Finance (No. 2) Bill 2008: Second Stage (Resumed).

Question again proposed: "That the Bill be now read a Second Time."

Deputy Michael Moynihan

Businesses are subject to a significant amount of regulation and it is small businesses which are most affected. Following the 2007 general election, the Joint Committee on Economic Regulatory Affairs was established to regulate the regulators. The difficulty is the large volume of regulation constantly coming through from all Departments and from the European Commission. It seems no consideration is being given to the effect this is having on small businesses and the enterprise community. This did not present a major problem as long as the Celtic tiger was roaring and businesses were operating at full tilt without time to think about the costs arising from this regulation. In the United Kingdom, there is a dedicated Department for Business, Enterprise and Regulatory Reform, and legislation is being drafted to ensure that every item of legislation is vetted for its impact on the particular sector it will regulate.

In this State, regulation has developed over the years without any attempt at overview or consolidation. The Department of the Taoiseach commenced a process last year with a view to reducing regulation by some 20%. Progress is ongoing in this regard and departmental representatives have discussed this at a meeting of the Joint Committee on Economic Regulatory Affairs. In light of the downturn in the economy and the associated challenges faced by all sectors of industry, particularly small and medium enterprises, we should ensure that any legislation which comes before the House is properly vetted so that businesses are not stifled by excessive regulation.

The agricultural sector experienced a major crisis in the mid-1990s in regard to BSE and brucellosis, leading to serious difficulties for the dairy industry and the suckler herd. As a result of the excellent work done by the Department of Agriculture, Fisheries and Food and the farming community, that has been brought under control. We are now almost brucellosis-free and have overcome the BSE crisis. However, all the additional staff recruited by the Department at that time remain in place. When a particular situation has been successfully monitored and resolved, is there a need to retain the associated additional staff? This is an important consideration given the need to ensure an efficient public service.

I welcome the changes to the income levy. The higher income earners are certainly being targeted. This is something the vast majority of people would welcome, and is something that we must examine. There is a section of middle income people out there who seem to be paying for everything, yet who also contribute the most to society. They look at the high rollers and those who seem to be getting everything for nothing.

This is a fair and equitable Bill and should be the cornerstone to make sure those that can pay do so. As the economy tightens, and indications are that it will be very difficult in 2009, we will have to mindful of those who lose their jobs and are forced to take social welfare payments. This is a global financial crisis, and is probably the worst crisis since the Wall Street crash in 1929. The Government is working hard to make sure we limit its effects. The difference between now and 1929 is that governments are intervening this time.

We saw banks make mistakes 30 years ago with the farming community, when they handed out credit willy-nilly. Maybe it is time for us to rethink the whole banking sector and the whole banking system in this country, with a national bank that is not a semi-State body. We need a banking system on which small and medium sized firms can depend. The mistakes that were made recently and those that were made in the late 1970s and early 1980s should never happen again.

Deputy Michael Ring

I wish to share time with Deputy Hayes and Deputy Crawford.

I spoke to the Minister for Finance about the tax to be levied on Knock Airport, as did Deputy Calleary and other Deputies. I know there are still reservations about it, but I am pleased the Minister has reduced it from €10 to €2. That regional airport is very important for the west. It suffers from the disadvantage of not having enough people, and it would be further disadvantaged if the people flying in and out of Mayo were taxed a further €10. I am delighted the Minister dealt with that.

I am disappointed the Minister did not deal with small businesses in the Finance Bill 2008. Small businesses are under terrible pressure. They cannot get funding from the banks. I call on the Minister and the Government to send out a directive immediately to all local authorities. They cannot come in here and look for a 3%-4% increase from small businesses. There are businesses suffering across the country, and if local authorities think they can increase water charges and rates this year, we will see many more of them fold. The day where they can charge businesses as they like is over. I am disappointed the Minister did not bring something in to get small businesses up and moving again.

We have already spoken about quangos, when we dealt with the FÁS issue. The Minister should write to every quango and to the local authorities. What was going on here over the last ten or 15 years was not right. Officials from every quango and local authority were travelling all over the world and thinking this was never going to end. It has ended and the message needs to come from the Department of Finance that we are in a serious situation at the moment. All foreign travel by officials from quangos and local authorities should be immediately stopped. There should be an investigation into every quango in the country. FÁS was one of the big boys, but there are many small boys and girls out there who played hell and thought this bubble would never burst.

There was a job going in Mayo County Council recently. There are interview boards for such jobs and for jobs like general operators. Up to 150 people could apply for these jobs. The new thing now is to put the manager or the county secretary on the interview board, and these people could get three months' work in doing interviews. It is probably more profitable than working. It is time this stopped and that all these quangos were dealt with. It was all about giving the councillors a few trips here and there, but that was nothing in comparison to what was going on behind the scenes, where officials were travelling everywhere using their credit cards and so on. It is time to stop all this. I recently put down some Dáil questions about the Western Development Commission. The same thing was happening there. The good times are over. The small people out there are being attacked in this budget and they will have to pay the 32 taxes introduced by this Government since then. That is nothing compared to what will happen when the local authorities get going in a few weeks' time.

I was disappointed the Minister did not come in with new ideas. I thought he would bring in some initiative to try to get small businesses up and moving. Small businesses employ people in towns and villages across the country. Instead of initiatives to keep them afloat, we introduce stealth taxes and direct taxes. The owners of small businesses are fed up with councils, the Revenue Commissioners, inspectors and so on. Some people are telling me that they would be better off on social welfare because they would not suffer as much aggravation from the State. Instead of encouraging them, they are being annoyed by civil servants who are not creating a job yet have to be paid out of the Exchequer every year.

Maybe it is time we had a proper review of what has been going on in this country. European legislation was coming in here and the Government was passing it on. Every time a European directive was put through, it cost the taxpayer, small businesses and those employing people here. They are sick and tired of going to doctors due to stress caused by the State. Instead of encouraging them to employ more people, we are putting further pressure on them. The recent budget certainly did not do anything for small businesses and I hope we see an initiative shortly from the Government. I know the Taoiseach is sitting down with the Cabinet at the moment and it will come up with some kind of a national plan. It is long enough in the job to get this plan up and running.

I see Deputy White is here, and I am sure she will not mind if I have a few words about the Green Party. I was in somebody's house the other day, and the woman had one of these new bulbs. She said that she was depressed enough with the state of the country and with the Government, but that now she is depressed further with these lights that will not shine. That was the best initiative of the Government in the last 12 months. The Green Party is depressing her with these lights.

Deputy Mary Alexandra White

They save money.

Deputy Michael Ring

Deputy Cuffe spoke the other day about bicycles. The way this country is going, we will be going back to using bicycles because nobody will be able to buy anything else. What time have I left, a Cheann Comhairle?

An Ceann Comhairle

You have 30 seconds.

Deputy Michael Ring

I had better be on my bike so. I will hand over to my colleagues.

An Ceann Comhairle

The Deputy has been as illuminating as ever.

Deputy Seymour Crawford

The Finance Bill 2008 is the last section of a completely discredited budget, with many U-turns and a total failure to face reality. Since last July, the Taoiseach and his Ministers prepared the country for what they said would be a tough but fair budget. They would look after those in need, but instead the budget attacked the medical card for the elderly, the education of our children, and by raising taxes on employment, the incentive to work.

In County Monaghan over the last five years, 1,200 jobs have been lost in the furniture industry. Along with the losses in the building trade, hundreds have also been lost in the timber frame manufacturing companies IJM and Century Homes.

The Bill before us increases VAT at a time when the VAT rate in Northern Ireland has been cut. This will have a devastating effect in my constituency and the entire Border region. The VAT rate in Northern Ireland is now 15% compared with 21.5% in the Republic. The price of petrol was also increased in the budget by eight cent per litre, bringing it close to the price in Northern Ireland and therefore discouraging people from travelling South to buy petrol and other goods.

I urge the Minister, even at this late stage, to reconsider the VAT situation and take account of the proposal made by Fine Gael last summer to introduce a VAT rate of 20% and claw back some of the windfall benefits obtained by the ESB and others. It is vital the Ministers for Enterprise, Trade and Employment and Finance take a serious look at the price differentials north and south of the Border in the same retail chains. They must deal with the anomaly that exists, especially with regard to food products, to which VAT does not apply. Taxes on car parking spaces and tax relief for bicycles will not affect the Border region.

We understood that the Taoiseach had a plan to take the country out of recession but this Bill introduces 17 new taxes aimed at ordinary taxpayers, raising an average of €2,500 from a typical household. The Minister has been forced by the Opposition and the general public into a U-turn on the income levy provision, which is now a little more equitable than its original form, but there are still serious problems for self-employed people where their gross income is being utilised as the base. In the farming sector, for example, most farmers have been forced to make major investments on their farms for environmental reasons. That investment will not increase their incomes by one cent but the normal depreciation allowance will not be allowed.

When the Government took initial steps to deal with the banking problems it was supported by the Fine Gael Party. However, it is totally unacceptable that the current uncertainty be allowed to continue, putting serious pressure on small industries for whom necessary and normal overdrafts are no longer available. It is vital the Minister brings his discussions with the banks to a speedy conclusion to ensure that finance is available to small businesses. Otherwise, more jobs will be lost and our best workers will either emigrate or join the swelling dole queues, thus increasing costs to the State.

It is unreal that at a time of economic difficulty, the Government has chosen to target education. There is no doubt the increase in class sizes and the lack of teachers and support services will mean that disadvantaged children and those with disabilities will have a lesser chance of obtaining employment on leaving school and will, in the long term, cost the country much more.

I cannot leave the subject of the budget and this Finance Bill without referring to the complete lack of leadership and responsibility at the Department of Health and Children and the HSE. The Finance Bill itself does not deal with the medical cards for those over 70. I understand that the medical card fiasco will be dealt with in separate legislation. However, it is impossible to understand the logic of a Minister and her appointees closing public hospital wards, such as the orthopaedic ward at Our Lady's Hospital in Navan, where there are state-of-the-art theatres and top quality staff. Patients who should have been operated on in that facility are now being sent to private facilities and their treatment is being funded under the National Treatment Purchase Fund or under private health insurance. Clearly, for the Minister for Health and Children, it is more important to prop up her friends in the private sector than to deal with the mismanagement of public health services.

While I welcome the U-turn in the Finance Bill vis-à-vis the original budget statement that full tax relief would not be available to those who must pay nursing home charges, the fact that the so-called fair deal has been delayed indefinitely and its financial structures severely limited will have a major effect on many families in the future.

I welcome the fact the Minister for Finance is committed to examining the overall cost of public service. Once again, however, rather than demand responsibility from the 33 Ministers and Ministers of State, he has decided to set up another independent review. Unfortunately, the track record of this Government in dealing with problems highlighted by the Opposition, the national media or independent reviews is not promising. I do not expect a better result from this latest review, unless the Taoiseach and Minister for Finance accept that major surgery is needed to bring the cost of running this country under control and to regain our lost competitiveness.

Deputy Tom Hayes

I am pleased to have the opportunity to speak on the Finance Bill and to refer to some of the issues that are currently exercising people, including the enormous number of job losses in recent times. Many people are also very concerned at the numbers leaving Ireland, whether immigrants from abroad or native Irish people who were educated here, because there are no jobs available to them.

The budget and this Finance Bill do nothing to assist the one area in which there are opportunities to create employment, namely the small business sector. Never before have I heard so many people in small businesses complain about how difficult it is for them to operate at present. In that context, the increase in the VAT rate must be condemned, particularly as the British Government has cut the VAT rate in the United Kingdom, which is encouraging people to cross the Border to do their shopping in Northern Ireland. We see evidence of this on our television screens on an almost nightly basis. That is putting additional pressure on businesses which are already struggling because of the economic downturn. The budget and Finance Bill do nothing to help small businesses which have lost competitiveness.

Agriculture and tourism are very important sectors in Ireland. During the last recession in the 1980s, the agricultural sector helped to bring about an uplift in the economy. Food production increased in every county. However, because of actions taken in the past, fewer young people are staying on the land and agricultural colleges all over the country have closed. This budget has made matters worse by abolishing installation aid, which was one of the few incentives for young people to go into farming, produce food and create wealth. I condemn that decision and urge the Government to reinstate installation aid at some stage in the future. I urge it to do likewise with the farm improvement scheme, which has been suspended. There is not a village, town or county that will not be badly affected by the ending of such schemes. The Government is behaving in an anti-rural and anti-small business manner.

Tourism also presents many job creation opportunities. The industry has been neglected in recent years because of the Celtic tiger. People who have been taking holidays abroad should be encouraged to stay at home. There are many very good hotels in the country now which are struggling to stay afloat. The Government must do something to assist the tourism industry.

The racing industry also deserves attention. Coolmore Stud in my constituency of Tipperary South and many other small stud farms are providing much-needed employment. Areas like Fethard, Cashel and the rural areas around them, are very dependent on the bloodstock industry. The racing industry has suffered a cutback of €55 million in the budget and this is wrong. It is unfair to the industry. People do not understand. I invite Members of this House and commentators on the bloodstock industry to come to County Tipperary and see for themselves the dependence of many ordinary families on that industry. There is a misunderstanding and a misperception of the industry. It is thought that it is owned by kings and queens and the wealthy but that is not the reality. Small farmers are very dependent on the industry. They own a few horses or keep them for others and they lease out their land or their stables. The spin-off is the creation of 15,000 jobs in the industry.

The bloodstock industry should be removed from under the aegis of the Department of Arts, Sport and Tourism and put under the aegis of the Department of Agriculture, Fisheries and Food because it is an agriculture-based industry. It contains a certain amount of sport. When he was Minister with responsibility for sport the Ceann Comhairle gave it his approval and was very committed to it in his time. However, it would be preferable to have it under the aegis of the Department of Agriculture, Fisheries and Food which is its proper home.

Ireland produces approximately 42% of all foals in Europe. They are probably the best in the world, yet we are turning our back on the industry. Many people are under huge financial pressure, in particular the smaller people with one or two foals. In Goffs or Fairyhouse foals are selling at a huge loss and those people will be driven out of this industry. Nobody cares. The Government only announces cutbacks, which is wrong. I am not talking about the big multinationals and interests but the small farmers. We need to support this industry, to understand it better and to help the small people involved in it.

Deputy Dara Calleary

I wish to share time with Deputy Mary White.

I welcome the chance to comment on the Finance Bill which was framed and delivered in an incredibly difficult international environment. I refer in particular to the United States where titans of the US such as GM and Ford are going to Congress begging for their survival and to the UK where an extraordinary budget was introduced this week and where short-term populist measures have been taken with the promise of an upturn and the threat of a long-term payback. It seems we may have to re-invent the English language to come up with words for the amount of debt outstanding in all those economies. The EU is today announcing its own programme for regeneration.

The Finance Bill is specific in its measures for supporting enterprise, combined with the increased provision for county and city enterprise boards announced in the budget. Many of them are doing excellent work in promoting small companies by helping them to start up and guiding them through the difficult initial years. The Bill provides further measures which are to be welcomed. The provision whereby new companies will see full relief where their total corporation tax liability in any of the first three accounting periods does not exceed €40,000, is particularly welcome. This will be a comfort to companies when they are in the early stages of development.

The increase in the rate of tax credit for incremental expenditure undertaken by a company on qualifying research and development from 20% to 25%, is necessary as we try to position ourselves in the knowledge economy and move our industries from traditional to new. I have met companies around the country, many of whom came to Ireland to do a specific job. They have re-engineered themselves by means of retraining and research and development and without losing employees. They now do something completely different. This is one of the stories that has been lost in the current climate. The number of such companies was reflected in the IDA survey. Companies came to Ireland to do a specific job perhaps 20 or 30 years ago and through investment and because of the talent of their workforce they now have a different work function and they are still in Ireland. The provision on research and development is to be welcomed.

The budget provided support to start-up companies with a provision whereby new companies will get full relief. The budget has also made some provisions for first-time buyers. We cannot tar the entire construction industry with the same brush. There are many small builders who operated their businesses decently and honourably over the past ten years. Tarring them all with the developer brush is unfair to those who built houses in response to the demand and did not behave like the big city-based developers.

Deputy Seán Sherlock

That is an implied acknowledgement of the cowboys.

Deputy Dara Calleary

I remind Deputy Sherlock that we must support and encourage them.

I welcome the fact that the stamp duty applicable to non-residential property is being reduced from 9% to 6% and there is also an increase in the rate of mortgage interest relief for first-time buyers. This has been coupled with a reduction in mortgage interest relief for non-first-time buyers. This rebalancing makes for a fairer system. The new home choice loan scheme will facilitate first-time buyers to return to the market. This is being piloted through the system by the Minister of State, Deputy Finneran. It is noticeable that the banks, in spite of reducing other facilities still seem anxious to target the first-time buyer in terms of promotion and advertising.

I welcome the extension to the stamp duty relief available for farmers acquiring land who are aged under 35 and have specific agricultural training. I also welcome the renewal of the 25% general farming stock relief and the special 100% stock relief for young trained farmers.

I agree with Deputy Hayes that the suspension of the installation aid scheme and the farm retirement scheme was regrettable. It was necessary in view of the expenditure contained in other schemes in the Department. A date should be set for the reintroduction of those schemes and in the case of the installation aid scheme, provisions should be made for those farmers who reach the age threshold during the time of the suspension. They should be assured now that they will be included in the scheme when it returns. I welcome the 17% increase in REPS 4. This rewards environmental investment in farming. The payments under the single farm payment have commenced today.

I note the CAP health check last week and the provision of the fund of €23 million for other areas of agriculture arising from the modulation increase. I ask that the Minister for Agriculture, Fisheries and Food would give consideration to putting some of that money into reducing the cut in the disadvantaged area payment, particularly to farmers in the west.

Deputy Ring referred to the air travel tax. Much of what he said about quangos and other agencies is true and should not be dismissed. The introduction of an air travel tax and the reduction of the proposed initial fee is welcome. The Minister has taken on board the cross-party representations made about the regional airports. Our regional airports provide a vital service. While once dismissed by certain elements in this House, they have now been embraced by all by reason of the service, the access and the support they provide to our regional economies. Any support is welcome. The lower rate of €2 will now apply to departures from any Irish airport where the destination is 300 km or less from Dublin Airport. That means the traditional Irish destinations such as Manchester, Liverpool and Glasgow, for people using Ireland West Airport, will be subject to the €2 rate.

Deputy Moynihan spoke earlier about the burden of red tape. The budget contains a number of initiatives such as legislation to provide for the introduction of e-stamping and the simplification and streamlining of provisions in a range of Acts for the collection and recovery of tax and duties.

I spoke last night on the Labour Party's Private Members' motion on small business about the burden being placed on small business by our interpretation of legislation. I have only been a Member of this House for a wet week. The House passes legislation but leaves its interpretation and implementation to outside bodies. We need to take control of the implementation of legislation, as it is resulting in large administrative burdens being placed not just on small businesses but farming and people in general. A red-tape audit needs to be conducted. While the Government is committed to reducing the red-tape burden by 25%, it will not be enough and many businesses will not even survive to see that reduction. Greater urgency must be attached to this and I know the Tánaiste and Minister for Enterprise, Trade and Employment will do that.

The Bill provides for all second-hand vehicles to be subject to a pre-registration check by the NCT as a condition of registration. The establishment of a temporary register for foreign-registered vehicles intending to remain in the State is welcome and overdue. Motor dealers are under pressure due to the influx of second-hand cars from outside the jurisdiction. Many dealers have made large investments in their premises in the past several years. Many of them provide substantial and technical employment in areas where it would not normally be. This measure will assist them in facing these challenges.

On Private Members' business last night I spoke on the banking system. I want to reiterate to the departmental officials and the Minister for Finance that this House placed faith in the banking system by passing the Credit Institutions (Financial Support) Bill in the manner which it did. I increasingly believe, and as the evidence mounts day by day, that this faith has been thrown back in our faces by the manner in which some banks are dealing with small businesses.

Deputy Michael D. Higgins

Hear, hear.

Deputy Dara Calleary

These banks are engaged in corporate bullying, using and abusing the very people who they were happy to serve this time last year. The banks are now putting them through the mill in a manner which no one can stand over. It is ironic that banks in the UK are giving guarantees on fees and contracts. I would hope Irish banks take similar acts of faith in their small business and general clients. I am not pleading for charity cases but for substantial and solid businesses with successful track records who for reasons outside of their control are facing pressure. They need space and this was the spirit of the bank guarantee legislation.

There are several other issues regarding small and medium-sized enterprises which I would like to see tackled on Committee Stage. Pre-qualification for Government contracts may have been a good measure several years ago but now it must be challenged. I welcome the Bill and that the Minister took on board feedback since his Budget Statement. I look forward to its passage through the House.

Deputy Mary Alexandra White

In light of the domestic and global economic downturn, the Government was right to bring forward the budget to impinge on the public the dire state of our public finances and the adjustments required in the short term. These are necessary to maintain money in the economy but they are also balanced as the need for extra revenue cannot be achieved only through borrowing. Revenue-raising through taxation is necessary and that signal has been sent out.

Mistakes were made with part of the budget — the medical cards and income levy thresholds to name two. The restructured income levy provides for the shielding of both social welfare dependants and low-income earners from the 1% levy, while the 3% on income over €250,000 is progressive in its targeting of the tax take on the wealthiest.

The levy of €200 a year on non-principal residences also marks an important shift towards more progressive taxation. It is a levy on those with the luxury of a second property and a resourceful way of funding local government. The move to finance local government by this measure should reduce local government dependence on motor taxation for revenue, an environmentally positive signal.

Other tax increases, such as DIRT in certain cases and capital gains tax, are taxes on wealth. The increase in the latter was advocated by the Green Party in the last general election so as to reduce the inequity whereby those who benefit from capital gains pay less than those who work and pay tax on their earnings.

Despite the economic challenges and tight fiscal parameters in which this budget was constructed, the Government has succeeded in driving forward the need to re-balance taxation and incentives towards a more environmentally sustainable system and way of life.

Combating climate change through the development of renewable energy generation, the allocation of €20 million for the greener homes scheme, €5 million for the warmer homes scheme for low-income households and the extension of capital allowance for energy efficient equipment are all welcome. In total, €71 million is being provided in capital funding for energy efficiency and energy research programmes. Climate change is the single greatest moral imperative of our time. Such investment is vital if we are to make Ireland a hub for renewable energy in Europe and beyond.

Other important environmental allocations include the extra €89 million for water services investment. The dangers facing the country from under-investment in our water infrastructure are massive, not to mention the EU penalties and fines that will loom large if we do not get our act together. With the water framework directive coming down the track, all water must be of good quality by 2015. The Government, and in particular the Minister for the Environment, Heritage and Local Government, Deputy Gormley, have shown a determination to make the investment before it is too late. Many areas, including Carlow-Kilkenny, will be glad of the input of capital investment in waste water treatment plants.

Two innovative ideas for reducing our usage of cars have been introduced. The levy on parking spaces in cities, while unpalatable to many, is a firm signal that we must move away from our complete reliance on and worship of cars. The car might be convenient and comfortable. However, until society arrives at a stage where cars are carbon-neutral, we will have to get used to the idea of using them less. This measure will hopefully make people reconsider their modes of commuting and opt for public transport which needs more investment.

With this in mind the safeguarding of investment in public transport projects in Transport 21 is crucial, which I welcome. The continuation of the rural transport and the green schools programmes is also welcome. I urge future decisions to expand these schemes as much as possible.

I am sorry Deputy Ring is not in the Chamber. The second innovative idea on reducing car usage in this budget is the tax relief for employer provided bicycles through the cycle-to-work scheme. While Deputy Ring may belittle cycling, I could not see the Danes, the Dutch or the Finish Opposition parties laughing at a tax incentive scheme like this. This idea has gripped the imagination, judging by the number of telephone calls and e-mails to the Green Party's constituency offices.

The tax relief provided for bike and safety equipment purchase is more than ample. Those who criticised the amount allocated for it would be the first to criticise the allocation if it were any greater. The cycle-to-work scheme is yet another innovation the Opposition wants more funding for but cannot tell us from where it would get it. I will not be holding my breath. As 2009 will be the first year of this scheme, the Government was right to be prudent in its allocation as it is not yet known what its take-up will be.

One other environmental aspect of the 2009 budget which should be acknowledged for its importance is the tax relief for cleaning up heavily polluted industrial sites. This is important for a green economy such as Ireland which produces quality and safe food in a clean environment. This is why many tourists come to Ireland. There is no need to rake over the sorry track record of industrial pollution but there is a need to rectify these industrial mistakes. This tax relief will be of benefit in cleaning up these sites.

I welcome the progress in section 13 regarding our infamous tax exiles. For far too long this State has had an ambivalent relationship with Irish people who find the burden of tax residency too costly. We have castigated their refusal to pay tax in this country, yet they are treated as national heroes with praise for their philanthropy and reportage of their business affairs and opinions. There is nothing national or heroic about these people attending events in Ireland throughout the year, taking positions on State and commercial boards and proclaiming pride in being Irish, while paying none of the tax the rest of us pay. If they benefit from this country they should financially support this country. No amount of job creation or generosity should overlook that. I welcome the move in section 13 to limit the time spent here by these non-residents. I hope the change will be enforced and their movements in and out of the country monitored so that they comply with the law. I commend the Bill to the House.

Deputy Michael D. Higgins

I propose to share time with Deputy Sherlock. I welcome the opportunity to speak on this Bill but my disappointment is due to the absence of a clear connection to the economy. Deputies on all sides have described the challenges the economy faces, not least in the potential to exceed 7.5% unemployment and perhaps an increase in unemployment next year and the following year. It is only reasonable that the main thrust would be in terms of the employment potential of the Bill in terms of employment protection or employment creation.

Regarding employment protection, we are not well served by those scapegoating the public service. I regard those who work in the public service with admiration. I was a Minister and know the differences that exist in the public service. A small army of people are in grades such as clerical officer up to principal officer, some of whom earn wages that qualify them for family income supplement. There are significant gaps in wages as one goes from higher executive officer to principal officer to assistant secretary to Secretary General. Talented people who decide, rather than working for themselves or private corporations, to work for the public service have my admiration. I regard it as cowardly of those who want to see a different kind of public service that they will not specify what change they would make.

I would make a change. We need a new economy, a new banking system and a different version of the public service. The public service is not well served as we move into conditions of change by having inflexibility, authoritarianism, hierarchy, excessive rules and so forth. We need to take that out and to examine the different quality of interaction at the time of a collapsed economy, which is anxious to recover, and previous good times. It is not acceptable to go into an office where people are registering as unemployed — as we heard on a radio programme recently — where there are five hatches, only two of which are open, with people drinking tea in the background. They are entitled to drink their tea but then, in time, they open the hatch and it is time to put on the hatchet face for the public. That is not acceptable. The degree to which morale in the public service is being reduced and attacked is serious. This is a time at which it needs to be reconfigured.

I turn to the pathetic connection between this Bill and the needs of the economy. The position in which the Irish economy finds itself is very different from the position of the British economy. It is different in so far as the British economy has the option to spend, in a rather Keynesian way, its way back to what it believes will be economic progress. In the case of Ireland, we have gone from a surplus in the national accounts just two years ago, to the second highest projected deficit in the EU; it will be the highest if the projections are taken as a proportion of GDP although I do not have the time to give detailed figures. I am not being anti-national in this.

What could have been done? The Government could have returned the national development plan and subjected it to an employment test and driven such capital expenditure as would have taken up the slack in, among other areas, the construction industry by addressing all of the schools in band 1.1. Granted, it would not have received the stamp duty it had during the housing boom. The largest contraction in sales is in respect of building materials such as furniture, glass and lamps as reported by The Economist intelligence unit. My suggestion would take up these secondary effects and there would be a better multiplier because the expenditure would be regionalised. One would not receive stamp duty but would create a good effect in the economy. There is nothing in the Bill in this respect but there is much droning on about the expenditure for an approved school building. No statement is being made that the national plan is being reconfigured to do certain things.

The Green Party might like the following suggestion and I am amazed it is not pushing it more strongly. I welcome the research and development references in the Bill. These are positive but I would prefer if they were connected to a real strategy in terms of the sustainable economy, the green economy, re-insulation, the retrofit of houses and the return to different estates. These are good, solid expenditure items that would justify borrowing at any time because one is creating the capacity for recovery.

I do not understand how it can be helpful to double the amount of time one must wait. If one interrupted one's education, as many did, to enter the construction industry and one wants to get back to education, it is now twice as hard. There are ridiculous little rules about people dragging themselves through local authorities to get a utility bill to prove one was not living at home for the previous 12 months. If one happens to be in a flat where the landlord is paying the electricity and the ESB, one is done for. The authorities will not accept driving licences, bank statements or phone bills. Utility bills must be provided. When did God make utility bills a requirement of any scheme? That is the kind of unimaginative, deadly stuff in the Bill.

Returning to education is one example where people will be faced with problems but there is a string of others. I feel sorry for those in public service whose lives are ruined by little meaningless rules so that they must turn themselves into ritualists. We in the political end of the spectrum have not given any direction.

I refer to what has preceded this Finance Bill, namely, our discussion on the banking sector. No one can make any progress on building a new economy, with a high employment content, without admitting what went wrong. The truth is there was an international credit crisis but within it there is a homegrown, crafted, carefully planned — over several McCreevy budgets — property bubble that we put within the credit bubble. I agree with Deputy Calleary, who referred to small builders. These builders put one brick on another, know the square footage of a house and know about slates. They are not those who got the big benefits. Those who got the benefit were pure speculators. The Government supported the speculative version of the economy that has nearly brought us all to ruin. Therefore, the banking system that stood behind it, like people blowing air into a fire, are the same people to whom people are now turning for help. For example, when the Labour Party was anxious to protect people's bank deposits and suggested a figure of €70 million, the Government did better and suggested €100 million. I welcome that but I do not welcome giving a blanket guarantee to the banking system that is now bleeding dry all its previous customers by looking for special charges for the renegotiation of term loans, freezing term loans, calling in overdrafts and so forth.

This House spent all night talking about solvency but the issue now is liquidity. There are people throughout the country who are worried about their jobs, and there are many decent employers who want to keep their employees but they are being crucified by banks.

There is nothing in this Finance Bill to indicate there will be relief. Instead of that, and it is the worst scenario of all, into the scene I have described is emerging the private consortium of Mallabraca containing as it does the Carlisle Group, famous for hit and run asset stripping activities everywhere it has invested.

On the question of the National Pensions Reserve Fund or the work of the National Treasury Management Agency, if it is profitable for Mallabraca to come into the Irish banking system and remain for five years, why would it not be appropriate for Irish funds to do that with the guarantees and the social responsibility of enhancing liquidity? Instead, we have Mallabraca, with its Carlisle Group that has such luminaries as President George H. Bush, former Secretary of State Baker, Frank Carlucci and so on and is the tenth largest US defence contractor as it happens by sheer serendipity due to the board.

I want to be consistent. I have said in this House that the NTMA should examine the question of investing in armaments. I have said that the National Pensions Reserve Fund should be careful about its investments and yet one of the leading funding groups, with its $160 billion fund, that funds armaments and is the tenth largest contractor for defence spending in the United States is coming into the Bank of Ireland. Does any Member of this House believe that kind of thinking will revitalise or make safe a single job or create a job in any village or town in Ireland?

Deputy Seán Sherlock

The Minister for Finance made a call to patriotic action. It was more of a cull in terms of patriotic action because despite the circumstances in which we find ourselves, the current difficulties we face and the external factors that have affected this economy, there was no imagination in terms of the framing of this budget. There was little by way of providing an economic stimulus that would create jobs and build a foundation on which we could climb out of this morass if not in the short term at least in the medium term. Instead of putting in place some inventive measures, the Government decided to slash and burn across the divide.

To take one sector, agriculture is a primary producer. Food and drink exports amount to €8.2 billion to €8.6 billion every year but at a time when production was going on in that sector and in the face of a global food scarcity, the Government decided to take money out of that productive part of the economy by way of cuts in the installation aid scheme and not extending the farm waste management scheme.

It has been proven that every euro spent within the rural economy has a multiplier effect and it stays within the rural economy. In cutting the installation aid scheme and other such schemes, the Government is automatically reducing that multiplier effect and the potential within what was a productive sector. That did not make economic sense. I ask the Minister, when replying, to address that particular aspect because we need to be imaginative about the direction in which this country is going in this tough economic climate.

The issue of VAT is one on which I would like the Minister to respond. If we are in an inflationary period and if there is less money in the economy, and public and consumer sentiment is non-existent, why would the Minister increase VAT at a time when people are not spending money? The returns to the Exchequer will be significantly reduced anyway. If the Minister could stimulate such demand by reducing VAT he would, by extension, increase returns to the Exchequer. That seems to be the most logical approach. He should not increase VAT but maintain it at the current rate or reduce it marginally but he certainly should not increase it in the current climate. I do not understand the reason the Minister has done that, and perhaps we could get an answer as to his logic in that regard.

On the Taxes Consolidation Act 1997 relating to research and development activity, we all agree that foreign direct investment has been very good for this country. That is something that has been a bedrock of policy for a number of years but we need to consider whether we should continue to rely on foreign direct investment.

I welcome the tax credits for research and development but I again question the reason for the base year of 2003. If a company is involved in research and development there is a good possibility that its research could predate that date. I would have favoured 2000 as a base year to try to exercise a credit of that nature but perhaps there is a logic to the Minister's position on that. He might respond to that when replying.

On the issue of banking, we need some consistency. Banks, by their very nature, have been profligate in the way they have lent in that much of it was developer led. There is an opportunity now through this State guarantee to enforce a new culture on banking. I argued last night in our Private Members' motion that an ecological loan book could be set up. At a time when not everybody will be eligible for the national insulation scheme we could set up a system of preferential rates that would allow people to borrow for improvements to their homes that would offset carbon. As I understand that scheme, the State has the control to enforce that type of lending and I do not understand why it does not do that. That would have a knock-on multiplier effect in terms of job creation. If preferential loans could be given to people who are not eligible for grant aid for home improvements, it would have a positive knock-on effect for the local economy. We need a little more imagination. While we all acknowledge the position we are in, four Ministers are involved in the Enterprise, Trade and Employment brief and surely many actions can be taken to stimulate the economy. This party has given many ideas about what we would do if we were on that side of the House and there is scope for those to be taken on board.

There has been much battering of the public sector of late. I know umpteen local authority outdoor staff on Cork County Council's northern division who have been let go. They were either on temporary contracts or had tendered for jobs. One of them has worked for the council as a JCB operator for more than 30 years of his life, was out on call at 2 a.m., 5 a.m. or whenever the council wanted him and gave a good service. If we are to have an argument in this House about culling the public service we must be careful.

Deputy Michael D. Higgins

Hear, hear.

Deputy Seán Sherlock

We must acknowledge that workers of that nature on the front line, who served their local authorities well and had great loyalty to them and to the people they served, are being let go.

Deputy Michael D. Higgins

They were proud.

Deputy Seán Sherlock

There are people working in FÁS offices throughout this country with whom I deal on a daily basis through community employment schemes. I support those people who deliver for their communities. I distinguish between the work they do and some of the profligacy that may have taken place at the top.

Deputy Peter Kelly

I am pleased to have the opportunity to speak here today on the Finance Bill. I strongly believe the measures announced will increase national productivity and competitiveness. This Bill seeks to restore order and stability in the public finances. It also seeks to protect those who are most vulnerable. As everyone knows, we are in difficult financial conditions, the "perfect storm" as some commentators have termed it. This Bill has been guided by the principles of fairness, sustainability and affordability, and by the need to put in place measures to improve our economic performance.

In difficult times, difficult choices have to be made, but we must not forget how far we have come as a country and how much potential we still have to grow. Ireland is well equipped to get through this economic situation. I am a positive man by nature, and believe that the glass is always half full. Considerable improvements have been achieved in recent times for the majority of our people. We are in the middle of an international economic and financial storm, a storm that is affecting most of the world.

We must be realistic about what has to be done so that we protect the gains made and ensure we are in a good position to benefit from the global economic improvement when it emerges. Nobody would question the assertion that Ireland has enjoyed unparalleled economic success over the past decade and a half. Our economy has been transformed beyond recognition. This transformation was achieved by hard work and enterprise from our citizens, and was supported by sound economic policies from the Government. Our economy is in a position to cope with the financial situation. We have a highly-skilled labour force, full of people with enterprising ideas and the determination to succeed in life. We can face the current situation from a position of strength.

The economic environment has clearly become more challenging. The openness of Ireland's economy makes us more exposed to global economic developments. While we have benefited substantially from positive developments in the global economy in the past, at present we are clearly being adversely affected by what is happening worldwide, particularly in the United States, and the difficult conditions in the house building sector. This is a time for decisiveness, and a Bill such as this is what we require.

The Bill emphasises the need to support the enterprise sector by enhancing the knowledge economy as the best means of meeting our economic challenges. New companies will see full relief where total corporation tax liability in any of the first three accounting periods does not exceed €40,000. There will also be an increase in the rate of tax credit for incremental expenditure undertaken by a company on qualifying research and development from 20% to 25%.

While people may disagree with aspects of this Bill, it is necessary for such measures to be taken at this time. This Bill has been framed in the context of the most difficult economic and financial climate in a generation. This is a worldwide situation that is having an influence on most of our trading partners. We are a small open economy subject to the winds of change. It is up to us as a country to determine how we will respond to the conditions we experience.

On the domestic front, the contraction in the new house building sector, which will continue into next year, has been added to by the international credit difficulties. The downturn in construction has resulted in a rise in unemployment and deterioration in consumer sentiment. The forecast for next year is not great and the scale of the downturn has surprised many experts, but we must not lose heart. The Irish economy retains a sound structure. In ten years we have increased the number of people at work by 600,000.

We must ensure we are in a position to take advantage of any economic upturn. The Minister said last night that he is guided by the need to introduce measures that would strengthen economic performance and encourage recovery. I echo those sentiments.

The Bill tackles areas that are crucial to our economic recovery and development. It contains measures that will attempt to make our research and development tax credit regime more attractive. Support is being provided to assist start-up companies and a new tax incentive scheme to facilitate the removal and relocation of Seveso listed industrial facilities is also being introduced.

I was pleased that farm pollution control relief will be extended to 31 December 2010. This relief will continue to encourage farmers to make the necessary costly investments in pollution control measures. Another provision renews the 25% general farming stock relief and the special 100% stock relief for the same period. This is a progressive Bill, which encourages innovation and development. While we are experiencing an economic slowdown, we do not have to stand still.

I refer to one of the main talking points of the current financial crisis, namely, our banks. The Minister for Finance said the Government has not ruled out making a State investment in our banks. However, the institutions must show a capacity to attract investment. The main concern is that the banks provide money to the economy through legitimate lending to sustainable businesses, as they must be an engine for our economy.

Our country has always been open for investment that supports domestic jobs. I was disappointed to hear the recent criticism from some quarters concerning our reliance on foreign investment. These critics should remember that much of our economic success has been thanks to overseas investment. The Government said that it would welcome private investment in banks on terms that serve the public interest. This means private investors would have to demonstrate a medium to long-term commitment to the economy. The Government will keep the public interest to the fore in this regard. Thus far, the Government's guarantee scheme has been successful in safeguarding the stability of the banking sector and in restoring its liquidity position. However, international market expectations about capital levels in the banking sector have altered and the Minister and the Government are acutely aware of meeting new challenges.

VAT is another issue that has been raised in these times of economic difficulty. While our VAT rate will increase from 21% to 21.5%, the UK Government will reduce its standard VAT rate from 17.5% to 15%. However, this does not compare like with like. Our starting point is very different from the UK's. We have a low taxation economy and, therefore, it is not possible to reduce taxes further. The Government is providing a long-term fiscal stimulus through capital investment of approximately 5% of GNP, which is twice the EU average. This will not only support jobs in the short term but will also add to our long-term productive capacity. The majority of foodstuffs, oral medicines, books and children's clothes and shoes are taxed at the zero rate of VAT, which is important. Our taxation policy has given us a significant competitive advantage over the past 15 years. We have ensured we have had the lowest levels of direct taxation on income and, therefore we have marginally higher indirect taxation. Following the budget changes, Ireland will still be one of the lowest taxation economies in the EU.

We must all be committed to protecting the economy from the worst effects of the current international downturn and to ensuring our international competitiveness is maintained and enhanced. The Bill assists our country in doing so. Maintaining support for enterprise is crucial and we must build for the future in concentrating on research and development. Improving our competitive position is essential to facilitate a rebalancing of the economy towards more sustainable, export-led growth and to maintain our attractiveness as a location for inward investment. While external factors such as commodity prices and exchange rates have an impact on domestic costs, these are beyond our control. We must seek to control costs over which we have influence and steps must be taken to improve productivity.

In further support of our competitiveness objectives, the Government is committed to maintaining a low burden of taxation on capital and labour and has implemented a range of policies aimed at improving competition in product markets and flexibility in the labour market. Improving our competitiveness position also means ensuring externally-driven price increases are not allowed to be worsened by internally-generated effects. We must all pull together at this time.

The mix of measures in the Bill is balanced. They protect those on low incomes and also seek to support enterprise and development. There is no quick fix for the current climate in which we find ourselves. I believe fervently, however, that if we maintain a steady ship and plot our course carefully, we can get through the financial downturn. I have great faith in our country. We dragged ourselves up from the rubble of our fight for independence and had to endure a civil war. We stood alone on the edge of Europe as World War Two raged and survived to tell the tale. We moved from mass emigration to the Celtic tiger, becoming a country that welcomed its former emigrants back. We have always been a resourceful people and we have, on countless occasions, proved ourselves adept at making the most of a difficult situation. We will get through the current downturn. We are a proud nation and people and if we work together there is much that we can achieve. I welcome the cycle to work scheme, which is a great idea. Healthy in mind is healthy in body. We look forward to seeing people on their bicycles all over the country.

Deputy Seán Barrett

Will the Deputy be cycling from Longford?

Deputy Peter Kelly

Perhaps I should, because my grandfather, Pat Gibney from Bective Street, Kells, County Meath, was a great cyclist. He was the all-Ireland one-mile grass cycling champion. He won the title in Virginia, County Cavan. I come from a long line of cyclists. My family are all on the bike.

Deputy Olivia Mitchell

Is the Deputy's punctured?

Deputy Peter Kelly

I have to confess I have not been on a bike for a couple of years. However, after listening to Deputy Mary White, I intend to get out my bike and get on the move.

Deputy Olivia Mitchell

There is a tax relief available.

Deputy Peter Kelly

That is probably the main reason I will do it. The Finance Bill is a good place to start working together to achieve what we want. I commend the Bill to the House.

Deputy Olivia Mitchell

I wish to share time with Deputy Seán Barrett.

Acting Chairman (Deputy Johnny Brady)

Is that agreed? Agreed.

Deputy Olivia Mitchell

I welcome the opportunity to speak on the Finance Bill. I have been sitting here for a while and have listened with great patience and restraint to the Government spokespersons talk about the current state of the country, the national finances and the economy generally. They speak as if it all had nothing to do with them and that somehow this was something global that descended on us. In fact, the blame for our particular situation lies firmly and squarely with the Government. We do not blame the Government for the international credit crunch, the global recession or fluctuating currencies but we do blame it for the fact we have come out of years of budget surpluses, which should have left us well placed to withstand the global downturn, whereas we are now so broke we will probably be impacted more than any other country of which I can think with the exception of Iceland. I also blame the Government for the budget, which was a wholly inadequate and inappropriate response when the Government finally got around to acknowledging there was a problem.

Most of what I wish to say relates to my brief, the tourism industry, but I also want to raise one other issue, namely, the reduction in the tax relief being made available for health. There are two aspects to this, the tax relief on nursing homes and the tax relief on general medical expenses. The reduction of tax relief on nursing homes from 41% to 20% has been pushed out until 2010 and the Minister informed us it would no longer be required at the higher rate because people would be subject to the fair deal. If one reads the fair deal, one finds it will only benefit a very small percentage of the population. If one lives long enough and has expended all one's assets, eventually one will benefit from it but the reality is that most families will have to pay for their nursing home costs. In those circumstances, they will not only not benefit from the fair deal, they will not benefit from the subvention they would get at present and also, on top of this — a treble whammy, if one likes — they can only get tax relief at the lower rate. There is no doubt this will cause huge hardship when it dawns on people this is the case.

The real problem is for families, who effectively face a halving of the tax relief on medical expenses. If one has a family of three or four children, it is very easy to rack up enormous medical bills. Even when my children were small, we always reached the monthly threshold and certainly every family would now reach the €100 limit. A GP is €50 or €60 a throw and there are also tests, dental bills and many other costs. Anyone contemplating orthodontic treatment for their children, for example, will now forget about it. The State has totally reneged on its responsibility in this area. This measure will have a huge impact on families who do not have the medical card and must pay for everything — they are the ones who will really suffer. This has not yet dawned on people but it will be a real problem for families and, as usual, it will be mothers and fathers who sacrifice their own health rather than deprive their children.

Ideally, health should be accessible to all and the State should be able to ensure people can attend their doctor freely when there is a need. However, as we are so far from that position, at least we could give tax relief at the marginal rate.

I want to turn to the issue of the impact of the budget on tourism. It seems the Government thinks the departure tax is somehow a victimless tax on faceless people and it does not seem to appreciate the impact this will have on the industry. The Government does not take the tourism industry seriously. It is regarded as something light and fluffy — very nice in good times but really not that important. The reality is that while its role in regard to foreign exchange is important, tourism plays an enormous role in terms of employment, particularly in the regions outside Dublin where there is no other employment. Over 250,000 people are employed directly and indirectly in tourism, which is a vital employment source for the country. Where else will jobs come from in the future? They will not come from manufacturing or agriculture, where output might grow but jobs will not, so jobs growth must come from services. Tourism is the ideal service to grow, yet the Government seems to be trying to tax it out of existence.

Ireland is an island nation. The most crucial element for our economy is aviation access into and out of the island, and close to 95% of all travel in and out is by air. Airlines and airports are vital to us so we should be wooing them and looking after them, not taxing them. Why penalise and disincentivise the tourism industry?

Everybody knows the state of Aer Lingus in particular is extremely fragile, as is the state of all airlines at present. Aer Lingus claims this departure tax will increase its costs next year by €30 million unless, of course, it moves its routes out of Ireland — we know it has already made a first move to Belfast. If it tries to pass on the increase to passengers, it is they who will very quickly move to Belfast. There is direct competition and if we begin losing flights, we can just close down altogether. I do not need to mention the VAT increases relative to the VAT reduction in the United Kingdom, which will cause a flood over the Border. Why would the Government decide to tax an industry that was bound to contract in a world recession? If we lose routes or, worse, entire airlines, which is not beyond the bounds of possibility, we can close up. Only today, Ryanair announced that, as a direct result of this tax, it is cutting yet another route out of Dublin.

The holiday home tax is bizarre. I do not understand its purpose given that all of these holiday homes were built with a tax relief designed specifically to incentivise people to build them. Then, when they built them, the Government put a disincentive tax on anyone thinking of getting into the self-catering business sector. Many of these houses are already lying idle and some I have seen are not well maintained. I do not know what purpose this tax can have except perhaps as a revenue raiser — it is €200 this year but could be €2,000 next year — but it will certainly not help the tourism industry. We will end up with rural tenements and villages that are completely derelict by the seaside, along the Shannon and everywhere else holiday homes were built. On top of all of these specific taxes we also have the other costs which feed into the tourism industry and are extremely relevant. Energy represents 10% of costs to hotels. This is the highest in Europe and we are completely uncompetitive. We had a recent hike in taxi fares to ensure we can fleece the tourists even further when they get here. As well as high energy costs, we also have high costs in transport and communications and poor broadband access. All of these militate against the tourism industry.

Just when profit and capital gains taxes were a memory in the tourist industry and in almost all industries, the Government has decided as part of this financial package, which was to take us out of a hole, that demands for these taxes are to be brought forward. In good times one could borrow to pay these taxes if they were brought forward but access to borrowing does not exist for businesses now.

It is a measure of the Government's failure to grasp the conditions in which businesses are operating that it should look to ailing businesses and expect that they would somehow find it easier than the Government to access cash. It is yet another example of businesses, employers and earners of vital foreign exchange being asked to pay for the Government's mistakes.

I wish to raise an issue mentioned in the budget but which will not become law until next year. This is a new VAT charge on the margins of tour operators. It is accepted that this must come in at some stage as a result of an EU directive but this is not the time to introduce something which will add 3% to the cost of foreign holidays. It is due to be introduced in 2010. Many of these tours are already contracted by the tour operators which means they will be out of pocket. I ask the Minister of State, Deputy Haughey, to bring it to the attention of the Minister for Finance and ask him whether it is possible to postpone this tax until times are better.

Deputy Seán Barrett

I wish to devote the few minutes I have to speak on this to the provision in the Finance (No. 2) Bill which raises the betting duty from 1% to 2% and to point out that, of all the major racing nations, Ireland is the only one that does not have a direct levy on its betting industry directly allocated to its racing industry. However, in terms of relative economic importance racing and breeding are far more important to Ireland than any other racing nation.

When the fund for racing was created in 2000, a direct link between the betting duty and racing was established. A limit was placed on the absolute amount that could be transferred to racing and this limit was reached in 2004. It was then raised and the new limit will be reached in 2009. The spending of the fund is controlled by Horse Racing Ireland, HRI, a body established by the Government. Even the 2% levy will leave the contribution to racing from the betting and gambling industry far below the levels in other major racing nations in relative and absolute terms.

It is essential that this funding is copper-fastened and that the industry does not have to go back to the days of dependence on annual Government handouts. Without the assurance of continued funding, HRI will be unable to plan beyond a one year time horizon and it cannot enter into any form of capital expenditure plans or commit to any borrowing to fund such projects.

As a result of the cut in funding, the long overdue redevelopment of the Curragh racecourse, which is home to Ireland's most high profile races and offers tourism and other benefits, has been put in doubt. The tax revenue or buoyancy from such developments would far exceed the amount of grant in any one year. This is crazy.

Conforming to international practice and directly linking the 2% betting levy to racing would also address the mistaken belief that taxpayers fund racing. It will also reinforce the message that the industry is self-funding, self-sustaining and more than self-financing. It is fair and reasonable that beneficiaries and consumers of the industry's product should support it, and be seen to do so.

In the budget for 2009 the Government announced a reduction of 9.5% for racing, irrespective of the level of duty collected from the betting industry. This was one of the most aggressive cuts in the budget and was in spite of the funding being limited to inflation since the year 2000. Retaining this limit would have kept increases far below the level of increases in all other spending areas. The reduction also came against a background of increases in betting turnover never seen during the same period.

It is important to note that despite the gaming industry's failure to produce figures, almost all turnover through betting shops is from horse racing and not other sports. Gambling through telephone, Internet and betting exchanges, which is where turnover on other sports is mainly channelled, does not contribute to betting duty because the companies base the computer servers in offshore locations to avoid taxation. This is unfair and unreasonable. Those who bet via the Internet or by telephone exchanges do not contribute anything towards the levy or towards the racing or breeding industries.

The Irish breeding industry exports 85% of its produce, unlike its main competitors who have large home markets for their output. It is vital for the industry that our reputation as a producer of high quality bloodstock is maintained. One of the key ways we can ensure this is by maintaining the reputation of our racing. Only by continuing to attract top class overseas competition to our major races can we do this. This means having prize money at internationally competitive levels; otherwise, the committees in charge of grading races will downgrade our top races and, as a result, the rating of our entire industry.

The growth of the number of horses in training since the introduction of the fund is 41% and this has resulted in an increase in tax revenue to the State which far outweighs the amount of money paid out under the scheme. Furthermore, the Irish breeding industry, unlike that of other nations, is primarily export-oriented with more than 85% of thoroughbred horses bred here being exported and thus earning substantial revenues for the State from foreign income. Ireland is the third largest producer of thoroughbred foals. Horse racing and breeding are significant, export-oriented rural industries which account directly for 14,850 jobs and one in eight jobs in the agriculture, forestry and fishing sector. This should not be forgotten.

Racing relies on the rearing and husbandry of thoroughbred horses and involves enormous input from full-time professionals, including trainers, jockeys, work riders, grooms, vets, farmer breeders, racecourse managers, racecourse employees, transport staff, security staff, integrity services, stud book and registry staff and so on. All of these people contribute in no small way through their PAYE and PRSI payments.

It is important to specify clearly that the racing industry, including breeding, in this country does not depend on handouts from anybody. It is an industry in its own right and should be respected as such. For this reason, I respectfully suggest that because of its importance as an industry, it does not belong in the Department of Arts, Sport and Tourism where it is judged alongside other amateur sports and seen as receiving grants far greater than them. They should receive a fair level of support to promote sport but in this instance moneys derived from a betting duty were supposed to go directly to the industry which, in return, would develop and contribute to the economy. However, the income from the betting levy goes into the regular funds of the Department of Finance and is not considered as income of the Department of Arts, Sport and Tourism. Therefore, if we examine the figures of the Department of Arts, Sport and Tourism, we find a large sum of money allocated to the racehorse and breeding industry. This gives a very wrong impression to the public, which is unaware that the original idea was to allow the income from the betting duty offset the grant allocated to the industry. I wish to avail of the opportunity to correct the impression given on a regular basis, sometimes from the House but also through the media, that the breeding and horseracing industries are treated preferentially compared with other sports. It is not recognised that we are dealing with an industry rather than a sport, which provides 14,850 direct jobs. This amounts to one eighth of the total amount of jobs in the agriculture, forestry and fishing sectors. I seek appropriate recognition for the industry and the contribution it makes to the economy.

Deputy Beverley Flynn

I wish to share time with Deputy Niall Blaney. I welcome the opportunity to speak on this Bill. It was only some months ago, before the summer, when I spoke on the economy. The position has changed drastically in that short period. I will discuss the economic downturn and the global credit crisis. I recognise that Deputy Mitchell referred to the problems in Ireland in this regard, but clearly this is a global problem. The world economy is suffering and as a result the economy in Ireland is in difficulty.

I refer to the banks about which I spoke last July. I am very concerned at the inability of the banks to function in the interests of business. I am not referring to the ability of the banks to function in their own interest, but I am concerned about the lack of availability of moneys for small businesses which are struggling. I understand that in many cases such businesses are receiving help from the banks, but onerous rates of interest are being charged, which puts further pressure on businesses that under normal circumstances would not have a difficulty. I am keen to see tighter regulation in the financial sector and would like to see the Minister for Finance bringing about a recapitalisation of the banks. This needs to be done, along with private investment, sooner rather than later. There should be a significant injection of confidence in the marketplace. Combining private investment, which I believe is available, with Government money is the best way to proceed. I encourage the Minister to do so as soon as possible.

Let us consider the situation when the bank guarantee was introduced some months ago. The Government was the first to make such a move, however most other countries have followed suit. I note that the vast majority of countries in Europe have injected capital in the banks and it is clear we must do the same at this stage. Consider the level and duration of the guarantees provided to banks in other countries. Most were offered a guarantee of between three and five years as opposed to the two-year guarantee introduced in Ireland. I accept that our guarantee was a blanket guarantee and this was not the case in many other countries. However, the duration of the guarantee and the fact that we have not yet injected any Government money into the banks needs to be addressed very quickly.

I call on local authorities to support businesses and re-examine the level of commercial rates. Rates should be frozen for this year and development levies should be reduced in local authorities, because the level of development, not only in County Mayo, but throughout the country is so small at present. The development levies charged in the past are unsustainable. I understand that local authorities are also experiencing financial difficulties, but there is no point killing off potential development by imposing onerous development levies. Any measure to stimulate growth at this stage should be welcomed.

I refer in particular to one area of the Finance (No. 2) Bill 2008, namely, air travel tax. Since the budget, I have spoken with the Minister for Finance on the matter. I am especially concerned about this measure as I come from the county in which Ireland West Airport, Knock is located. I recognise that the Minister has reduced the departure tax from €10 per passenger to €2 per passenger and has taken account of the concerns raised by the regional airports, especially those on the western seaboard. The lower €2 tax will apply to departures from any Irish airport to a destination 300 km or less from Dublin Airport. This means all Irish departures to locations such as Manchester, Liverpool and Glasgow will be subject to the €2 charge. This measure is more equitable than that proposed in the budget and it removes the advantage given to passengers flying to UK destinations from Dublin rather than Knock. However, I am still not satisfied and I do not believe the €2 charge should apply at all to the airport at Knock. The charge has and will continue to have a negative impact on tourism. The benefits to the State coffers will be negated by the drop in tourism revenue which will occur in the west of Ireland as a result.

I wish to correct several assumptions made concerning smaller airports. There is an assumption that the airport in Knock is dependent on operational subsidies, that the main services connect to Dublin and that it is a loss-making airport. These assumptions are incorrect. Ireland West Airport, Knock is a low-cost, profitable, independent airport. It receives no operational subsidy. Some 97% of the traffic is direct to 28 international destinations. Will the Minister acknowledge that certain aviation policies currently in place in the country provide the airport in Knock with a competitive disadvantage and constraint? The Minister should examine abolishing the €2 charge altogether. I draw his attention to the fact that when a similar tax was introduced in the UK the Government exempted the highlands and the island regions of Scotland because of the scarcity of the population, the peripherality of those regions and their reliance on air services. That situation is very similar to that which pertains in Knock.

I draw the Minister's attention to the fact that the current system of state operational support, namely, the core airport expenditure system, rewards failure not success. The airport at Knock is a victim of its own success. If Knock airport were loss-making there is no doubt that under that expenditure scheme help would have to be provided. However, because the airport operates on a profit or breakeven basis, it does not receive such support. Since State airports receive supports and services not available to Knock a competitive disadvantage exists. I have strong views on this issue, because most of those who avail of the services at Knock airport come from the UK as tourists and I am conscious that a negative impact will be felt. The airport receives no hand-outs for air traffic control, it does not benefit from usage by Government sponsored military aircraft, it has no preferential tax status, it does not benefit from any accelerated infrastructure in the region and it does not benefit from free marketing. I highlight these facts and draw the attention of the Minister to the fact that those in County Mayo and the airport at Knock are already discriminated against. Given the similar experience of the regions in the UK referred to above, there is a good case for exempting Ireland West Airport, Knock from the €2 charge. It is still not too late to do this and I call on the Minister to examine the possibility.

I refer to the income levy which is among the measures in the Finance (No. 2) Bill 2008 changed since the budget. I welcome the new 3% income levy on those earning in excess of €250,000 per year. This measure will bring in 20% of the tax take. This is a welcome measure. It sends the right signal to the market that those who are in a position to pay more are paying more. I am also happy to see that all social welfare recipients will be excluded from the levy, as are those with an entitlement to a medical card. That is necessary. I welcome the exemption threshold of €18,304 per annum, which excludes those on low incomes from the levy. In addition, I welcome the introduction of the age-related exemption for persons aged 65 of over €20,000 per annum for a single person and €40,000 for a married couple. This shows compassion on behalf of the Government. Those who are in a position to pay more — those paying the 3% levy — will contribute 20% of the overall take from this levy. This has enabled the Minister to provide these exemptions and increased thresholds to help those who are less well off in our society. I welcome that.

I also welcome the measures to support business, although I will not get a chance to go through them in great detail. I welcome the introduction by the Minister of the three-year exemption from corporation tax on trading profits and chargeable gains for new companies, which is to commence next year. This is a welcome development. In addition, the research and development tax credit has been increased from 20% to 25%. Lastly — again, I do not feel the Minister went far enough in this regard — the reduction in stamp duty for new residential property from 9% to 6% is welcome. However, there is a need to stimulate growth in the construction industry. I have spoken about this in the past. I do not believe enough has been done and I would like to see a few more measures to help in this regard. I would have liked to see stamp duty reduced further but, at the same time, I recognise that the Minister has gone down the route of trying to improve matters, and I welcome that.

Deputy Niall Blaney

I thank Deputy Flynn for sharing her time with me. I welcome the opportunity to speak in the House on the Finance Bill. There is much worry out there about the state of our economy, and from talking to my own constituents I know it is a very real concern. However, it is worth pointing out that this is not an issue that is particular to Ireland. We are in the midst of a global economic crisis, but one for which we are better equipped than many. Difficult decisions had to be made by the Government to deliver this budget. They are decisions we would rather not have to take, but they are necessary in these uncertain times.

I do not think any Minister enjoys having to deliver stricter budgetary controls to social welfare beneficiaries, schools, hospitals, PAYE workers or senior citizens. These decisions were taken to ensure that the progress of the past decade is protected and that the country is best placed to take advantage of the inevitable upturn in the international economy when it comes. Our economy is now much better insulated than it was in the 1980s to withstand the difficulties to be faced over the next couple of years. We are tackling the situation head on, and I am confident the Government will see Ireland through this storm. Our focus is on generating economic growth by providing employment, assisting industry and enhancing the competitiveness of the economy. The Government's decision to guarantee deposits in Irish banks in an effort to restore confidence was a courageous one and has been replicated by many other European countries. We have led the way in times of despair, and other countries are examining our movements to try to keep up. The Government was elected to manage the economy and that is what we are doing at this difficult time.

Many commentators both inside and outside the House have given their spin on the question of recapitalising the banks. I have one concern in this regard. Many people are throwing their weight behind the idea of recapitalising the banks as an answer to everything. We must realise that this recession is not just of our own doing; it is a global recession. The difficulties with the banks are a global problem. I do not believe that to suddenly recapitalise the banks would be the answer to everything. Too many people are putting all their eggs in one basket. The Minister is right to examine this before going too far and perhaps realising there are further ramifications down the road.

Much has been offered in this budget in terms of social welfare for those more in need. Improvements in the family income supplement for low-income working families have been introduced and there have also been increases in child-related payments to those dependent upon social welfare. A total of 18,000 more families will become eligible for the back to school clothing and footwear allowance — an allowance that is much needed by many families.

The closure of two Army barracks in my own county is causing much concern among staff and Army personnel in both Rockhill and Lifford. Unfortunately, the running of these barracks is extremely costly and the Minister has decided that the personnel are to be facilitated at Finner Camp in the near future. This decision has been reached for two main reasons, the first of which is cost savings. In addition, it is believed that due to the peace process in Northern Ireland there is less requirement for Army barracks along the Border. It is envisaged that the proceeds of the sale of Rockhill and Lifford Army barracks will produce substantial resources for the modernisation process of the defence organisation. There is much unrest among soldiers and their families about the imminent closures and I have met with many of them in recent weeks. I have also met with the Minister to convey these concerns. At the very least, the Minister will deliver. The personnel involved should be very well accommodated. I expect the Minister will step up to the plate in this regard and do what he can to ease the burden for our Army personnel and associated staff in these difficult times.

At this time, it may be tempting to become negative about what we have achieved in this country over the past ten to 20 years, but I would like to focus on the positive for a moment. The value of GDP increased in Ireland by a factor of more than 70 between 1970 and 2006, which is well above the EU average. National debt as a percentage of GDP has fallen from over 87% in 1990 to just over 20% in 2006. This economy has been booming now for many years and nobody can deny the progress that has been made in this country over the past ten to 20 years. We have all been part of building it and we have all enjoyed it. Such has been the progress that Irish emigrants come back home on holiday and can barely recognise their home towns. We must not forget that.

We have experienced incredible growth and prosperity and the economy is now taking a hit, but I believe that with the proper management this Government is providing it will level out. The good times will be back. However, the emphasis at this critical point is damage limitation. I appeal to those in the public service to row in behind the relevant Ministers. No Minister wants to make savings within Departments but that is the situation we face. People will have to grasp the reality. With a bit of rowing together for the next couple of years, the good times will come back sooner. In the last couple of weeks since the budget, people have started to realise we are facing difficult times. I appeal to those in the public sector to work with the relevant Ministers for the good of all concerned and for the good of our country. I believe that with the proper mentality and a spirit of co-operation we can bring the good times back sooner rather than later.

The economic outlook has changed. However, after the strong performance of our economy over many years, the Government is in the best possible position to navigate our way successfully through the challenges that lie ahead. That is what we intend to do. Our focus must now be on positioning Ireland to participate in the global upturn.

The Opposition has been playing political football with the economy in recent times. It plays the blame game when it is required to consider the economic problems this country faces. When the Opposition parties were in government over ten years ago, they decided to freeze direct school funding. They also proposed a reduction in teacher numbers. I do not think the proposals they are making nowadays are very different. When they were in power, they cut the budget for school buildings and renovations by €20 million. This is in stark contrast to the record of the current Government. Over the past 11 years, the Government has invested unprecedented amounts of taxpayers' money to build roads, schools, houses and water and sewerage treatment plants. We have spent billions on increasing pensions, children's allowance, carer's allowance and other social welfare benefits. The level of spending on health, education and social welfare has increased in the current budget. It is fair to say that times are tough. Everybody is feeling the strain on their disposable income. I wonder which of the aforementioned increases the Opposition would like us to withhold. Should we decide not to spend additional money on schools, roads or pensions? The Opposition parties are keen to remind us of the 1980s. I understand their interest in the decade in which they were last returned to government following a general election.

Deputy Bernard J. Durkan

We mention the 1980s because that was the last time the country was broke.

Deputy Niall Blaney

Deputy Durkan will have his chance in a minute.

An Ceann Comhairle

The Deputy is right. Deputy Durkan will get his chance.

Deputy Bernard J. Durkan

I thank the Ceann Comhairle.

Deputy Niall Blaney

At that time, inflation was approximately 21% and personal tax rates were 40% and 65%. When Fianna Fáil returned to power in 1987, Ireland had a higher per capita debt than Ethiopia and Sudan. I am confident that with Fianna Fáil at the helm, we will not go back to the 1980s. The Taoiseach has been the subject of much criticism from the Opposition over recent weeks, as the budgets over which he presided were held up to scrutiny.

An Ceann Comhairle

The Deputy's time has expired.

Deputy Bernard J. Durkan

Everything has expired.

Deputy Niall Blaney

I do not think there was anything in his budgets that the Taoiseach should be ashamed of. When he was Minister for Finance, the old age pension increased by €66. Financial supports for the parents of kids under the age of six were almost doubled. Provision for special needs education was doubled. The social welfare budget increased by40%. The Taoiseach looked after the vulnerable in our society. I have confidence in the Government. The Irish people are willing to work with the present Government to bring about a return to the good times sooner rather than later.

An Ceann Comhairle

I call Deputy McHugh. He has 20 minutes.

Deputy Joe McHugh

I wish to share my time with Deputies Durkan and Doyle.

An Ceann Comhairle

Is that agreed? Agreed.

Deputy Seán Power

I assume the Deputy will take ten minutes and give his colleagues five minutes each.

Deputy Bernard J. Durkan

No. We will see how things develop.

Deputy Joe McHugh

We are interested in equity on this side of the House. It will be done in an equitable manner.

Deputy Andrew Doyle

We will take seven minutes each.

Deputy Joe McHugh

I am glad to be able to contribute to this debate. I propose to highlight two problems in the constituency Deputy Blaney and I represent. I refer to the continued mass exodus of shoppers across the Border and the difficulties encountered by small businesses in County Donegal as they try to survive. There is a false economy in the region. As businesses try to hold things together without having to lay people off, they find in most instances that they are unable to get credit from the banks. They are trying to hang in there. I share Deputy Blaney's optimism that we will get out of this crisis eventually. We need to do something in the meantime, however. In the United States, ambitious proposals are being made and political leadership is being shown. Similar action is being taken, rightly or wrongly, across the water. The unprecedented times we are experiencing are economically dangerous. Nobody has the authority to say he or she knows what is going to happen. The UK Chancellor of the Exchequer, Mr. Alistair Darling, has decided to reduce the rate of VAT in the other jurisdiction on this island to 15%. The two jurisdictions that are side by side have separate economies, which can lead to anomalies. The major anomaly relates to the two different tax bands that exist.

I would like to mention something I raised last night. I will not spend too much time on it. We have an obligation under the Good Friday Agreement. I am aware that Deputy Blaney is the chairperson of the British-Irish Interparliamentary Body. We need to examine the anomalies that are being created. Two things are happening. People from Donegal, Dublin and other parts of the South are travelling to Northern Ireland for a so-called "shopping experience", but they are not getting it. While I accept they are getting reduced prices, and many people are happy to go for price, they are getting something else as well. It is predicted that many stores in the Border areas of Northern Ireland will have to close this Saturday morning because they will be unable to cope with the level of demand. There are similar issues on this side of the Border, where businesses may have to close their doors because there is not enough demand. We need leadership. The Government should do something. We need the Minister to come up with some kind of solution to try to stimulate the economy. This country's economy needs some form of stimulation or injection. We will not trade our way out of this problem if we continue to increase indirect and stealth taxes. We need to trade our way out of our economic difficulties. That is something the Government should focus on.

I heard indirectly this morning about a discussion that took place in a public house in Letterkenny last night. I was not present for the discussion, naturally, because I was in this House. The proprietor of the public house told me that a man summed up the present difficulties by comparing the Irish economy to a boat off the coast of Tory Island — it is rudderless and it lacks a captain. We need somebody to take charge and control. Both of the economies on this island — the regional economy in Northern Ireland and our own economy here — are faltering. Both of them need some form of stimulus. Petrol and diesel prices on either side of the Border will always increase and decrease over time, which will lead people to cross the Border. The economy in Northern Ireland is in as much trouble as the economy in this jurisdiction. The difference is that the authorities there are doing something about it. They are getting customers, etc. I wish to mention something of which this country should be cognisant. There is an Asda store in Newry and another on my doorstep in Strabane. Asda is a subsidiary of Wal-Mart. It is not called Wal-Mart, but it is part of the same corporation grouping. Its outlet in Strabane has the highest turnover of any Asda outlet in the United Kingdom. The revenue being accrued at that store is being lost to our Exchequer because of the 30% differential in this country's pricing structure. We have failed to attack our high cost base. We are not protecting our small and medium sized enterprises. We have hammered them by introducing more red tape and bureaucracy. We have not assisted them.

Deputy Bernard J. Durkan

Hear, hear.

Deputy Joe McHugh

Some small and medium sized enterprises in this country are surviving. They are working in the global market. They will continue to survive. We should be supporting small business, at the discretion of the Minister. If a small business is thriving, we should give it incentives to help it to take people off the dole and into work. Perhaps we could make grant aid available to help small businesses to expand. That is just one way of making progress in this regard. As people lose their livelihoods, they become insecure, which is the last thing this country needs. We are all responsible for nurturing the type of democracy to which we all aspire. We need to do something quickly. I emphasise that economies in other parts of the world, including the United Kingdom and the United States, are doing something about these problems. I appreciate that we are affected by international factors. The effects of the troubled economic climate are even being felt in Dubai. As I said earlier, the Irish economy is like a boat off the coast of Tory Island — it is rudderless and it lacks a captain.

Deputy Bernard J. Durkan

It is holed below the water line.

Deputy Joe McHugh

We need somebody to steer the ship. The Ceann Comhairle might have to take a sabbatical from his comfortable Chair and return to his former pasture.

Deputy Charlie O’Connor

The Opposition was not that nice to the Ceann Comhairle when he was a Minister.

Deputy Andrew Doyle

On 3 September, the Taoiseach announced that there would be an early budget, on 14 October to exert control over the public finances and instil confidence in the Irish economy at home and abroad. In the meantime, prior to the announcement of the budget, he agreed a national pay agreement which provided pay increases of 6% to workers, despite having said in July that it would not be the end of the world if an agreement were not reached and that partnership had served its purpose. He accepted the 6% increase in September in the full knowledge that the agreement was neither sustainable nor affordable.

What is missing in the current situation is confidence in the Government and the Minister for Finance and confidence on the part of the financial sector and the business market that we can play our way out of the difficulties we are experiencing. Instead, what we got in the budget was a list of stealth taxes. My colleague, Deputy Bruton, has observed that these additional charges will amount to some €2,500 for every family in the State. At the same time 10,000 jobs per month, or more than 300 per day, are being lost. In other words, significant numbers of people who were formerly tax contributors are becoming tax takers. This imbalance, if it continues to worsen, will seriously jeopardise our finances and hinder our ability to extract ourselves from the mess we are in.

The Government claims this is a global crisis. That is true. However, our difficulties were made worse by the domestic policies pursued in recent years. The Government reminds me of a hedgehog caught in the headlights in the middle of the road. It knows it will be run over if it remains there, but it chooses not to move in the hope that the driver will see it and stop. Unfortunately, we cannot depend on other countries to help us out of this difficulty.

Deputy Bernard J. Durkan

Most hedgehogs get squashed.

Deputy Andrew Doyle

When the Finnish were experiencing similar difficulties some years ago, they chose to invest in education. The Government has chosen to do the opposite.

Deputy Seán Power

What did the Finnish do about hedgehogs?

Deputy Bernard J. Durkan

It is a prickly subject.

Deputy Andrew Doyle

The Government has reduced funding for research, agriculture and job creation. In education, funding was provided in recent years for such noble and innovative initiatives as the applied leaving certificate programme, the Traveller's book allowance scheme and the transition year programme. All these initiatives enhance educational prospects for children who might not otherwise remain in the school system. All now face significant reductions in funding.

We should go back to basics. Instead of being part of the problem from the point of view of overproduction, greenhouse gas emissions and so on, we should look to be part of the solution. People will need food and pharmaceutical products into the future. We can obtain an advantage by investing further in research and development into cutting-edge technologies. The Minister of State at the Department of Enterprise, Trade and Employment, Deputy Devins, recently attended the launch of a research and development facility for Oriflame, a Swedish cosmetics company, in Bray. It is heartening to know that almost every Irish employee in that company received their third level education in an Irish institution. The reason Oriflame has invested in Ireland is the availability of that level of expertise in a workforce which has come through the Irish education system. We have an edge on other countries in this area and it is something we must develop. Many Irish companies in this sector remain at the head of the field.

In regard to agriculture, we have in Professor Gerry Boyle an excellent director of Teagasc. His vision for 2030 shows his ability to drive the industry forward. We should encourage the transfer of as much information as possible to as many young and energetic trained farmers as possible. Instead, however, we have imposed roadblocks in their path, with the installation aid grant being abolished — or suspended, as we are told — and the restrictions in the early retirement scheme. Currently, only 8% of farmed land is farmed by farmers under the age of 35. It is likely that only half that figure would have been achieved in the absence of these schemes. We should try to trade our way out of the current difficulties rather than sitting in the middle of the road waiting for somebody to bail us out.

I agree with Deputy Flynn that increasing development levies at this time is not the ideal solution. Wicklow County Council was faced with a catch-22 situation in this regard when it could not install a water scheme for Arklow without doubling the class two levy because the required funding was not forthcoming from the Department of the Environment, Heritage and Local Government. Adding to the costs will not stimulate activity. It would be normal in such a situation to emulate a commercial trader by offering an incentive to encourage people to spend. However, the opposite approach is being taken.

There is speculation that the Minister for Finance will introduce a mini budget in February. I submit that this is the mini budget and that the real budget will be introduced in February.

Deputy Bernard J. Durkan

I welcome the opportunity to contribute to the debate on this important Bill, which gives legislative effect to the budget proposals. The Finance Bill and the Social Welfare Bill are the two most important items of legislation that go through the Houses every year.

The first question to ask is how have we arrived at this juncture. Why are there swingeing cuts in services throughout the State and taxes being imposed which were not mentioned a year ago? Why were these taxes not introduced last year or the year before? Why were medical cards for over 70s, which were granted prior to the 2002 general election, taken away so suddenly? What have older people done wrong? Have they committed some atrocity for which they must be punished? Why have their rights been taken away arbitrarily at the stroke of a pen?

Why are the problems in education that were identified some 18 months ago, such as overcrowded classrooms and inadequate accommodation, now being exacerbated through reductions in funding? These problems were recognised by Government and Opposition alike. Parents, teachers and politicians combined to focus on the problems of overcrowded classrooms and insufficient teachers to address the unsatisfactory pupil-teacher ratios. Why has this suddenly changed?

Cuts are being imposed throughout the agriculture sector. We are a food producing country. In the past 18 months it has become clear that the EU has insufficient food supply for its own population. The proposed cuts in all these sectors will impede economic development here.

Although not officially announced, we are all aware that a spate of cuts are being imposed in health services throughout the State, such as restrictions in the qualification criteria for medical cards and home help hours being reduced. A series of swingeing, slash and burn cuts are being imposed on the most vulnerable members of our society.

What has gone wrong? The public was deceived in the last general election. For the Government, there was no question of being honourable and admitting that the State was broke. The budget represents a band-aid whereby urgent remedial action is being taken. Why was it not taken a year or 18 months ago? The answer is that it could not be done because a general election was about to take place. I did not touch yet on the banking situation.

All of this has a serious impact on where we find ourselves now. Why are we here? Certain people in certain places did not do the job they were supposed to do. The Government did not do the job it was supposed to do. It did not impose the regulations that it should have imposed. The Department of Finance did not impose the regulations that it should have imposed. The Central Bank did not impose the regulations it should have imposed. The Financial Regulator did not do so either. The reason for this is that they were all acting under the direction of the Government. They were not supposed to do this, but that is what they were doing. We are now in a situation whereby the people of this country must pay the price, in spite of the fact that they were not guilty. They did not ignore any regulations. They continued to work and took the advice they were given. Now they are up to their ears in debt. We have now incurred personal debts far in excess of anything in the US or elsewhere in the world. We were told by people who were supposed to know that we were the third richest nation in the world and the envy of everyone. What in God's name went wrong?

A Cheann Comhairle, you are the only person in this House who can look forward to the next general election with confidence. Long may that continue, because you are doing a wonderful job as Ceann Comhairle.

An Ceann Comhairle

I agree.

Deputy Bernard J. Durkan

Everybody in the country must surely know that somebody somewhere should have taken action on that side of the House. Some of us were trying to do it on this side of the House. We pointed out all the things that were happening and that should not have happened, but we only had access to limited information. We took the information that we received and we acted upon it. A crazy situation has developed. We now have a Finance Bill that hits everybody indiscriminately and that will create further economic problems for this country down the road.

Before the Ceann Comhairle took the Chair, Deputy Johnny Brady was the Acting Chairman. Before the last general election, he used to express grave concern about the prospect of the Green Party in government with Fine Gael. Imagine his chagrin when it transpired that the Green Party went into government with Fianna Fáil? His worst fears were realised when it was announced in the budget that bicycles were to be issued to the population, and that a special grant was to be given to employers to issue such bicycles. The good news came afterwards. It has now been generally agreed that saddles will be put on the bicycles as well.

An Ceann Comhairle

I do not mind as long they are not being put on greyhounds as well.

Deputy Bernard J. Durkan

Whatever happens from here on, there is a duty on the part of those in public life to tell the people the story as it is. They should not hold vital information from the public, especially in the run up to a general election.

An Ceann Comhairle

The Deputy has gone over time now.

Deputy Bernard J. Durkan

I am sorry. I tend to do that. We in public life should not hold from the public information that would be pertinent at a time when the public are about to make a vital decision such as choosing a Government for the future. The people were entitled to that information, but it was withheld.

Deputy Seán Power

The Deputy should accept the result of the election. The people have spoken.

Deputy Bernard J. Durkan

My colleague from south Kildare is a very nice guy and I am very fond of him. However, I am not so fond of him that I am afraid to criticise him and his party for the way they misled the Irish people and brought the economy to a shuddering halt. I must say that it is appalling.

Deputy Charlie O’Connor

I wish to share my time with Deputy Gallagher.

I welcome the opportunity to make a brief contribution to this important debate. A Cheann Comhairle, as someone who has been a genuine admirer of your work for a long time, it is absolutely gratifying to sit here in the Chamber and listen to such eminent Fine Gael Deputies praise your work. We have come a long way. I was in the Chair myself last night, and I heard colleagues talk about Cinderella and Dracula. It has been that sort of debate.

In yesterday's debate, the Minister stated:

The Bill before us today has been framed in the context of the most difficult economic and fiscal climate in a generation. The upheaval and uncertainty in the international financial system has had a detrimental impact on the global economy and its prospects. Each day brings further bad news for economies across the globe. The majority of our trading partners are experiencing a weakening in their economic fortunes, and this clearly will have a negative impact on a small, open, trading economy such as ours.

In fairness to the Minister, that puts this particular discussion into context. Some colleagues across the floor should be force fed on a diet of international newspapers and made to watch Sky News and CNN for a while. This problem is happening all over the world, even in America. The glum expression of President-elect Obama tells its own story.

I will not stand here on the Fianna Fáil backbenches and say that there are no difficulties for me or for my constituency in Dublin South-West. I live in Tallaght, which is the third largest population centre in the country. People have been talking all week to me about the issues that are of concern to them. By the way, I was at a dinner for Shamrock Rovers last Saturday, and the Ceann Comhairle will be glad to know that he is a hero in Tallaght for what he did for the club. He stood up for us when many did not. That is to his enormous credit. The club and its supporters look forward to welcoming him in Tallaght next year.

An Ceann Comhairle

I hope the glow is reflected on the Deputy.

Deputy Charlie O’Connor

The Ceann Comhairle is very kind. It is important in all this doom and gloom that Ireland stays open for business. It is important that we continue to go out and spend money on entertainment, on taxis and the Luas from Tallaght into town and on shopping. I read the statement by the Dublin City Traders Association to the effect that it is glad to note that people are beginning to spend again. This might be happening because it is coming up to Christmas, but it is important nonetheless. It is important to maintain jobs.

I was made redundant three times in my life and I know what it is like to go home to the family and announce that Christmas is cancelled. I know what it is like to be under pressure looking for a new job. I know what it is like to access social welfare services. I spent all day at the Select Committee on Social and Family Affairs, which is dealing with the Social Welfare (Miscellaneous Provisions) Bill 2008. There are serious issues involved, which also affect us on this side of the House. However, we must get the message across. Deputy Cyprian Brady made a valid point that as far as social welfare is concerned, we must continue to do our best to ensure that funding is available for those who need it. The unemployed clearly need our support.

Other colleagues have spoken of the need to continue to ensure job creation. I will not just talk about Tallaght, but I am entitled to talk about the needs of our community. We have a very young population in Tallaght and people will be worried. I visited a number of schools this week, where there are issues about education that are of concern to teachers.

We must continue to promote all of our constituencies. That will happen in Donegal, Limerick, Monaghan, Kerry and elsewhere and I will not fight with any colleagues about needs. The message we must get across to the Government is that the best way out of poverty and economic difficulties is to continue to be positive and continue to create jobs.

My colleagues may challenge me on the needs of my constituency. I do not want to be purely parochial but my constituency, like every other, has certain needs. In times of difficulty, one must continue to be positive and get one's message across. In Tallaght, for example, there is a pressing need for a new Garda station. I hope, despite the current difficulties and constraints, that project will not be put off forever. It is important for me to continue with my campaign in that regard. Tallaght also needs a new court house. The area needs facilities for more gardaí and I will continue, even in these difficult times, to make that point. When the upturn comes, it is important that projects such as this are on the table. I hope the Minister will continue to listen to me.

It is important that various infrastructural developments go ahead, country wide as well as in Dublin. As far as my constituency is concerned, one of the proposals of which we are most proud is the plan to extend the Luas. The Luas is a tremendous service, which transports passengers between the city centre and Tallaght. There are plans to extend the Luas line from the city centre to the former Point Theatre, now known as the O2, as well as plans to extend the line beyond the west Tallaght estates of Fettercairn, Brookfield and Ardmore and out to City West and Saggart. That will have a very positive effect in terms of selling points for my community. It will enable us to continue to make a positive case for new jobs in our area because the transport infrastructure, along with other infrastructure, is continuing to develop.

Deputies who know Tallaght will know that a great deal of progress has been made there in recent times, with the development of many new hotels and other infrastructural facilities. These are the kinds of facilities one expects to find in any major population centre. I often said that Tallaght had the population of a city but the status of a village but thank God, that has now changed and we are progressing. We must keep our eye on the ball and in these difficult times, continue to be positive and to get our message across.

I have often quoted Deputy Bertie Ahern in saying that at a time when all boats are rising, one must remember the little boats and at a time when boats are in difficulty, it is even more important that we continue to mention the little boats. I will continue to stay faithful to my ideals as far as social inclusion is concerned and will continue to speak up for my community at every opportunity. I will also continue to do my shopping in Tallaght. I will not be found going across the Border to take advantage of lower prices. If that upsets people, I am sorry for that but the few bob that I spend will be spent in my own community. I hope everyone else does the same.

An Ceann Comhairle

It is clear that Deputy O'Connor will not rock any boats.

Deputy Pat The Cope Gallagher

I am grateful for the opportunity to contribute to this debate and thank Deputy O'Connor for agreeing to share his time with me. I first came into this House in June of 1981 and experienced the economic difficulties of the 1980s. I was proud to be here in 1987 as a Minister of State in the Government which laid the foundations for the economic recovery of the 1990s. Social partnership, which the Government entered into at that time is one of the bedrocks upon which our economy is now established. In addition, our membership of the European Union gave free access to a market of more than 500 million people for our goods and services. The high standard of education of our young people also contributed to our economic recovery.

Unfortunately, we are in difficult times once more, something I did not think I would experience again in my political lifetime. However, we are an island economy which is highly dependent on exports and the fact that there are so many factors outside of our control makes it more difficult to deal with our problems. Having said all that, the economy must be managed properly and financial rectitude is vitally important.

The price of oil has dropped considerably in recent times, which is a welcome development. However, while the drop in price is reflected at the pumps, it is not reflected in the surcharges on transatlantic flights. The airlines should be called to account for this. When the price of oil rose, the surcharge was increased, although perhaps this is an issue for another day.

I refer to the banks which have contributed to the current economic downturn. They were too generous in giving 100% mortgages to customers, which is now causing serious problems for those who have lost their jobs and are unable to make their repayments. The banks have a responsibility to assist us now. They cannot continue to exercise the type of pressure they are exerting on businesses. They must work with business people rather than against them.

I am pleased that the Minister was pragmatic with regard to the 1% levy and agreed that it would not apply to those earning less than €18,304 per annum. I also welcome the age-related exemptions for those over 65 whose gross income is less than €20,000. The 3% levy does not concern us in Donegal. There are very few, if any, people in the county earning more than €250,000. Unemployment in Donegal has increased by 60% in the past 12 months, which is very serious. While we are very proud of our county and would not swap it for the world, there is no doubt that the fact that it is squeezed between the Atlantic Ocean and Northern Ireland, with only a five kilometre border with the Republic, causes its own difficulties.

PAYE workers will pay 1% on their income, as will many self-employed people. With regard to the latter, I am particularly concerned about hard-pressed farmers. I seek clarification from the Minister on the issue of capital allowances and whether they will be taken into consideration for farmers. Farmers are very hard pressed at the moment, which is not helped by difficulties with the installation aid and the early retirement scheme. I have received letters from mothers of young farmers who are concerned about the serious consequences of the suspension of such schemes. I hope the suspension to which the Minister refers will take age into account. Perhaps the Minister will look at the entire area again. The changes to the disadvantaged area scheme and the suckler cow scheme will also affect many farmers in my constituency. I hope the Minister will decide to divert the envelope of funding that is available in Europe at the moment to the sheep sector, which is particularly hard pressed.

The Bill refers to the corporation tax rate. Successive Governments have retained our low corporation tax rate, while various European countries have argued for tax harmonisation. If they want to harmonise taxes, let them come down to our level. The purpose of harmonisation was to remove Ireland's competitive advantage, which has been so important to our economic development. Section 5 outlines certain exemptions regarding corporation tax, which I welcome.

Some Deputies have suggested to the Minister that the regional airports should be exempt from the airport levy for flights within the country. The additional funding that the levy will yield will have a crippling effect on regional airports, even at the lower rate of €2. In the case of flights between Donegal and Dublin, for example, many of the passengers on those flights are cancer patients travelling to Dublin for treatment. That should be taken into account by the Minister. The airport levy provision was tweaked very recently. Many rushed out to welcome the pragmatic decision of the Minister, but all politics is local. I come from west Donegal where it takes one full hour from west Donegal to the N56 whether it is in to Letterkenny or in to Donegal town. The airport is in west Donegal because of the pragmatism and commitment of many people who went with their heart rather than their head and it has been quite successful. The public service obligation has been extremely helpful to us. There is no public service obligation on the Dublin to Prestwick flight. It is being done by Aer Arann on a Tuesday and at weekends. It is 145 miles from Carrickfin to Prestwick, but we are just fortunate that it is within the 300 km from Dublin. It makes little sense. This was amended to facilitate other airports in the country without any thought being given to Carrickfin.

As a result of the commitment of those in Carrickfin, we now have a Saturday flight to Rotterdam. The distance from Dublin to Rotterdam is in excess of 475 miles. Those who are flying in from Rotterdam do not pay the €10 but when they are flying back out again from Carrickfin they must pay €10. This will have a crippling effect. I suggest to the Minister that he must find some formula, taking into account the size of Carrickfin or the fact that it is a developing airport, that it is contributing substantial funds along with Fáilte Ireland and Saoirse Ireland to the marketing of this charter route. Last year, 1,247 passengers flew from Rotterdam and spent a week in Donegal and wrote glowing reports on their return. They wrote about scenery in Donegal, the lakes, rivers and mountains. The hills and the stunning coastline captured the hearts of these visitors and they could not wait to show their videos to their friends to convince them to come to Donegal. The marketing campaign is under way and this year we hoped with an 80% payload to have about 1,680 passengers coming to Donegal. This would mean we would have to find €16,000 whereas the Minister should allow us an exemption. I hope the Department of Finance will use its ingenuity to find a solution. It found it elsewhere for the other airports in the country, for Knock Airport — of which I am very supportive — and for Galway and others, to ensure they were brought nearer to the west coast of the UK. The Department should now find some formula to exempt Donegal. There may be an exemption in existence of which I am not aware but I ask it to consider that many cancer patients avail of this very important service.

While I may sound somewhat negative I am a realist and a pragmatist and I have been through all this before. I realise there has to be financial rectitude. The Minister has a most difficult job to do. On the positive side, the Committee Stage of the Social Welfare Bill is under way in another part of the building as we speak. I recognise that Fianna Fáil has never forgotten those who have played such an important part in the development of this economy and the €7 increase in pensions is important.

I take the opportunity to commend the Minister for his pragmatic response to the case I and many others made on the medical card issue. Many of our elderly may never use the medical card but at least at this stage in the autumn of their lives, they can take comfort in the knowledge that they have one. I do not have time to refer to other issues tonight such as the carbon tax and VRT which I do not regard as fully equitable and I will expand on that point tomorrow.

Mar focal scoir, tá áthas orm an deis a fháil páirt a ghlacadh sa dhíospóireacht fíor-thábhachtach seo. Gheobhaidh mé deiseanna eile amach anseo maidir le h-oideachas agus an cháin ar fheithiclí a thagann isteach ó thíortha eile.

Deputy Caoimhghín Ó Caoláin

The Finance Bill implements what can only be described as one of the most disastrous budgets ever imposed on the Irish people. It seems that as the Taoiseach and his Ministers were returning from their summer holidays they witnessed with growing panic the major recession facing the economy. The fundamentally flawed economic decisions of the past decade were clearly coming back to haunt them. The chickens were coming home to roost. It would appear that since 14 October, the Taoiseach and his Ministers have been running around like headless chickens.

Their panic and first reaction was to bring forward the budget to 14 October. It was a rushed job and like all rushed jobs, it quickly fell apart. Within days, decisions like the axing of the automatic medical card entitlement for over-70s were altered but not withdrawn. We had the unprecedented sight of Cabinet Ministers and backbenchers apologising to the public for decisions they had stood and applauded in this Chamber but days before. The savage budget announced on 14 October remains a savage budget and its worst effects have yet to be felt. An ill-considered budget has been followed by further ill-considered measures in this Finance Bill.

Low income families are being hit with the 1% levy on all incomes above €18,305. That figure is far too low and we in Sinn Féin have called for the 1% levy to be applied to incomes in excess of €38,000, more than double what is being exacted here by Government. We called for the threshold for the 3% levy — which we welcome — to be lowered to income in excess of €200,100. It is not a case of not pointing out how it can be acquired, how it can be done. We have done that very clearly, time and time again, over these past weeks. It is typical of the wrong-headedness of this Government that it refused to introduce such a levy on higher incomes during the Celtic tiger years and to devote the revenues raised to address inequality. Now the Government is doing so out of budgetary necessity while at the same time penalising low income families with a 1% levy.

Low income families are also penalised by the VAT increase to 21.5%. They will be disproportionately affected by the rise in prices. This is another example of the Government's perfect timing. VAT goes up by 0.5% to 21.5% on this side of the Border and is being reduced by 2.5% to 15% in the Six Counties. The VAT gap thus created, along with underlying cross-Border price differences is already having a very damaging effect on the retail sector and employment in the Border counties within this jurisdiction. As usual, this Government has made decisions without giving a thought to the effect on such vulnerable local economies, important integral parts of the overall economy. The Government's failure to harmonise the economy on an all-Ireland basis, is a long term failure with real consequences for real people and it must be addressed.

During Question Time today, the Taoiseach tried to misrepresent the view of Sinn Féin, reiterated throughout the Celtic tiger years, that the Government had made the economy dangerously over-reliant on inflated property prices and depended too much on construction for employment. Despite my protestations, he deliberately misinterpreted this as hostility on our part to the construction industry. It was such utter ballyhoo. He has lost it whenever he resorts to that type of codology.

An Leas-Cheann Comhairle

I am loath to interrupt the Deputy but will he move the adjournment of the debate?

Deputy Caoimhghín Ó Caoláin

"Codology" is a fine word upon which to conclude at this point.

Debate adjourned.

Dáil Éireann debate - Wednesday, 26 Nov 2008

Finance (No. 2) Bill 2008: Second Stage (Resumed).

Dáil Éireann debate -
Wednesday, 26 Nov 2008