provisions, which will make it easier for small business, but the overall problem is the Government parties missed many wonderful opportunities over the past five years. The Minister of State was very vocal as leader of his party when in Opposition about the squander mania on the roads. I recall the announcement of the national development plan, under which €6.5 billion was allocated for the roads programme, but it will cost €20 billion by the time it is completed. Somebody got his or her figures extraordinarily wrong. Would the Government not build many hospitals for €12.5 billion? It is like selling the family silver.
There is no better organisation in Europe than Fianna Fáil for spin doctoring and getting a message across, whether it is right or wrong, to suits its need on a particular day, except on this occasion.
We are always telling the truth.
That is not what I said. Many people are beginning to wonder why in the run-up to the 2007 election the party stated there might be a slowdown and even if economic growth reduced from 7% to 3% or less, it could still take many initiatives. However, the Government cannot do a great deal if economic growth is only 2.8% or 3%.
I refer to small issues around the country. For instance, I tabled two parliamentary questions recently about two schools in Cathair Geal, Tuam, and Aughrim, Ballinasloe, in my constituency. I never received such a gobbledegook reply as that from the Minister for Education and Science. The schools are being considered in the context of the multiannual budget, which was the case five years ago. I refer to the proposed amalgamations of Presentation College and the Mercy Convent in Tuam as well as St. Jarlath's College and St. Patrick's College. Ten years ago all the stakeholders, including teachers and unions, reached agreement on these projects but sites have still not been acquired. These are examples of the lack of delivery at ground level. The budget does not provide any hope for these projects over the next few years even though they have been around forever.
Pollution control is an issue for the Department of the Environment, Heritage and Local Government. The sewerage scheme in my home village of Mountbellew is outdated and everyone has known this for years. It is polluting the local River Shiven. Only last week An Bord Pleanála granted planning permission to a developer to build a number of houses and a shopping centre but inserted a clause preventing him from commencing the development until a new sewerage scheme has been built in the village. I contacted the Department about the file on this and it could well be another four or five years ago before the scheme happens. Such projects must be considered in the context of the budget and the infrastructure it will create. The Tánaiste can talk in global terms all he likes but it is what happens on the ground that counts.
I refer to the moneys allocated to the Department of Education and Science in the budget. Most of the new schools building projects are located in Dublin or on the east coast. I cannot understand why the summer works scheme was abolished. Many small schools availed of it to carry out rewiring, replace roofs and carry out other external works. The Department went to the trouble last September of asking school boards of management to make applications for the 2008 scheme. Engineers and so on were retained to send in the applications but a unilateral decision was taken to abolish the scheme a few months ago. That does not represent joined-up thinking or consistency in policy.
I welcome the Minister of State to the House. The Bill has been presented to the House as Ireland enters a tough period in competitiveness and economic growth. The Tánaiste and Minister for Finance referred to Ireland as being on top of the world and the best place to do business at this time. He ignores the fact that people are losing their jobs throughout the State and business is declining in all sectors, including services and construction. People's livelihoods are being seriously threatened. Over the past ten years the Minister for Finance did not have to worry about these issues but today a working couple cannot afford to pay a mortgage, despite the additional mortgage interest relief provided in the budget, which is welcome. However, it is insufficient to meet the needs of these couples because they bought a house without realising the downturn was imminent.
The number of house repossessions granted by the courts is increasing by the day. That is a tragedy for young couples starting their lives. The onus is on the Tánaiste to substantially adjust the supports for young couples and it is essential that he realises these matters were not on the horizon when the budget was announced in December. I hope he amends the legislation to support young couples who have purchased houses and begun repayments when times were good but who now find themselves in serious trouble. Adjustments are particularly necessary where one partner has lost a job or is in part-time employment.
Many aspects of the budget are acceptable. Deputy Curran referred to supports for small enterprises, which are welcome. However, we have to realise that we will no longer see major foreign direct investment by multinational companies such as Dell. These companies are relocating part of their operations to lower cost economies while retaining research and development in Ireland.
The provision in the 2006 budget of a tax incentive scheme for tourism projects in the mid-Shannon region was welcome. It was more or less a parallel of the pilot scheme in the upper Shannon region which resulted in significant improvements in places such as Carrick-on-Shannon and surrounding communities. The provisions announced in the 2006 budget had benefits for parts of the Tánaiste's constituency. However, I have tried without success to ascertain the guidelines and criteria for the scheme. I was told when I was in the other House that they would be made available shortly. I raised the issue in the Dáil last June through a parliamentary question and more recently on the Adjournment but was given the same response. When I sought application forms I was told they were not available and there has been no agreement from Brussels regarding the scheme's acceptability and guidelines. We do not know the guidelines, so how can Brussels adjudicate on them? In addition, there is no interdepartmental agreement on the scheme. If a scheme initiated by the Minister for Finance is not agreed to by the Minister for Arts, Sport and Tourism, is that not unacceptable? We enthusiastically embraced the scheme and looked forward to the benefits it would bring to areas of Galway East such as Portumna, Woodford and Eyrecourt, which are not blessed with many tourist attractions, but nothing has happened. If it is a matter of the Department of Arts, Sport and Tourism wanting more than the Department of Finance is willing to give, it is time somebody made a decision because 15 months after the scheme's introduction, people are still prevented from using it to improve their incomes.
The three main aims of this Bill are supporting enterprise and innovation, advancing sustainable development and ensuring a fairer tax system. In a Finance Bill containing 200 pages of new tax legislation, it is critical that tax policies are used in a creative way to maintain our competitive position and sustain economic growth. However, some of the Bill's provisions will not meet these requirements. I welcome the support for small businesses to meet their VAT and corporation tax obligations by eliminating red tape. It is important that our tax code makes it easier for businesses to operate and incentivises sectors such as energy. The Bill provides for tax breaks on environmentally friendly activities and establishes the new commission on taxation. I welcome the incentives for businesses that invest in green equipment but these schemes need careful monitoring to prevent abuse.
The Tánaiste revealed that some companies based in the International Financial Services Centre see significant opportunities for expanding their operations into carbon trading, particularly in the context of EU plans for an enhanced emissions trading scheme. Companies will be able to buy and sell so-called carbon credits, which essentially give permission to emit a certain amount of carbon. The current emissions trading scheme has been subject to criticism but it is likely to become more widespread and lucrative in the future once carbon becomes a widely traded commodity.
The Government's failure to date to meet our Kyoto targets will be very expensive. According to figures released by the Minister for the Environment, Heritage and Local Government, between €150 million and €325 million will leave the country over the next five years to pay for carbon credits in order to offset this failure. This money would be better spent at home on technologies and projects which can reduce our emissions. The EU announced last month that we will have to make a 20% reduction on the 2005 emissions figure by 2020. The trading in carbon credits represents an opportunity for our financial services sector but, given our terrible record in reducing emissions, we are no more likely than any other country to profit and any benefits from financial services will be marginal compared to the enormous sums of money being spent on our failure to meet the Kyoto targets.
In the current climate, many industries and small, medium and large businesses may be experiencing temporary financial difficulties and it is important the Revenue Commissioners are lenient and accept that such difficulties exist. The Revenue often demonstrated flexibility in the past and put in place proper programmes in respect of the repayment of arrears. I suggest that it adopt a policy aimed at facilitating people in this regard in the short term. This would allow viable industries to remain in operation and to continue to provide employment. There must be an element of understanding and the Revenue should, as it has previously, adopt a policy of accommodation, particularly when, with its agreement, proper repayment plans are put in place.
I welcome the opportunity to make a brief contribution to the debate on the Bill. I acknowledge the presence in the Chamber of the Minister of State at the Department of Agriculture, Fisheries and Food, Deputy Sargent. I am sure he is delighted that he has recently been the subject of all sorts of attention and has received much kudos. This shows that the Green Party, in government, is clearly doing its job. While I have his attention——
I love Tallaght too.
——and if he ever has time available some Friday, I would love him to visit Tallaght and its farmers market. I am aware that he has a particular interest in this matter and I would welcome the opportunity to show him around. It would be good if he could visit and promote our farmers market.
The Deputy has a date.
When the Tánaiste and Minister for Finance, Deputy Cowen, introduced the Finance Bill, he pointed out that it is based on sound fiscal policies to encourage economic growth while promoting care for the environment and protecting the less well-off in our society. He also stated that the Bill contains a range of business-friendly measures that will support continued growth and job creation in a climate of economic slowdown and that various measures in it are aimed at combating tax avoidance and criminal tax activity. He further stated that it is the fifth Finance Bill he has introduced. The Tánaiste was speaking my language.
I do not want to draw out the Opposition or upset my good friend, Deputy Noonan. However, many remarks have been made about the performance of the Government and how matters are developing. I am happy to be a member of a Government party, the members of which have confidence in the ability of the Taoiseach, Deputy Bertie Ahern, and the Tánaiste, Deputy Cowen, to deal with the enormous challenges we face.
I do not wish to be flippant but someone said to me earlier that if the Taoiseach and the Tánaiste were candidates in the American presidential election, they would do well because they have demonstrated their abilities. When one travels abroad — we have all had the opportunity to do so on occasion — one is struck, even in the current climate, by the manner in which politicians in other jurisdictions point to the success of the Irish economy. I accept that times are tight and that we face competition, but what has happened with the economy is good for our image.
I co-chaired a meeting of the Joint Committee on Social and Family Affairs earlier and I was reminded that the Tánaiste must ensure that proper resources are made available in order to cater for the needs of the vulnerable and disadvantaged. The Taoiseach used to say — I strongly subscribe to this view — that at all times, even when the economy is doing well but certainly when it is being challenged, it is important that we remember all the boats, particularly the smaller ones. My predecessor in the constituency I represent, Chris Flood, often made that point in respect of social inclusion. It is something I have promoted in my community and political work and I will continue to do so.
I share the concerns expressed by previous speakers with regard to the challenges we will face in the negotiations on pay. As someone with a trade union background who now has an opportunity to make a contribution in Dáil Éireann, I am of the view that it is important to understand the nature of those challenges. Difficulties will arise and Members have been subjected to a great deal of lobbying. Previous speakers referred to the position of agency workers, etc., and I have met delegations from my constituency and representatives of SIPTU to discuss these matters. It is important that the Tánaiste understands our concerns in this regard and that progress is monitored as the negotiations on pay evolve. I hope measures will emerge that will take into account the difficulties and challenges we face.
On occasions of this nature, I am always aware that I should not refer only to Tallaght and my constituency of Dublin South-West. However, I have listened to most of the debate on the Bill and previous speakers mentioned almost every town in every county. I will not, therefore, be sensitive about referring to Tallaght, Templeogue, Greenhills, Firhouse, Brittas or Bohernabreena.
I have no desire to suggest that as I go about my daily business people stop me and state that they want to discuss the Finance Bill. However, like their counterparts in Finglas and Limerick — to which we sent John Fitzgerald, a man who did good things in Tallaght, to resolve its problems — there are issues which are of concern to them. Sometimes the Opposition think that Government backbenchers are happy with everything and that they do not have concerns or are not prepared to express such concerns if they do harbour them. I would not be doing my job if I did not express my concerns.
There are a number of issues which the Tánaiste must examine. Previous speakers referred to their constituencies and I am certainly going to refer to the constituency I represent. I share Deputy Connaughton's concerns regarding the summer works scheme and I am aware the Minister for Education and Science, Deputy Hanafin, has been under pressure in that regard. It should be acknowledged that, over a period, tremendous work has been done in many of our communities, particularly in my constituency, as a result of the scheme, which has provided good value for money. I appeal to the Tánaiste to check the coffers in order to see what might be done to ensure that funding is again made available in respect of the summer works scheme. There is no doubt that the scheme was a welcome development throughout the country and my constituency was no different in that regard.
I hope the Tánaiste will give consideration to the various issues raised by Members. I ask him to examine the position of Tallaght community school, which is caught in a bind in the context of trying to redevelop the swimming pool at the local sports complex. There is some confusion as to whether the Department of Education and Science, the Department of Arts, Sport and Tourism or South Dublin County Council have responsibility in this regard. The swimming pool is on the school's property and the school authorities are responsible for it. It is important that my constituency colleagues and I make the case on the school's behalf.
On a number of previous occasions I referred to hospital services and the position of Tallaght Hospital. Other Members also referred to such services and to the relationship with the HSE. I share their concerns. I have no wish to be parochial but I feel strongly about Tallaght Hospital, the catchment area of which encompasses not only Tallaght — the third largest population centre in the country — but also includes parts of Kildare and extends as far as Carnew in County Wicklow. I become concerned when I read about the HSE encountering difficulties in attempting to fund services. I accept that the Tánaiste has a great many matters with which to deal but I am of the view that Members who represent areas in which major hospitals are located should not be afraid to highlight the issue of hospital services.
I wish to refer to employment and job creation. The Tánaiste, through provisions in the Bill, is continuing his policy of creating a situation in which jobs and investment can be attracted to Ireland. I raised the matter of job losses at Jacob's on the Adjournment last week. Job losses in Wicklow and elsewhere have taken Tallaght off the map a bit in that regard, although it is very important.
Last week, I stated in the Dáil that I bring to my politics my own experiences. I have been made redundant three times in my life in different ways but I recovered and I know the trauma of such an experience. I know it is important to support families and I express solidarity with the people in Wicklow. There is an issue for me in Tallaght regarding the jobs being lost in Jacob's. There are 220 full-time jobs and 130 seasonal jobs. It is reasonable for me as a Tallaght-based Government Deputy to make this point.
Public representatives will always make a point about their communities, towns, cities and counties but the case for Tallaght is strong. We have a very young population and we had to deal with challenges such as unemployment over the years. Since The Square opened on 23 October 1990, things have come on enormously in my community. We need more job creation rather than job losses so the Minister must continue to introduce policies that will continue to attract investment.
Cases can be made for everywhere else in the country but I am not afraid to make the case for Tallaght. As I stated, it is the third largest population centre in the country so it is important I do so.
In the context of the Finance Bill, it is important that Departments providing various facilities and services in all our communities continue to be monitored. I listened to some of the comments of the Opposition regarding the current state of the economy. I came into town last Saturday on the Luas with my son — I do not normally come in but I was lucky enough to get a ticket to Croke Park — and the city was buzzing. I came to work this morning again on the Luas. As Deputy Noonan knows, it is good to walk and I strolled around the city this morning. There is a genuine impression that people are working and getting into the city as the streets are full of cars. We may listen to comments of foreboding about the state of the economy but there is still much vibrancy out there. People are still working and tourists are coming in.
I will not preach but we should not talk down our economy. We should be clear and continue to understand that good management is very important. That is the reason I have much confidence in my colleagues, the Taoiseach, Deputy Bertie Ahern, the Minister, Deputy Brian Cowen, and the other Ministers. The presence of my good friend, the Minister of State, Deputy Pat Carey, reminds me that all of us should continue to support the work he does and not only in the drugs area. Although that is the headline of his responsibility, he also deals with community activity and development. It is important that the Minister for Finance continues to ensure proper funding in that regard.
I heard criticism today of other sections of the Department of Community, Rural and Gaeltacht Affairs but none of the comments concerning the Minister of State, Deputy Carey, was negative. He is clearly getting the message across to us and I continue to support him in that regard.
I hope the Acting Chairman does not mind me mentioning Tallaght again, but I mentioned Limerick a couple of times.
I am not sure I could stop the Deputy.
Without wanting to upset the GAA, this is a soccer night. I wish I could be let out to go see Ireland playing Brazil tonight, led by the Tallaght man, Robbie Keane. I was with the Minister for Arts, Sport and Tourism, Deputy Séamus Brennan, last Thursday when he took the opportunity to come to Tallaght to look at the Shamrock Rovers stadium. That will be a significant boon, not only to Tallaght but to the wider region. Many people from all over the country, including Limerick, will come to the stadium.
I have listened to colleagues mentioning issues from other constituencies. It is important that projects such as the Shamrock Rovers stadium is properly funded.
I will mention another local issue with regard to Government funding, specifically that within the remit of the Minister for Justice, Equality and Law Reform, Deputy Brian Lenihan. A comparison is often made, sometimes unfairly, between Tallaght and Limerick. Limerick apparently has more gardaí and Garda stations as Tallaght only has one station. All of us would welcome what is happening in Limerick city and county. In the context of Government finances, there is a significant issue with regard to Garda facilities in Tallaght. There is a campaign asking whether we need a second Garda station and although the Garda authorities are not quite happy about it, we certainly need a modern Garda station. Since I first came to the Dáil almost six years ago, I have raised the matter with other colleagues. I hope we will not see the introduction of too many more Finance Bills before we can say there has been real progress on the issue. I have much support throughout my community and from my colleagues in the House on the matter.
There has been much talk about green issues and climate change, a matter we should be concerned with. I come from a generation where there were not many cars on the road and there were still a few horses, but things have changed. I live in a place that is a city in all but name and the challenges presented by climate change and energy concerns come across very strongly.
Tallaght got some unfair publicity lately when it was named as one of the country's litter blackspots. That upset all of us. I did not take the approach of putting my head in the sand and saying there was no problem. The morning after the Irish Business Against Litter survey was published I walked around Tallaght and had a look for myself. I was disappointed, although the community does not want us to be negative. I would certainly never be negative about Tallaght. If problems have been identified we should be brave enough to deal with them. In the context of that problem, there is a need for all interests in my town to note the issue, as in other towns. Other places have faced difficulties in that regard and dealt with them properly. People in those places can now argue they no longer have a problem.
There is work to be done, particularly with young people. I started school across from Leinster House on Clarendon Street, then went to Synge Street and Drimnagh Castle. In those days we did not speak about climate change or all that much about the environment, as far as I remember. I remember my school days as good times. Now I listen to my granddaughter, who is only six, as these issues are discussed in her school. That is fair enough.
Any of us can walk a line from a local school to a local shop and see litter in any of our communities. This disappoints people. The matter is about waste management and saving our climate. Although I will not try to steal the clothes of the Green Party, all of us have a role to play in this concern. We should all try to do our best in our own environs.
I am as bad as anybody in using paper in my office but I try to make a little effort. Although it is not always possible, I try to leave my car behind when possible and use the Luas instead to go to town and on to Leinster House.
Or doing both.
I will continue to do so. Thank God for the Luas and for the Minister, Deputy Séamus Brennan.
The Deputy could cycle in front of the Luas either.
The Luas is great and will be extended through west Tallaght, Saggart and Citywest. That is what we should be trying to do. I accept that one cannot walk from Kildare, Limerick or Kerry.
The Deputy has one minute left.
One certainly would not do it in a minute.
Will the Chairman not compensate me for the heckling?
There is not very much I can do about that.
I know. I appreciate that.
The Deputy has one minute.
It is important that we all play our part. People expect public representatives to make a little effort. My effort is humble and is not achieving much but it would help if we all made a similar effort. Every day the streets in all our towns are full of cars spewing out stuff that is not in the interest of the climate or the community.
I wish our colleague, the Minister, Deputy Cowen, well. Whatever about the politics across the House people recognise that he is doing a good job. People have confidence that at a time when things are difficult——
The Deputy would make a good Minister of State.
I have no ambitions in that regard so I would not like the Deputy to get me into trouble. I commend this Bill to the House.
I wish to share time with Deputies Durkan and Deenihan.
I had the pleasure of watching the Budget Statement on television because I was not in the House that day. It was a non-event; there was very little of significance in it. The same criticism applies to the Finance Bill which enacts the budget and puts it on a statutory basis. With two exceptions, the measures on VRT and stamp duty, it is of interest only to tax lawyers and accountants. There is little to it as an instrument of economic management. On the day of the budget the Minister spoke about the difficulty of using a budget as an instrument of economic management when the way ahead is so uncertain, especially when the Exchequer returns are in decline and he could not foresee the preceding run of taxation continuing into 2008 and 2009.
After contemplating this for a long time, he decided to do nothing and fill the void by borrowing. This was quite dramatic in terms of the deterioration in the public finances. He turned a surplus of €2.3 billion into a deficit of €4.9 billion. Between the end of 2007 and the start of fiscal year 2008, the public finances have deteriorated by a record €7.2 billion. Since 1922 there was never such a deterioration in public finances over a fiscal year in absolute or percentage terms. That assumes that the Minister's figures will come in as expected but I do not think they will. They are based on 60,000 new houses being completed in 2008. Every 10,000 houses yields €1 billion in taxation to the Exchequer. The expectation in the building industry is 40,000 houses, a figure calculated by a former colleague of the Minister's, Mr. Parlon. That represents a deterioration of €2 billion in the public finances.
There is not much in the budget for pay, although new pay negotiations are looming. On the normal rule of thumb, if one adds the Minister's consumer price index prediction of 3.5% and his growth rate prediction of 3%, the opening position for the pay round will be 6.5%, just to stand still. That is a significant sum of money on a payroll and the budget does not provide for such serious expenditure on pay. Although there will not be a full year effect, it will begin to come in this year.
The budget is based on fairly sandy foundations. There is a serious deterioration in the public finances and the Government is engaging in a significant borrowing requirement. The country can afford it for one year because the previous years have been so strong but by the Minister's rolling budget there will be even more serious borrowing in 2009 and 2010. The Minister's illustrious predecessors, Messrs Lynch, Colley, O'Donoghue, Haughey and O'Malley started out with good intentions in 1977, fulfilling many budget promises, but they trebled the national debt between then and 1981. This was done in yearly increments and everybody had the best of intentions. That is what can happen when one goes down this road.
I can see why the Minister decided not to depress demand by taking stringent measures to restore fiscal balance but he did not take the supply side initiatives that would help the economy. He has made no effort to reform the public service, to eliminate the massive waste in public capital programmes, to fulfil our mantra of being a knowledge economy when we rank 26th out of 32 OECD countries for broadband service, or to restore our competitiveness which has declined on every front over the past five years. Normally if one cannot risk demand management — I can see why he did not do this — and one borrows, a Minister for Finance managing an economy should have a series of supply side interventions which would make it more efficient.
I agree with the VRT provisions in the Bill. It was far-sighted of the Green Party Ministers, particularly the Minister for the Environment, Heritage and Local Government, Deputy Gormley, to base VRT on engine emissions rather than engine capacity. The five categories suit all sorts of vehicles. There is, however, a downside. I have been driving an environmentally friendly car, a 320 diesel BMW, for several years. According to a schedule published in The Irish Times the VRT on it before the budgetary changes was €12,900, but after the changes it is €6,800. A reduction of €6,100 in VRT seems like good news but its effect on me is to reduce the value of my car by €6,000. For those of us who were conscious of the environmental effect of driving, the first result of this change is to reduce the trade-in value of our cars. It is worth considering that the first to be penalised are not those who drive gas guzzlers but those who drive low emission cars.
The cost of motoring is high. Petrol and diesel have become very expensive, particularly in the past 12 months. I hope that using VRT as an instrument of environmental protection does not bed in VRT at the current rates because there is a strong case for progressively reducing the burden of VRT. It was first introduced to protect the car assembly industry in Ireland but where is that industry now? We and the Danes received permission to introduce VRT for similar reasons. Now, however, it exists purely to collect taxes. I hope the Government, particularly the Green Party, will not see this as a way of collecting taxes in the future and using it as an instrument to protect the environment by varying the rates for cars with different emission levels.
Tolling also makes driving expensive. The way in which tolling operates at present means the more economically disadvantaged areas will have a higher incidence of tolls than the greater Dublin area. The reason is that projects in the capital programme that were lower down the priority list were funded by public private partnerships. In Limerick, one will pay a toll on the Limerick tunnel next year after its completion. Thereafter, one will pay tolls on the road from Limerick to Nenagh and following the extension of that road to join the motorway at Portlaoise, one will pay a toll along the entire route. Apart from the expense of driving, the Government should take into consideration that the incidence is heavier on the less competitive regions.
While I do not wish to return to the issue of Shannon Airport, I have encountered something that the Minister of State should bring to the attention of his colleagues. I refer to Aer Lingus's constant policy of trying to close down its routes out of Shannon. I checked recently on someone's behalf the return cost of flying from Dublin to Los Angeles and from Shannon to Los Angeles. It cost 50% more to get on the aeroplane in Shannon, fly to Dublin and take the flight to Los Angeles than to fly from Dublin. At present, the return cost from Dublin to Los Angeles is somewhat more than €400. However, the difference in cost for taking the flight from Shannon is €230. This constitutes blatant discrimination on the part of Aer Lingus to give itself justification for closing down the routes from Shannon on the basis that people are not using them and is as good an example as one will find.
I agree in principle with the Minister's actions on stamp duty. He has adopted the correct approach by acting on a once-off basis rather than incrementally. However, it is a pity that he did not carry this out last year because it is not now having the effect of putting a safety net under the building industry. It is too late for that.
I will take up my colleague's points on tolling and VRT about which a dangerous trend has become established for many years. One should not forget that, at present, motorists contribute approximately €5 billion annually to the Exchequer. In exchange, they are clamped if they park anywhere and must pay a toll to drive from one county or town to another. Moreover, as my colleague also pointed out, those who drive eco-friendly cars have been penalised for so doing. Strange things have happened over the years and while the current Minister was not specifically responsible, they form part of the trend.
I wish to refer briefly to a subject with which the Minister is fully familiar. In common with many others, I am worried about the economy's competitiveness at present. This issue has not arisen in the past six months but has been present for more than five years. I understand the Government's relative contentment with inflation, particularly house price inflation, because it receives more money in VAT, stamp duty and every which way.
Although it has been suggested that 100% lending was the cause of the problem, lending at 150% and, in some cases, 200% was the cause. In some developments, house prices were inflated by up to €80,000 per unit in the space of a weekend. This constitutes serious inflation and no action was taken to deal with it. Consequently, many people have been obliged to pay mortgages well in excess of what they could command. This is not a new development and has happened before. It has happened in the United Kingdom and in the United States and there is no point in blaming either for our problems. We contributed to our own problems in a serious manner. Why were rules not introduced in respect of credit control? This would have been a simple matter, particularly at a time when interests rates were low.
My colleague across the floor is making signals. I am unsure whether he wants to know the time or is anxious to get home.
It is far from me to say.
Members should be clear that this should not have happened. It has been brought to my attention by investors in my constituency and gives me no pleasure to state that unless we check, challenge and address the issue of competitiveness in the economy, both manufacturing and service industries will suffer. As the Minister is aware, such enterprises are relocating on a regular basis to more competitive economies and state openly that this is what is happening. It is now imperative that the lending institutions, the financial services sector, the Department of Finance and the Central Bank come together to find out how best to address the issues that now are cause for concern.
While the Minister may state it is easy to make this point in hindsight, some Members have been making this point for the past five or six years. Whenever one mentioned such issues, one was regarded as being unpatriotic for suggesting the taking of steps that might have improved the position. The country is going through a test at present. This is a test for the Minister, who is capable of facing any test. The question of how to deal with the unfolding economic situation also constitutes a test for the Government and the people. While it can be surmounted, doing so will take a great deal of determination and guidance from those whose responsibility it is to give such guidance.
The spin by many Government speakers in recent days has been to blame Opposition Members for talking down the economy. However, I intend to cite some figures produced by the Department of Finance that demonstrate that the points made by the Opposition are completely accurate and were not exaggerated. In 2007, tax revenue was €47,249 million, which was €1,826 million below target. An Exchequer deficit of €1,619 million was recorded in 2007, compared to a surplus of €2,265 million for 2006 and a budgeted Exchequer deficit of €546 million. The budget 2008 forecast for the Exchequer deficit is €4,866 million. If this does not constitute a problem when analysing the economy, what does?
Another statistic I examined concerned the most recent balance of payments data, which relate to the third quarter of 2007. The data show a current account deficit of €1,768 million in the third quarter. In addition, the deficit for 2006 was the largest current account deficit ever recorded. Undoubtedly, other speakers will confirm that the economy is not perfect and that a major problem exists. According to the latest set of forecasts published by the Central Bank, economic growth will halve this year. The volume of goods and services produced by the economy, or gross national product, GNP, is expected to increase by 2.6% this year compared to an estimated real GNP growth of 5.1% in 2007. In addition, the number of people claiming unemployment benefit rose in January at the fastest pace since 1980. That statistic speaks volumes about achievement.
In addition, business conditions have deteriorated markedly in the Republic. More than four years of growth in manufacturing came to an abrupt end in January. Furthermore, a recent analysis appeared in the Irish Examiner on individual debt in Ireland. In the past 20 years, the economy has been fuelled by American investment, especially from the information technology and pharmaceutical industries, by European investment, including Structural Funds, and, to an even greater degree, by domestic borrowing. The local economy has been fuelled by local individual borrowing and, as Deputy Noonan has noted, every house completion is worth the equivalent of approximately €100,000 in taxation. However, that trend has now stopped. The money borrowed from banks and elsewhere — it was once the State that borrowed and now it is the individual — was spent directly on fuelling the economy, providing services, etc. It was not really a sound economic philosophy.
A recent statistic suggests the value of our exports is increasing but apparently it is decreasing. Foreign-owned firms are responsible for 90% of our exports. There seems to be a wobble in the US economy and a 1% drop in US growth translates into a 1.75% decrease in Irish growth. Since our export trade is so dependent on foreign-owned international companies, the wobble will therefore have major repercussions for the Irish economy.
I welcome the initiatives on vehicle registration tax. Ten years ago, when Deputy Noonan and I were official spokespersons on finance, I called for such a measure. Traditionally, we dealt with emissions by trading and capping but the way to proceed is to focus on new appliances, be they cars or other items. We must deal with them and I agree with the proposed policy.
I must ask the Deputy to conclude.
It is a pity we do not have a more decent debate on this Bill.
I call Deputy Blaney and I must call the Minister at 6.45 p.m.
I wish to share the short time I am allowed with Deputy Peter Power.
Is that agreed? Agreed.
If the Minister, Deputy Cowen, takes nothing else from tonight's discussion, he can take the point that any admission by an Opposition that a budget is a non-event is a real goal for a Minister for Finance. Despite the recent downturn in the global economy, particularly the US economy, Ireland has been and will remain largely unscathed. This is due to the experience and forward planning of the Government. It is capable of taking practical steps when required.
I am thankful that the Minister is not one for knee-jerk reactions and I am confident he will see this country through the global economic difficulties. This Bill does not consist of measures to deal with an economy on the brink of economic downturn but of measures created by a forward-thinking and solid Government capable of upholding and advancing an already buoyant economy. I had prepared a ten-minute speech but due to the time restriction, I will hand over to my colleague.
I thank Deputy Blaney for sharing the very limited time that is available.
It is regrettable that there has been so much negative comment on the economy by the Opposition and the media in the debate over the past two days. It is clear that there is confusion between instability in the financial markets and national economic instability. Those who are confusing the concepts would have done well to have attended the meeting of the Joint Committee on Finance and the Public Service last week, chaired by Deputy Michael Finneran, at which the Governor of the Central Bank made it perfectly clear that the fundamentals of the economy are absolutely strong. While share prices go up and down and financial market stability increases and decreases, the underlying, real economy remains the same, strong and robust. Most people would accept this.
I always respect the comments of my constituency colleague, Deputy Noonan, but on this occasion he is very much mistaken. His central thesis this evening was based on the premise that the budget did nothing. The reality is quite different. Although a number of countries, particularly the United States, are introducing quite radical and, some would say, untimely financial packages and interest rates, the Minister for Finance in Ireland introduced his fiscal package long before the financial instability. It was called the budget and it involved a measured, prudent, proportionate injection of liquidity that did not in any way jeopardise our financial market. Deputy Noonan dressed this up as reckless borrowing. We will take no lectures in this quarter from a Government that lost power in 1987 when the banks were knocking on the door due to Fine Gael's borrowing.
That is a load of rubbish. The Deputy has a very tainted version of history.
We will take no lectures from that quarter. The electorate has not elected the Deputy's party since.
He always runs away from the truth.
I thank Deputies for the many interesting contributions to the debate on the Finance Bill 2008 and look forward to a constructive and informed discussion on Committee Stage, during which I hope Deputies will have a fuller opportunity to discuss some of the issues of interest to them. In my reply I will respond, in so far as possible, to the points made by the Deputies on the Bill.
In my introductory remarks, I pointed to the hallmarks of an equitable tax system and to what had been achieved in recent years for those on low and average incomes and for the more vulnerable groups in society. On the question of tax incentives, successive Governments, of all hues, have used such reliefs for the purpose of furthering certain socioeconomic objectives. Once again, Deputy Burton has failed to acknowledge any of the measures taken by me or my predecessor to abolish reliefs that had achieved their purpose and whose continuation was no longer appropriate, or to counter tax avoidance, or on base broadening, with a view to achieving greater equity in the system.
I point in particular to the measure I introduced in the Finance Act 2006, which came into effect from 1 January 2007. The measure restricts the use of tax incentive reliefs and will ensure that those who have high incomes and who use tax incentive reliefs will have an effective rate of income tax of about 20% at least. Data from the Office of the Revenue Commissioners on those with the highest incomes in the country consistently show that the majority of them pay tax at or close to the top rate. It is estimated for 2008 that the top 1%, approximately, of income earners, representing those earning in excess of €200,000 per annum, will contribute about 25% of the expected yield compared to less than 15% of the income tax take in 1997. These are the indisputable facts.
Deputy Bruton alleged that the Government was introducing new tax incentive schemes without any appropriate cost-benefit analysis but this is not the case. In budget 2006, I made it clear that any proposals for the introduction of new special incentive reliefs should, as far as appropriate, be time limited and subject to an assessment of costs and benefits prior to their introduction. Since then, the mid-Shannon scheme was subject to an independent cost-benefit analysis before it was introduced and the film relief scheme was subject to one before it was extended. Therefore, the Deputy's assertion that no cost-benefit analyses are being conducted on proposed new tax incentive schemes is clearly wrong.
Deputy Bruton's concerns regarding the termination of the schemes in July 2008 rather than at an earlier date fly in the face of the recommendations of the consultants who carried out the reviews, who saw no merit in an early termination of the property-based schemes in 2006. Rather, both external consultants' reports recommended that the schemes be retained for existing projects over a transitional period in order to allow for an orderly winding down of the schemes and to prevent overheating of the wider construction sector in the rush to meet the 2006 deadline.
I remind the Deputy that the main property schemes have been closed off to new projects since early 2003 in the case of the urban renewal scheme and since December 2004 in the case of the reliefs for student accommodation, hotels, holiday cottages, town renewal, rural renewal and the living over the shop scheme. While the Deputy is correct in stating the schemes are due to terminate in 2008, he fails to acknowledge that the time extension applied to pipeline projects only and also that, during the extended period, the levels of reliefs provided were reduced progressively to 75% and 50% of the levels that applied previously.
My decision to provide for a orderly winding down of these schemes between 2006 and 2008 reflected a pragmatic and balanced approach which took into account the significant role of the construction sector in the economy as a generator of economic growth and employment.
Deputy Burton expressed concern about a potential rise in home repossessions and about families meeting their mortgage commitments. As I noted in my reply to her in the House last week, possession orders applied for are not always granted or implemented and they are not always issued against residential properties. I am sure the Deputy would also acknowledge that higher levels of court proceedings for property repossessions need to be interpreted with caution given the variety of circumstances that give rise to such cases and the fact that not all of the proceedings relate to residential property.
Even where orders are secured, some are not enforced. The number of orders granted by the High Court in 2006 represented a tiny proportion of all home mortgages, in the order of 0.05%, and the Irish experience is of low levels of non-performance on mortgage loans.
In this context, the Financial Stability Report 2007, published last November by the Central Bank and Financial Services Authority of Ireland, points out that there are no firm indications of a significantly higher level of mortgage arrears in the banking system. In overall terms, housing affordability is supported by relatively low loan-to-value ratios, income growth, interest rates that are relatively low in historic terms and, in particular, increases in mortgage interest relief for first-time buyers.
In regard to mortgage repayments, the Government has provided substantial assistance in budgets 2007 and 2008 in the form of increased mortgage interest relief to those most in need of support in this area, that is, first-time buyers within the first seven years of taking out their mortgage. This has substantially cushioned the impact of increases in interest rates. Cumulatively, as a result of the last two budgets, first-time buyers have obtained additional relief of up to €100 per month, if single, or €200 per month, if married or widowed, subject to paying sufficient mortgage interest to avail of the relief. These improvements are in addition to the complete reform of stamp duty on residential property which considerably alters the economics of house purchase and repayment, especially for first-time buyers. The measures taken by the Government in the past two years represent a substantial level of support to mortgage holders.
Deputy Burton also referred to the tax position of a single person on the average industrial wage where bonus payments or overtime payments are received. With the single standard rate band set at €35,400 for 2008, the average industrial wage for 2008, estimated at some €34,000, is placed well outside liability to the higher rate of tax. This fulfils the commitment made in the programme for Government.
The effective tax rate of a PAYE worker on the average industrial wage of €34,000 is some 9% in 2008. If such a person earns, for example, an extra €2,000 in bonuses or overtime this year, his or her effective tax rate will be approximately 10%. The Deputy will agree that such low effective tax rates at such low levels is a substantial signal of the importance the Government has attached to reducing the tax burden for lower and average earners.
The latest comparative data available from the OECD, relating to 2006, indicate that in international terms, for the single worker on average earnings, Ireland has the lowest tax wedge in the EU and can report significant progress on income tax reform as a result. Deputies are probably tired of hearing me say this because it has been the case for each of the seven years from 2000 to 2006. For a married one-earner couple with two children on average earnings, Ireland has the lowest tax wedge in the entire OECD. In addition, when cash transfers from the State are taken into account, such couples face a negative burden because they receive more in cash transfers than they pay out in tax and social security contributions. Ireland is the only OECD country where this is the case. Moreover, the data do not take into account the further improvements made in budgets 2007 and 2008.
I remind the House of an interesting fact. After budget 2008, the percentage of the income tax yield coming from those earning at or under the average industrial wage is estimated at 4% of the total tax yield as compared to more than 14% when we came into office in 1997. Such earners represent approximately 55% of all income earners. This represents a considerable improvement in terms of tax equity.
Deputies Bruton, Burton and Shortall referred to the absence of provisions in the Finance Bill dealing with the pensions system. The Green Paper on pensions was published in the autumn of last year and sets out comprehensively both the challenges facing us and the options for change in the pensions area. The Green Paper is a discussion document aimed at ensuring that we have an informed public debate before any particular approaches to dealing with the pensions agenda are decided. In this context, a period of consultation on the contents of the Green Paper is under way. It would not be appropriate for the Government to undermine this consultation process by adopting particular courses of action at this stage. We will listen to what the social partners and others have to say on this and the other issues discussed in the Green Paper before progressing proposals in this area.
Deputy Burton raised the issue of the cost of the incentive for energy-efficient equipment, and Deputies O'Donnell and Finneran asked why it is not being extended to individuals. This incentive involves providing companies with the opportunity to invest in certain specified energy-saving technologies and being able to write off the full cost of that investment against their taxable income in the year of purchase. In the normal course, companies would only be entitled to write off the cost of this type of expenditure over eight years. The additional cost to the Exchequer arising from this incentive in terms of tax forgone will depend on the extent to which it encourages more companies to invest in the specified equipment than would do so in the absence of the incentive.
Moreover, it should be recognised that there will be benefits and savings to investing companies, the economy and the environment from the increased use of energy-efficient equipment. Putting a monetary value on these benefits is not a simple matter, but this incentive should be viewed in the nature of a "pump priming" exercise that will operate for three years. It is hoped that, over time, companies will see the ongoing value of investing in energy-efficient equipment in terms of the improved economic returns to themselves as well as the environmental benefits to society.
I note the welcome from Deputy Burton for the measures designed to increase the tax take from higher profits from the exploitation of future oil and gas finds. The Deputy asks whether these measures cannot be applied retrospectively. There are limits on the extent to which it is legal or desirable to make taxation retrospective, while there is a compelling case for increasing the tax take in the future from more profitable oil and gas fields. Internationally, licensing terms are being amended in favour of national governments in light of increasing oil prices and fewer prospect areas available for exploration.
The overall objective of the changes being made in this Bill is to ensure that the State will get a higher return in the case of more profitable oil and gas fields while continuing to encourage the industry to invest in exploration for oil and gas. We must get the balance right between ensuring, on the one hand, that Ireland gets an appropriate return for the exploitation of its resources while, on the other, giving sufficient encouragement to those who would search out and extract those resources at considerable risk. The revised arrangements achieve that balance.
Deputy O'Donnell referred to the changes being introduced to bring the tax treatment of foreign-sourced dividends received by companies in Ireland effectively into line with the tax treatment of the underlying income out of which domestic-sourced dividends are paid. He has called for the introduction of participation exemption. There is an argument that entirely exempting foreign-sourced dividends from taxation would help to encourage corporations to locate their headquarters or holding companies in Ireland. While there may be something in this, there are also some downsides to bear in mind. We must be careful not to contravene the EU code of conduct on business taxation and not to open the door to Ireland being used as an open channel for the passage of untaxed foreign income to other destinations.
While we always look closely at suggestions which could increase the attractiveness of Ireland as a location for foreign investment, I must find the right balance in this case. A concession of the type being sought by various commentators could have the negative side effect of attracting operations of little substance whose purpose here would mainly involve tax planning. We maintain an attractive low rate of corporation tax and will continue to do so. We maintain a tax system that is efficient and open to business and will continue to do so. Commentators who take one aspect of our system and compare it to favourable aspects of other systems often miss the key point that our business tax system is very attractive in the round.
With regard to Deputy Burton's comments on carbon emissions trading, the provisions in this regard are part of a package of measures that should assist with business development within the international financial services industry and are consistent with the Government's commitment in the Building on Success report proactively to "pursue appropriate actions for the further development of the industry". Trading in carbon credits is an integral part of the effort to reduce greenhouse gas emissions. Carbon credit trading is one element of our approach to meeting our Kyoto targets as set out in the national climate change strategy. It also forms part of the EU's proposals for the post-Kyoto period to 2020. It is recognised that it helps reduce emissions globally, encourages technology transfer and helps lesser developed countries.
Deputy Burton has accused me of undermining the housing market when it came to amending the stamp duty regime. I have made it clear that it was my intention that changes to the stamp duty regime that would disrupt the market would not be introduced, not that reform of stamp duty could not take place. The election of itself raised speculation as regards possible changes to the stamp duty regime which was fuelled primarily by the Deputy's proposal to introduce changes over a three-year period. It was responsible to react to this speculation and bring certainty to the market by setting out future intentions with regard to stamp duty reform.
It looks as though even Deputy Peter Power believes the Minister made a bags of it, and he is an ardent supporter of the Minister.
That one got by the Deputy; she did not realise it would work.
Who is buying a house at the moment?
Deputy Mansergh correctly pointed out that it is just not possible to introduce stamp duty reform in an overheated market. The conditions that now prevail allow for reform of the stamp duty regime without unduly affecting the market conditions. That is why I have chosen to introduce reform at this time rather than when the market was overheated. The reform will lead to a direct benefit for purchasers rather than sellers which, to answer Deputy Michael Noonan's question, would have been the position if they were introduced earlier.
Turning finally to the macro-economy, many Deputies spent much of their time speaking on this topic rather than the contents of the Bill, which is fair enough. More than anything else, it is important that we take a balanced perspective on the economic outlook and on developments in the construction sector. Developments in the housing market in recent years are a reflection of the success of our economy. Employment has risen substantially, earnings have increased and taxes have been reduced.
As Deputy Peter Power said, it is clear that the fundamentals of the Irish economy remain strong. The Irish workforce is dynamic, well educated and responsive to changing circumstances. We are committed to the consensus approach to wage formulation through the social partnership process which has played its part in delivering key benefits to our economy in the past and by ensuring that all stakeholders in our economy have a shared sense of the emerging issues. Social partnership will form a key part of our response to any difficulties that may emerge.
Time does not permit me to respond to all the points raised but I look forward to Committee Stage which will offer an opportunity for many Members, not only spokespersons, to be involved in a more detailed discussion.
- Ahern, Michael.
- Ahern, Noel.
- Andrews, Barry.
- Andrews, Chris.
- Ardagh, Seán.
- Aylward, Bobby.
- Behan, Joe.
- Blaney, Niall.
- Brady, Áine.
- Brady, Cyprian.
- Brady, Johnny.
- Browne, John.
- Byrne, Thomas.
- Calleary, Dara.
- Carey, Pat.
- Collins, Niall.
- Conlon, Margaret.
- Connick, Seán.
- Coughlan, Mary.
- Cowen, Brian.
- Cregan, John.
- Cuffe, Ciarán.
- Cullen, Martin.
- Curran, John.
- Devins, Jimmy.
- Dooley, Timmy.
- Fitzpatrick, Michael.
- Flynn, Beverley.
- Gallagher, Pat The Cope.
- Gogarty, Paul.
- Grealish, Noel.
- Hanafin, Mary.
- Healy-Rae, Jackie.
- Hoctor, Máire.
- Kelleher, Billy.
- Kelly, Peter.
- Kenneally, Brendan.
- Kennedy, Michael.
- Killeen, Tony.
- Kirk, Seamus.
- Kitt, Michael P.
- Kitt, Tom.
- Lenihan, Brian.
- Lowry, Michael.
- Mansergh, Martin.
- Martin, Micheál.
- McEllistrim, Thomas.
- McGrath, Finian.
- McGrath, Mattie.
- McGrath, Michael.
- Moloney, John.
- Moynihan, Michael.
- Mulcahy, Michael.
- Nolan, M. J.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- O’Brien, Darragh.
- O’Connor, Charlie.
- O’Dea, Willie.
- O’Flynn, Noel.
- O’Hanlon, Rory.
- O’Keeffe, Edward.
- O’Rourke, Mary.
- Power, Peter.
- Roche, Dick.
- Sargent, Trevor.
- Scanlon, Eamon.
- Smith, Brendan.
- Wallace, Mary.
- White, Mary Alexandra.
- Woods, Michael.
- Allen, Bernard.
- Bannon, James.
- Barrett, Seán.
- Broughan, Thomas P.
- Bruton, Richard.
- Burke, Ulick.
- Burton, Joan.
- Byrne, Catherine.
- Carey, Joe.
- Clune, Deirdre.
- Connaughton, Paul.
- Coonan, Noel J.
- Coveney, Simon.
- Crawford, Seymour.
- Creighton, Lucinda.
- D’Arcy, Michael.
- Deasy, John.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Enright, Olwyn.
- Feighan, Frank.
- Ferris, Martin.
- Flanagan, Charles.
- Flanagan, Terence.
- Hayes, Brian.
- Hogan, Phil.
- Howlin, Brendan.
- Kehoe, Paul.
- Kenny, Enda.
- Lynch, Kathleen.
- McCormack, Pádraic.
- McGinley, Dinny.
- McHugh, Joe.
- McManus, Liz.
- Mitchell, Olivia.
- Naughten, Denis.
- Neville, Dan.
- Noonan, Michael.
- Ó Caoláin, Caoimhghín.
- Ó Snodaigh, Aengus.
- O’Donnell, Kieran.
- O’Dowd, Fergus.
- O’Keeffe, Jim.
- O’Mahony, John.
- O’Shea, Brian.
- O’Sullivan, Jan.
- Rabbitte, Pat.
- Reilly, James.
- Ring, Michael.
- Shatter, Alan.
- Sherlock, Seán.
- Stagg, Emmet.
- Stanton, David.
- Timmins, Billy.
- Tuffy, Joanna.
- Upton, Mary.
- Varadkar, Leo.