Deputy O'Donnell is in possession and has eight minutes remaining.
Finance Bill 2010: Second Stage (Resumed).
In the debate of the past half-hour on the budget we heard from the Government which, in my view, is being disingenuous with its figures, basing everything on net rather than gross amounts. Net can be different for different people, depending on their circumstances, the credits for which they qualify and whether they are married or single. The Government appears to have made a decision and is now going back to plug the holes, working from the decision backwards rather than having prepared that decision. The assistant secretary grade has had a 3% reduction but in essence the Government has given a 5% bonus because 8% should have been applied. If one were looking for consistency that is the kind of thing one should look at. If one considers a gross salary that includes average performance-related pay, it appears that bonuses were paid to everyone at different rates but at an average of 10%. If that is the case why not deem it to be salary? One cannot have it both ways.
Regarding the Finance Bill, I refer specifically to the Limerick regeneration project. I brought the matter up earlier with the Taoiseach, saying I would ask the Minister for Finance to consider tabling an amendment to deal with the provision of tax designations for the regeneration areas in Limerick and some adjoining areas to encourage private investment to take place in those areas. In addition, I would like to see the Government providing the funding that was committed for the Limerick regeneration project over two years ago. It is at a very sensitive stage and people are losing morale. This €3 billion project was launched amid fanfare by Government, with €1.7 billion to come from the State and €1.3 billion from the private sector. Proper government is about providing an environment where the private sector can flourish. One of the elements in the Limerick regeneration project should be to provide tax designation for investment within the areas in question.
In his speech the Minister raised a number of points, one being the solidarity bond. It is critical for the Minister to indicate in his response exactly how he sees the funds to be raised by solidarity bonds being used. Fine Gael has launched a ground-breaking document, New Era, which proposes significant job creation potential for up to 100,000 people in the areas essential for competitiveness in this economy, namely, water, energy and broadband. When we look at competitiveness we must look at it in the context of job creation. There are three elements to driving the economy forward. These are the three Cs — confidence, credit and competitiveness. This Finance Bill and the budget that preceded it lack any incentives in that area. We need to see the Government addressing these issues across a range of areas. Fine Gael proposes reduction of employers' PRSI for employees. We considered halving the lower rate and taking 2% off the top rate which would reduce costs for employers.
Energy costs are related solely to Government policy. In 2001 our cost for industrial electricity was average within the EU. We are now 50% below that average, with the second-highest cost in the EU.
Research and development tax credit should be available for offset against PRSI.
The air travel tax is ludicrous. I would love to know if a cost-benefit analysis was done on the amount of money it brings in and how much has been lost in terms of people coming into the country, hotels, tourism and the general economy. In Limerick, in the mid-west and along the western seaboard we have suffered greatly from this tax and this fact has been reinforced by people such as Michael O'Leary.
The issue of credit flow to small business is critical. In a study done by the enterprise boards 96% of small businesses stated they have more difficulty accessing credit now than they had six months ago. This is having a detrimental effect on small businesses which are the lifeblood of the economy. The multinational sector is extremely important and there are measures dealing with it in the Bill that we will look at in greater depth on Committee Stage. I welcome that but we must have a rounded approach.
My worry concerns vision. My vision of Ireland Inc. is that in terms of sustainability it must be driven towards the SME sector. The multinational sector is vital in the provision of jobs but we are no longer a low cost economy. We must provide an environment where an entrepreneurial spirit can flourish. The rudiments for that are not present. There must be a practical edge to the way we deal with the SME sector. It is critical that we have corporation tax exemption for the first two years for limited companies but this should be extended to sole traders. The majority of people who set up in business set up as sole traders and entrepreneurs, not as limited companies. We want a situation where people will set up in business and become self-employed. Shortly, probably over the coming summer, it is conceivable that we will have 500,000 people on the live register. Of those, 250,000 have signed on in the past two years. That is an indictment of Government policy, apart from global factors.
We must provide an environment that gives competitiveness and brings confidence back to people so that they will spend again. They will do so only if they feel they have security in their jobs. We must be export driven. We are a small open economy. In 2003 we were that economy. When Deputy Richard Bruton was Minister for Enterprise, Trade and Employment, we were that economy. From 1997 to 2003 our exports increased. In 2003 they decreased.
The Deputy is way beyond time.
Subsequently we had the property bubble and are now suffering for it. If I might encapsulate the situation, we need to have a vision for the SME sector so that it can become the driving force of the economy. It employs 800,000 people, with 200,000 others involved. Small and medium-sized enterprises are the future, along with what the multinational sector provides. The vision must be to have an entrepreneurial culture.
I welcome the publication of the Finance Bill and the chance to speak on it briefly in the House. The Bill, which provides a framework for the budget produced in December, has a number of very important measures, namely, a budget which will provide €1 billion and offers activation for employment during 2010, including a €20 million fund for activation measures specifically targeted at people aged under 35.
I welcome the commitment in the Finance Bill to framing our legislation to encourage sharia finance to this country. We have an amazingly good standing as a country within the Muslim community, particularly in the Middle East. Last year, I had the pleasure of travelling with people from the College of Surgeons to see some of their work in Bahrain. Their work and the work of our medical community generally in the Middle East, as in other countries, will give us a great platform from which to exploit this source of finance, and to use our good standing and geographical location as a natural base for that finance. The commitment in the Finance Bill to introducing those measures is welcome and should be exploited.
With regard to the new taxes proposed in the Finance Bill, I am intrigued by the level of discussion on the increase in VAT on bin charges. As someone who lives in a county where there is no choice and where there has been no local authority involvement in bin collection for some time, I have had to pay VAT on bin charges for the past five years. As far as those of us who pay those charges are concerned, this proposal levels the pitch in the interest of those who have no choice in the matter.
I endorse the comment made by Deputy O'Donnell — I know he will repeat this on Committee Stage — on the provisions in the Bill to attract further talent from the multinational sector. He is correct with regard to his remarks on small businesses but we must realise the engine of our economy comes currently from the multinational sector and the work it is doing, particularly in the area of research and development. The more we encourage those involved in this sector to locate their human talent and physical operations here, the better our chance of exploiting that human talent for our small business sector.
I welcomed that.
We need to challenge ourselves to come up with a way, for example through partnership schemes or networking, whereby that talent will engage with the small business sector or, as it did in the first wave of the multinationals coming to Ireland in the 1970s, become the small business people of the future. This measure will help that. The solidarity bond is a very good response to the current savings phenomenon that seems to have taken hold in the country. I hope the Minister will ensure it is as attractive as possible to savers and provides the security for which they are looking. With regard to comments on the small business sector, a number of initiatives were launched in the budget, including the employment subsidy scheme, in which €135 million will be invested this year. The scheme has been hugely successful, with 2,700 applications. These are currently being assessed and will guarantee 80,000 jobs. This is the kind of encouragement business needs. It is hoped we will be in a position to expand that scheme next year.
There is vision in the Finance Bill. There is a vision to promote human talent and to exploit different sources of revenue and new markets, such as the finance market to which I referred. There is a vision in it for employment. What we need now, across Departments and the House, is to exploit that vision and put it into action in our various spends. The Minister has given us the leeway to do that. It is now up to those of us in government to ensure we see this through over the next 12 months.
Earlier in the debate we heard ongoing criticism that the Bill does not do enough for the economy and fails to recognise there is still a substantial capital spend contained within the budgetary programme for 2010. That capital spend will be spent on roads, schools and in the productive sector. By exploiting that sector and the fact we are now in a situation where we can get lower prices, we should be able to maintain the physical investment and ensure job creation arises from that €12 billion. We must ensure jobs are created to the best possible employment standards and that there is no race to the bottom within the tendering process.
Finance Bills, by definition, are dusty pieces of legislation. This is no different and there are dusty areas in it. However, it is a Finance Bill which touches on some very important measures, some of which are very subtle but which will have a major impact. It is important for a Finance Bill, particularly in the current climate, to strike the right balance. Therefore, it needs to be more than just a book-keeping exercise. This Bill is certainly more than that. The Finance Bill must operate within the difficult economic parameters within which we find ourselves and this Bill does this. It must also contain measures that enhance Ireland's attractiveness as a place to do business and create jobs. I accept the point made in Deputy O'Donnell's contribution that SMEs and their inventiveness have a particular role to play. I also agree with the Minister of State, Deputy Calleary, that we must address both sectors
There are particular measures in this Bill to deal with innovation, research and development, which will be very important. I will touch on some of those measures shortly. The Finance Bill must continue the task of stabilising Ireland's public finances and do so in a way that is equitable. The Bill before us ticks all the right boxes in terms of all of these issues. Of course, as with any Finance Bill, we can always think of improvements that could be made. The Minister has shown he is willing to listen and, when provided with persuasive arguments, reverse previous positions.
I would like to turn now to some of the specific measures of the Bill. I welcome the wide range of provisions in the Bill that will assist enterprise, some of which are subtle and new. Those that will assist innovation, research and development are particularly important in terms of creating long-term and sustainable employment and of putting Ireland back on the track to full recovery. The Bill will amend the existing research and development tax credits to cover situations where a company carries out research activities in different facilities or separate geographical locations. I am pleased the Minister has taken this step. It may not seem a huge step to many, but it is critical, particularly for the pharmaceutical industry. As we are all aware, over the past two years and in the coming years, the pharmaceutical industry has and will go through significant change. It is going through a period of consolidation. It is important therefore that bureaucratic procedures which applied previously in this area should be wiped away. The Minister has proposed changes which will be welcomed by the industry, particularly in this period of consolidation. I welcome the change and the fact it indicates the Minister was willing to listen.
I also welcome the enhancements of the existing tax treatment of dividends received for companies here to increase the attractiveness of Ireland as a place for economic activity in general. The provisions in the Bill in this regard are complex, but what the Minister is seeking to do is to tap a new possibility of bringing financial services into Ireland and consolidating the grip we have in this area. The amendment he proposes here will mean, for example, changing the current tax rate of 25% on foreign dividends paid out of trading profits from countries with which Ireland does not have a tax treaty. This will operate to the benefit of Irish enterprise. The Minister has introduced further complex measures that will have the effect of simplifying the arrangements under which foreign dividends are treated as sources for trading or non-trading profits. He also provides tax exemptions to foreign dividends forming trading income for portfolio investment. I suggest these measures will have a significant effect, particularly in the financial services area.
The Bill also gives effect to an important change in the remittance scheme introduced in the Finance (No. 2) Act 2008. The scheme will now cover EU and EEA nationals and the period during which they must be based in Ireland is reduced from three years to one year. This will greatly improve Ireland's ability to attract high-skilled individuals who are innovators in their own field and who will act as magnets to attract economic activity. The Bill also contains important measures aimed at enhancing Ireland's attractiveness as a base for internationally traded services, particularly financial services. The Bill's provisions are aimed at bringing clarity with regard to the tax treatment applying to foreign funds that are managed from Ireland under the recent EU directive, Undertakings for Collective investments in Transferable Securities, UCITS. The change in the Bill is both prudent and timely. This is a complex area which has not received much attention in the media. Nonetheless, it is an area that will be more significant in the future.
I would mention two measures that are particularly welcome in terms of job creation. First is the extension of the existing scheme of tax exemptions for new start-up companies over the first three years of operation. Deputy O'Donnell pointed out it is important we do something to help small and medium enterprises. This measure is aimed specifically at small and medium enterprises, which by nature are small on start up. The existing scheme is now to be extended to those who commence trading in 2010, which I welcome.
I also welcome the extension of the scope of the existing scheme of capital allowances for energy efficient equipment to cover additional technologies, including refrigeration and cooling systems, electoral and mechanical systems and catering and hospitality equipment. In this difficult period, it makes sense to incentivise the application of energy efficient and clean technologies, which this section of the Bill will achieve.
The Bill also contains a number of more down to earth provisions. We all spoke in this House in the past year of the extraordinary situation that had applied in the motor industry. An industry that had been booming during the previous five years, perhaps excessively so, had come to a juddering halt. Thousands of people all over the country were losing their jobs in this industry. I realise that one can make an interesting economic debate about issues such as the scrappage scheme and whether it would really create jobs. However, the important point about the scrappage scheme that is in place is that it will help an industry that was brought to its knees by the end of the spend. The measures introduced in the budget are already beginning to have a positive effect. While one could ask whether the scheme is wise or the best way to deal with this issue, it has called a halt to the decline in the industry and has had a stabilising effect. Therefore, I suggest that whatever shortcomings schemes like this may have, it is welcome, particularly in the circumstances of that industry.
Moving from general economic issues to more domestic ones, I also welcome the extension of mortgage interest relief for qualifying loans where entitlement to mortgage interest relief was due to end in 2010. Every one of us in the months since the previous budget will have become aware of people for whom the ending of the relief would cause real difficulty. Given the dramatic changes that have occurred in the Irish property market, extending the relief to the end of 2017 is very welcome.
On the issue of hard-pressed mortgages, the Minister's efforts to extend the provisions of the code of conduct on mortgage arrears is something we would all welcome. We have all met people who are in mortgage arrears. It is an issue that is now presenting itself for the first time in political clinics, irrespective of which side of the House one is on. Under the existing arrangements, the banks and building societies which were registered with the Financial Regulator under the code, or other lenders covered by the code, had to make every reasonable effort to agree an alternative repayment schedule for borrowers who found themselves in difficulties. They were required to wait for at least six months from the time of the first arrears before they commenced court actions.
I take the view, as would many others in this House and not just on this side, that banks and building societies, which were throwing out money at extraordinary levels, should be certainly more patient with customers. I strongly support the extension of the stay period in the code to 12 months — in fact, a case could be made for extending it beyond 12 months because it must be asked what banks, building societies or other lenders would do with any properties repossessed given the current state of the of the market.
I also strongly support the efforts that have been made recently, somewhat belatedly, by the Irish Banking Federation when it reached a protocol with MABS with regard to couples and house purchasers who find themselves in difficulties. The arrangements which are coming through in that system will provide help to people who are in real difficulties. When I was in the Custom House as Minister for the Environment, Heritage and Local Government, one of the interesting statistics that came across my desk is that the last thing on which the Irish people in general will default is the payment in regard to their houses. Given the excessive way in which the market developed, it is right, prudent and proper that the degree of support to help people to hold onto their homes should be extended.
I also believe firmly, as do other Members, that not only should the stay be extended from six to 12 months but that it should apply not just to the traditional lenders — the banks or building societies — but to the non-traditional lenders who entered the market in Ireland in recent years. I look forward to the regulation and the code extending to them because certainly some of them have behaved in a predatory way, and they should not be given any support in their activities. I am pleased that on a number of recent occasions in the courts, some of these more predatory actors have been told to put a halt to their gallop.
There are three other arrangements in the Bill to which I wish to extend a particular welcome. First, I welcome the idea of creating a national solidarity bond. Many Members of this House have mentioned this. I believe I remember Deputy Bruton referring to it, although I am not sure what he called it. I am willing to give credit to him because I have been defending him——
We called it the NewERA bond. ICTU called it the national recovery bond.
Whatever we call it, it is a good idea and it has had a general welcome and general appreciation. I have been defending Deputy Bruton on local radio.
Yes. Notwithstanding the occasional run-ins we have in this House, I still recognise a good idea when I see it. This is a very good idea, which I welcome in general.
Of course, one could argue that the last thing we need is another savings scheme because savings are at an extraordinarily high level and we need to encourage people to spend, although perhaps not as profligately as they did in the past. The provisions of the Bill which will facilitate the introduction of the bond are positive. At present, as Deputy O'Donnell said, people are saving at unprecedented levels. While this has had the effect of depressing demand, if savings are available, they must be used to enhance the productive capacity of the State. A solidarity bond, managed by the National Treasury Management Agency, would be clearly more beneficial to society as a whole than a speculative investment by banks or financial institutions whose sole focus is private wealth rather than the public good. I look forward to the details of the bond being published, and I particularly hope they will focus on enhancing the creation of infrastructure. As the Minister of State, Deputy Calleary, said, we already have a substantial capital programme, but if a bond were to be used to enhance that, we would all welcome it.
A second novelty in the Bill which should be mentioned is the introduction of the domicile levy of €200,000 on all Irish-domiciled individuals who are Irish citizens. This will ensure that the super-wealthy make at least some contribution to the operations of the State. Persons liable to the levy will have to pay it regardless of where they live or where they are tax resident. This is an interesting innovation and I would be very interested to see the detail as it comes through. We will all be interested in assessing it in a year.
The third novelty in the Bill which I welcome is the provision which would allow for the introduction of a statutory scheme for providing for voluntary deductions for members of the Judiciary. I have never taken the view, nor do I believe many people in this House share the view, that the general provisions in the Constitution which were aimed at protecting judges from oppressive activity by the State were ever intended by the drafters of our Constitution to exempt judges, who after all are citizens, from the general taxation provisions or other levies or impositions that the State must from time to time place on its citizens. Taxes are the price we pay for living in a civilised society. That price has to be paid by the most powerful as well as the most junior.
Having said that, I want to acknowledge that the bulk of judges have made their contribution to the pension levy and have come into it in a voluntary way. However, while that is good, it is not good enough. All citizens, whether they are in the Judiciary, in this House, the other House, the Presidency or otherwise, have a responsibility to make their contribution.
I have always taken the view that flexibility is a sign of strength and it is never to be taken as a sign of weakness. I particularly welcome the decision of the Minister to reverse the decision on the 21.5% VAT rate. It takes a strong person to say "No, that was not a good decision", which is what the Minister has done.
I welcome the Minister's decision to remove the life assurance levy on pensions products. During the past 12 months, I became aware of concerns that the levy could discourage investment in pensions. It is critical that investment in pensions be encouraged. Ireland, like the entire world of developed nations, faces the reality that population aging is increasing. The Minister's change and flexibility in this area is welcome.
In general, finance Bills tend to be dusty. While this Bill too has its share of dusty corners, it meets all of the requirements which I outlined at the outset. Is it perfect? Probably not. Few pieces of legislation that come before this House are perfect. The Minister for Finance, Deputy Lenihan, has shown that he is more flexible than has been any other Minister for Finance in recent times. He is flexible, willing to listen and willing to pick up a good idea and run with it.
The Bill reverses a number of previous policies and prudently extends others. It is a good Bill, on which I commend the Minister. I commend the Bill to the House.
The Minister is listening to the bankers and not to anybody else.
I welcome the opportunity to contribute to this debate. I am disappointed with the Finance Bill 2010, which, while big in volume, in terms of detail contains nothing new. Although the Bill contains some positive measures, there is no clear thrust to it or clear objective in terms of what the Government is trying to achieve. It is but a reheating of the budget introduced before Christmas. The Bill provides no clear sense of direction in terms of where the Government is going and no focus in regard to job creation, which is hugely disappointing. The mantra of this Government is to cut support to those who cannot work, to take away the opportunity from those who want to work and to force those on low pay out of employment. This Bill does not seek to change any of that.
Where in this Bill is the stimulus plan to turn the economy around, get it off its knees and assist people back into employment? Sadly, the Bill contains no such plan. My constituency, no more than any other, has growing levels of unemployment. Unemployment figures for my constituency have increased by 155% during the past two years. This means that in real terms there are an additional 8,500 people in the counties of Roscommon and Leitrim on the dole queues. In a constituency, which has one of the smallest populations in the country, there are 8,500 additional homes without income. There is nothing in this Bill to kick-start investment or to encourage investment in infrastructure, which is urgently required. There is no investment in our people either.
One in every three men unemployed is under the age of 25. These people are signing on the dole with little prospect of getting a job. While this Bill should have provided some direction or focus in this regard, sadly, it has not been forthcoming. There does not appear to be any direction from Government in this regard. I discussed during the weekend the impact of this legislation on my constituency and county in terms of club football and so on. Many young people who would normally participate in the local club senior team have emigrated to London or further afield. The cores of communities are being decimated. While there were many ills associated with the Celtic tiger in terms of the economy during the past ten years, young people were at least able to remain living in their communities and to get involved in their local sporting and voluntary organisations. Sadly, all they are doing now is taking Ryanair flights out of this country to the UK and further afield. The Finance Bill copperfastens the focus of a budget that has resulted in 75,000 additional people becoming unemployed this year at a cost to the Exchequer of €1.5 billion to be obtained through cuts in social welfare payments and front line services. The lack of focus in this respect is hugely frustrating.
Another issue close to my heart is that of agriculture. I believe, as do many people in the country, that agriculture, which has traditionally been the backbone of the economy, has the ability to lift us out of the mess into which the Government got us. Rather than supporting agriculture and encouraging investment and the development of high quality premium food companies which can be world leaders, of which we have some and can have more with a little encouragement, this Finance Bill copperfastens as announced in the budget, the carbon tax on farm diesel, which will have a direct impact on the competitiveness of agriculture and the farming sector. Without the basic raw material to support our food industry, we will not be able to provide the volume of exports needed. Members on this side of the House, the other side and among the wider public have stated that the only way we will get out of this recession is to trade our way out of it. While agriculture is the one sector of the economy that can assist us in trading ourselves out of the mess we are in, the policy has been to dumb down agriculture rather than support and develop it.
Another area touched on in part by Government in this Finance Bill is that of research and development. The Government is putting many of its eggs into this basket in terms of its belief that research and development and the smart economy can get us out of the current mess. There is no doubt that a focused co-ordinated approach can assist us. The report by Mr. Colm McCarthy questions the Government's investment in research and development, the number of PhDs being produced and the benefit of this to the economy. While there has been huge investment in research and development during the past ten years or so, one must question the benefit of this to the economy given the lack of figures in this regard.
A number of years ago, my colleague, Deputy Richard Bruton, and I produced for the Joint Committee on Education and Science a report on science and technology in education, which included a number of detailed and cost effective proposals. As usual, that report is now gathering dust somewhere. One of the recommendations was that a specific Oireachtas committee focused on the issue of science, technology and innovation be established to provide a forum which would allow people involved in this area to defend to Members of the Oireachtas how they spend their money and to explain on what they spend it. Coming from a scientific background, I must question my profession in regard to its lack of business focus. Deputy Michael D. Higgins and I could probably debate some aspects of that. It is important that people involved in R&D set down a finish line in terms of their work, in particular in the science and engineering area. They should not engage in research for research purposes. While it is important we invest in basic research it is also important that the applied research is focused on an end product and that we have credible data to back it up. Sadly, however, that is not provided for. Far too much investment is currently focused on universities driving research, rather than having enough private enterprise involvement focused on having an end product, thus facilitating job creation.
Academic researchers should not purely consider the value of intellectual property, which may inhibit its commercialisation. They should also focus on the impact it can have on stimulating our economy, creating jobs and creating the new multinational companies of tomorrow. I was disappointed that the Minister did not take up the recommendation by the Commission on Taxation on the flexibility of R&D tax credits from private enterprise. The State is putting in investment so it is important to justify and explain exactly how that money is being spent and how it will be of benefit in the short, medium and long term. Private enterprise must also put in its fair share of investment but incentives and structures need to be put in place to facilitate and encourage that to happen.
I acknowledge the sections that encourage skilled professional people to come into the country. The Minister has reintroduced a tax treatment concerning foreign professionals coming into Ireland, but it is only scratching the surface. We will have to examine the matter in a far more detailed and focused manner. Up to now immigration has been perceived as people coming in and taking jobs. There is huge concern at the moment about that, but there is huge potential for immigrants to create new jobs here.
I read a report on Silicon Valley in California, which came about as a result of Asian nationals who moved to the United States and turned that idea into a reality. Last year, we saw the two young lads from Limerick who came up with a very good idea, but they could not get support from Enterprise Ireland. They went to Silicon Valley in the United States where they got venture capital support. That is an indictment of our own development agencies. These sharp young people could not get investment here, so it was better for them to go abroad. We should examine novel ways to compete. We should bring people with ideas into this country instead of putting barriers in their way, which is what we are doing now.
One practical example of this concerns the granting of permission to a non-EU citizen who wants to set up a business here. In order to get permission from the Department of Justice, Equality and Law Reform, they must have €300,000 in their back pocket and must also employ two EU citizens. Otherwise they will not meet the criteria for business permission and as a result their application is refused. According to the latest available figures, some 85% of all such applications were refused. I do not believe that we should allow anyone and everyone to set up a business in every corner of the country. However, if someone has an idea with a sound business base it should be granted business permission. It may only employ one person but it will take that person off the live register and it has a potential in the longer term to create four, five, ten or 12 jobs. The Government should look at the false barriers of red tape that have been created, which inhibit the creation of new employment.
The United States has been the expert front-runner in bringing new people into the economy to create jobs. In 2006, businesses started by immigrants in the USA employed 450,000 people with a turnover of €52 billion. That is €2 billion short of what we will pay out for NAMA. The United States is looking at new ways to attract such smart people because the world has become far more competitive. A new start-up visa system is being developed for those who wish to establish new enterprises in the United States. The authorities are looking at automatically granting visas to people who hold PhD qualifications in science, technology and other innovative areas.
A number of non-EU citizens are currently paying fees to study for doctoral qualifications here. They will then have to go cap in hand to the Department of Justice, Equality and Law Reform to seek permission to remain in this country. If they want to start up a business they will have to return to the Department again to seek business permission and guarantee that they have €300,000 as well as creating two jobs. That environment needs to change quickly.
We should send out clear and unambiguous information on the type of person we need in Ireland at the moment, as well as the type of supports we want to put in place for them. Information on labour market trends, job skills shortages and oversupply, as well as social welfare restrictions, is available in various Departments in an array of languages. However, it should also be available centrally on the web so that someone considering coming to Ireland will know what the structure is like. In addition, they could know about banking, insurance, the rules of the road and how to get housing. That could act as an advertisement to attract the type of people we badly need in this economy — those who can stimulate and develop small businesses. They would bring new thinking and ideas to our economy, which could nurture the new multinationals of the future, in the same way as Kerry Foods, Intel and Wyeth.
We are not, however, making an effort to cultivate such highly qualified people who have come through our education system and because they do not have an EU passport they are turned away and sent home. After such a significant investment by them and by our universities, it would make sense to hold on to such people and encourage them to stay here, thus helping to turn around the economy which is in a mess at the moment. That could provide some direction in assisting us to get the economy off its knees and begin to create jobs. That is why Fine Gael has set out detailed proposals to put the basic infrastructure in place that is needed in the economy, including water, broadband and energy. The economy will turn around at some stage, whether in six or 12 months, or two years.
It could, however, grind to a halt due to the lack of investment in developing basic infrastructure needed for the new economies of tomorrow. Energy will be crucial to that. My colleague, Deputy Coveney, has set out detailed proposals to ensure that Ireland will be a net exporter of energy in the years ahead, by putting in place infrastructure to create 100,000 jobs in the next four years. We need to have the infrastructure in place in order that we can capitalise on the upturn in the world and European economies. Sadly we have not seen any direction from Government in that area. The only thing Government has done is to ridicule the Opposition proposals to try to stimulate the economy and get it up off its knees. Deputy Bruton has set out in great detail proposals that would support small business by setting up a back-office investment bank that could provide the capital needed to the commercial banks to support businesses that are struggling trying to manage their cash flow. Surely it makes sense to try to support existing jobs rather than letting them go to the wall. We were told at the end of last year that the €54 billion going to NAMA, which my children and their children will need to pay back in coming decades, would bring the injection of capital needed into the economy. We now know that the Minister for Finance had in his back pocket the information from the IMF that totally contradicted that and clearly stated the money would not ensure capital would flow.
It is disappointing that the Minister has missed a golden opportunity with this Finance Bill, which we shall all regret in the long term.
I wish to respond to Deputy Naughten's final remark on the €54 billion for NAMA which he claimed his children and their children would need to repay. The entire intention of NAMA is that it will get property at a discount and will, over a period of ten years, sell that property and recoup that €54 billion plus a profit. It is not as a debt for him, his children or their children thereafter.
Does the Deputy honestly believe that?
I certainly do.
The Deputy is very naïve.
As a result of the budget, the Finance Bill and the work the Minister has done in the past year we are going in the right direction in that regard. We have a very challenging economic situation at present. This budget will be a significant step in restoring stability to the public finances. The Minister for Finance was very brave and courageous in taking the steps he took in 2009. He initially took €5 billion out of the system principally through the pensions levy and a reduction in capital expenditure and then in the budget he made further adjustments of €4 billion. While such adjustments are difficult for some people, they have been generally accepted. There is no doubt the people recognise the Minister's courage and, as a result, his profile and that of the Government have improved. As can be seen from the recent opinion polls, the people believe and have faith in what he did in the budget and as expressed in the Finance Bill before us.
We are in a very difficult borrowing situation, which is disimproving dramatically. Gross national product was €154 billion in 2008. The projection for the end of 2012 is €126 billion. The wealth of each individual in the country has reduced. Our standard of living has reduced. When we entered the EEC, the big talking point was that our income was at 60% of the Community's average. That increased to approximately 120%. We are now coming back to 90% to 95% of the EU average. That appears to be the stable sustainable position over the short to medium term.
Regarding the debt, there is a reason for expenditure having been cut and the adjustments having to be made. The country is spending far more than it is taking in. In 2009 the current expenditure was €45 billion and the total current revenue was €33 billion. That was a €12 billion balance. There was also a capital expenditure of nearly €14 billion. We are €26 billion in the hole since last year. That needs to be clawed back. Some of it is what one calls a structural deficit which exists because we — all the people of Ireland — allowed the economy to reach a stage where we were spending so much money because we had a lot of income coming in. Then suddenly our income reduced drastically. However, it is not as easy to reduce the expenditure. There is a structural deficit that needs to be dealt with in coming years. I understand the intention is that it be dealt with by 2014.
The Deputy should remember that McCreevy urged us to "party on".
I would hope that date would be set in stone rather than letting it go on any further. We owe it to our future generations that we, who gained the benefit of it during the Celtic tiger years, should deal with it in our time and not leave it for the generations of the future.
Having said that, the budget makes adjustments of €4 billion. Union representatives have appeared on television programmes claiming it would reduce demand and would push down growth generally. That is true to some extent, but because of the work the Minister did and the confidence it gave to the people on a domestic basis, yesterday's KBC Ireland-ESRI consumer sentiment index of the domestic market was higher than it has been in the past two years. There is that positive sentiment among consumers for spending. It has been stated that if they do not have the money they will not spend. We all know the savings ratio has increased dramatically. People are saving because they do not have the confidence to spend. Fortunately that is now turning around and that confidence exists. While we do not want people to spend all of their savings, there is certainly room for a significant amount of it to be spent. We can see that is working. New car sales in January have increased compared with the previous year, notwithstanding that for a couple of weeks the weather made it very difficult for anybody to go to a car showroom to buy a new car.
The Minister of State, Deputy Peter Power, said that at the weekend he read the newspapers referring to the countries in the eurozone that were basket cases. It is not too long ago — before the Minister for Finance took the steps he took — that Ireland was included among those cases. However, now Ireland is not near the situation of Greece, Portugal, Spain or Italy. As the Minister of State mentioned, Britain has a fairly significant debt-GDP ratio of nearly 70%. There again there are also significant problems with employment. Ireland is a small and vulnerable country, but the steps we are taking are getting us out of the situation.
There is also the question of excise duty. The reduction in beer, whiskey and wine has reduced the consumer price index. There were significant increases and young people in particular, with disposable income, tend to drink more than others. It does have an effect, and it did, while at the same time it impacted on people travelling to the North to buy their booze for Christmas. That happened on 9 December, so there was a double whammy, and that will project itself into 2010 and beyond. It will be a softener, as far as the reduction in wages is concerned.
I am particularly concerned, however, as regards those with big mortgages, which are out of proportion to their incomes. Whether it is low, middle or relatively high income there are still mortgages out of all proportion to earnings. Payments per month because of levies, wage and salary reductions or reduced profits in private industry mean that incomes generally are lower than they were two years ago, while the mortgage payments remain the same. This is complicated by negative equity and whereas it does not affect the money coming in or going out, emotionally it is a distraught subject. I believe the action the Minister has taken with regard to the banks, with the code of practice stipulating that they do not take legal action against those in default before an extended period of time, is the correct course as far as people on low and medium incomes are concerned.
The Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan put forward some solutions regarding banks extending the length of loans, making them interest repayable only, among other issues, and I was very sorry to see some commentators in Sunday papers at the weekend indicating that the Government should not help out these people with big mortgages. They argued, in effect, that since they had got into this position through their own fault, their neighbours should not have to bail them out. However, that is what this Republic is about, and what being a society is about, where in the best way possible those in difficult circumstances at a particular point should be given a dig-out.
On the question of competitiveness, I hope Deputy Higgins does not find this too boring.
I can hear the next bit.
The Deputy is concerned with the word "competitiveness". We have had problems with competitiveness, as regards the domestic market, particularly with the fall in demand. We have also had problems in relation to ordinary manufacturing on the domestic front, outside the foreign-owned multinationals, pharmaceuticals, ICT companies, etc. Overall, exports only fell by 2.5% in comparison with global trade down by 12.5% but unfortunately, there was a bigger reduction in the indigenous type of industries where we need to improve. That can only be improved by Ireland being more competitive, with lower labour costs, greater efficiencies and lower prices all around.
I want to focus in particular on the cost of professional fees. These are the fees of accountants——-
I fully agree with the Deputy.
——solicitors and professional people who are not lowering their fees sufficiently. They will lower them if they are in a very competitive situation. In fact, they will more than halve them, just to keep somebody else out. However, that is only in a particular situation. For those already in position, and where they are comfortable, the fees are not being reduced. The Competition Authority needs more powers to ensure that all fees are published, including the hourly rates, so that people may see what value is available in the marketplace. At this point, there is no need for professional firms to reduce their costs and this is deplorable because it is the one centre of costs which can be immediately focused on, and it is restraining cost reductions in many other areas as people say, in effect, "Neither the lawyers nor the accountants are reducing their fees". We must see some action in relation to that matter.
From a competitiveness viewpoint, I am pleased to see the exemption from corporation tax for companies in the first three years of business. That is also available for companies which are commencing operations in 2010. A member of the Opposition indicated earlier that this should be applied to private individuals. However, it is only for corporation tax, so that PAYE directors who take a salary out of the company will pay tax on that and do not get an exemption. In the same way, if a profit is made by a sole trader, he or she pays tax on the income taken out of the business. If an individual wants to avail of this and provided there is sufficient income in the business, then it is not difficult to register a company and get it going.
The Minister has introduced a certain fairness to the tax system in relation to the high earners, that was not there previously. The provision regarding the sum of €200,000 is something of a sop to some members of the Labour Party, if Deputy Higgins does not mind me saying so. I cannot see the amount that will be got from that as being very significant, but it is fair, nonetheless, and a start in the right direction. The people this might apply to——
It is like throwing the coins to the peasantry.
——can move around very quickly. One commentator said there is no aggregation of assets between a husband and wife, so if it is a question of a €6 million house in the name of the wife, then it would not apply to the husband since it is all being done on an individual rather than an aggregated basis. Hopefully, that is not the case. It can be adjusted if necessary.
The whole idea of companies buying back their shares in order to increase the share price so that the individuals who hold them can make money through capital gains and pay a lower rate of tax than the dividends which would otherwise be payable is an excellent move. There was an article in a newspaper on Sunday about €400 million being avoided in relation to the capital gains tax on gilts futures contracts, government securities. There were two transactions in question, one where a gain was made, and a corresponding loss was then made. On the gain there was no tax because it related to government securities, but the loss could have been applied to other profits for capital gains tax purposes. I would like to know whether that occurred. I realise capital gains tax avoidance provisions are in place now, but were they not in place earlier? Was that article correct?
This budget has certain initiatives which will improve by a quantum leap the business in the International Financial Services Centre. Effectively, there are three items of note, including matters related to Islamic finance and principles of Islam under sharia law, which are to be applied to finance. The way in which this will improve the amount of business transacted is noteworthy. I understand in the Middle East financial institutions are looking to set up staging posts in Europe at the moment and Ireland could be a good place for such a set up. There is great potential in this regard.
I refer to the UCITS, undertakings for collective investments in transferable securities, to which the Minister of State, Deputy Roche, referred earlier. There will be clarity now as far as the taxation of funds managed by UCITS managing agents are concerned. If a non-resident fund is domiciled in Germany but managed in Ireland, no tax will be applied in Ireland. This is clear and allows the Irish management company to offer its services throughout the EU. Deputy Naughten referred to the remittance basis for income earned by individuals seeking highly skilled, value added individuals who could set up here, possibly in the area of sharia finance or the UCITS management business. The fact that such people may operate now, even if only on a remittance basis for one year, is commendable. All in all, this is brilliant work by a brilliant Minister for Finance and I commend it to the House.
I wish to share time with Deputy Arthur Morgan. I listened with great care to the speeches made. There are some points with which I find myself in agreement. In the course of the ten minutes available to me, I wish to put some fundamental questions about what is under discussion in this Bill. In the past week there has been a considerable debate about what we discuss in the House and how effectively we can discuss it. In this Finance Bill there is a great inability to face up to some fundamentals of political economy. At the risk of future political consequences, I might as well state that at this hour of the night, one will not find many of the media interested in what we have to say about the economy. I find a great limitation in what I hear in respect of the problems in place now. I have spent a great deal of my life as an academic but as such, one is neither deaf nor blind to what is taking place in one's constituency. This week in my constituency some 175 people in Boston Scientific lost their jobs. Whether one has been a lecturer, professor or a teacher, one understands what it is like for people to go home and say that they have received notice that they are to lose their jobs. What I find rather strange in the analysis taking place is how little political economy is present in the debate.
I will outline some the questions one might put although I realise I have a very limited amount of time in which to speak. Do we accept that the model of the economy that has been in place for a period has been a significant failure? If one does not examine the matter in a sharp sense, taking its parts bit by bit, one ends up with rather general statements. I agree with some of the points made by Deputy Ardagh, but the term he used was "We" were involved in this great excess which brought us to the point at which our expenditure vastly outstripped our income, based on a speculative bubble in the property market. The fact is the use of "We" is disguising a truth. Not everyone built dozens of townhouses in bogs in north Leinster. Not everyone shared in all of this expenditure of a lavish nature which took place. Not everyone was accommodated personally without collateral by the banks. After this traumatic week, let us decide in the interests of truth that we will not use the term "We" unless we specify to whom the "We" refers. However, we may use the term "We" to say that we must all pay for this now.
There was a tendentious speech given in the previous matter under discussion today that suggested the percentage paid by higher civil servants was in some way a greater sacrifice than that of people we drove practically below the poverty line at clerical officer level in the public service. This is a great nonsense. The question of where one stands in this regard was put by one Deputy. I can inform the Deputy very straightforwardly where I stand on this matter.
There is good and informed political and economic opinion, including from such people as Joseph Stiglitz of the World Bank, which holds that the model was disastrous. There are things which cannot and should not be supplied in a republic. In respect of the security of citizens, the market cannot supply a guarantee of basic decency and a floor below which no one should be allow to fall. If one doe not accept this, one finds oneself paying for tax concessions for a minority, while reducing the income of the disabled, the poor, widows and so forth. In addition, the Christmas bonus was taken off people. Upon examination, one finds the tax concessions given to a very narrow group of people would have paid for all of that.
Now, let us stop the nonsense. This is an immense political and ideological point. I refer to getting out of the bind we are in. The one truth coming through from every Deputy and on every side is that the greatest problem we face is unemployment. Reference has been made to the loss of jobs, the threat to jobs and the havoc and poverty this creates. However, there is a great distance between the language and the reality. For example, I refer to the matter of returning to education. It is mere idle rhetoric to state we are encouraging people in the construction industry, especially male unemployed people, to get back to education. The tests in place for jobseeker's allowance are prohibitive and one must claim for a particular length of time to qualify for the back to education allowance, but we disqualify people right, left and centre. The week before last, an electrician came to see me at my advice centre who was disqualified.
I refer to an example of getting back to education. Let us suppose one was on an access course. In certain circumstances one must qualify twice. On must be deemed a jobseeker but also, because of the criteria of certain institutions, one must qualify for a maintenance grant which is means tested. The people going back to such colleges have been told they will not be paid the maintenance grant which is, in fact, a major breach of trust. It is absolutely disgraceful.
I would rather dwell on the more positive things that could have been part of an imaginative Bill. One helpful development would be the acceptance that this model has failed. Throughout the world people are considering the proposition. Let us consider the economy overseen by Mr. Obama. They are considering a second round of stimulus. This is what Joseph Stiglitz has advised for the Obama Administration.
Where is the stimulus here? I attended Farmleigh and wanted to be positive, as I am, but I must ask where the supports are for the creative economy that could have generated so many jobs in film, design, digital media and music. I know this area well. When Ireland had the second highest incomes in the world, it had the second lowest level of social protection. One could have incorporated all the caring jobs into the economy, the caring economy. In the green economy, about which we hear so much, we do not see the jobs in terms of technological application.
Consider the use of loose language and the notion of competitiveness, about which many are speaking. I agree with Deputy Ardagh on one point, that is, on the cost of services. He is correct. However, there is a secret agenda such that competitiveness is being used as a cover for driving down wages. If one wants to be a real economist, one should show me, in respect of export costs, the contribution of escalated wage costs. When this occurs, we can talk about what is real.
Competitiveness is being used as a cover to try to mount a campaign to reduce the minimum wage and get people to accept that miserable 1930s philosophy that one should be willing to come out of the house for anything one is offered simply in order to get out of the house. This thinking is widespread and people are using the present economic conditions as an excuse and cover for other regressive attitudes.
It is not only in the property bubble that the magnus of market thinking destroyed things. It made its way into the universities. I know much about these because I worked in them for 18 years. There is no need to make a choice between fundamental research and short-term applications through technology because one can do both. There are areas in which Ireland is a world leader, as emerged at Farmleigh. I refer to immunology, nutrient research and other areas. Ireland was full of opportunities but one found people who were looking for short-term yields from fine places of scholarship and asking them what they could develop in five years. Anybody who knows anything about medical research knows that it takes more than a decade before one can develop a particular product. We put at risk our third level institutions by short-term thinking.
The Minister for Education and Science referred, at a time when we are to produce tens of thousands of unemployed graduates with disappointed expectations, to the brand that was accepted all over the world, that of the National University of Ireland, NUI. The Minister of State at the Department of Foreign Affairs, Deputy Roche, referred to the Royal College of Surgeons. If he respects the Royal College of Surgeons, why does his colleague, the Minister for Education and Science, want to dump the NUI brand that is accepted all over the world? It is not that we are experiencing some great trauma this particular week in the absence of some technical expertise, it is that we are not doing real economics. That is what we need in the Finance Bill.
I thank Deputy Higgins and the Labour Party for sharing time.
This Bill does not provide the mechanism necessary to lift us out of this economic recession. The Government is failing completely to put in place a stimulus package and to incentivise economic enterprise and those entrepreneurs who are vital to getting us back on a constructive course. The Government has been pursuing the same policy for two years.
Deputy Ardagh, whom I hope I am not misquoting, stated the people of Ireland overspent. He stated this was the big problem. If so, it is the fault of the people of Ireland that we are in this economic mess and experiencing this catastrophe. If Deputy Ardagh or anybody else really believes this, he should not be here.
People did, of course, overspend but they were following Government policy, which not only allowed them but actively encouraged them to do so. The Government looked the other way when banks were giving 100% and 120% mortgages. My colleague and Deputy Ó Caoláin, in particular, called on the Government over three years ago to cap mortgages at 90% or, at an absolute maximum, 95%. This would at least have cooled the market to some degree. It did not happen.
Where was the financial regulator to address the question of the salary-loan ratio? The regulator looked the other way and allowed the mess to continue. One cannot blame the people, therefore, for getting into this mad rat-race or crazy economic race that took place over the best part of the past decade. Government policy was looking in the wrong direction, as the Government is doing now through this Bill.
To understand what I mean by "the wrong direction", one must ask who the Government is targeting. Special needs assistants comprise one group. Although there are many others, I mention them in particular because I have had an avalanche of representations in my constituency offices from them. I have no doubt but that other Deputies also had significant numbers of representations. I hope these Deputies feel as bad and helpless about the issue as I do. Parents, and in some cases single parents, explained to me the huge disability of their children and how those children were getting on so well because of the special needs assistants and the excellent care and love and attention they were receiving, yet they are the victims of the Government's policy.
There are other categories of people affected, as we see from the slashing of the social welfare payments to swathes of people. One should compare this policy with that of cutting the wages of high-income earners by only a fraction, as discussed in the Fine Gael motion on Private Members' business, which I totally support. The mantra stated regularly by the Government that it is targeting those who can pay and leaving alone those who cannot afford to pay is untrue.
The Government's taxation policy is crazy. Through the boom years, the Government was totally dependent on consumption taxes, such as stamp duty and VAT. The over-dependence on consumption taxes was completely unsustainable because the taxes were indirect and therefore completely unreliable in terms of generating an income stream for the Exchequer. As a consequence, when the economy began to turn, the Government was caught, a bit like the emperor with no clothes. It was completely exposed to huge risk. There is still insufficient capacity to pursue a proper and fair taxation system.
Every Government decision in the past three years has compounded the damage already done. One concerns the bank guarantee scheme of September 2008, worth €440 billion. It was implemented without putting proper terms and conditions in place. The decision to guarantee the banks was bad enough on its own but the failure to have proper terms and conditions meant that it was ludicrous. The decision to nationalise Anglo Irish Bank was crazy. Why would one do this? It was done because the bank is known as the Fianna Fáil bank. This is the name it had about town. We need not waste time this evening elaborating on this. Allied Irish Banks and Bank of Ireland were recapitalised when they should have been nationalised. A proper State bank should have been put in their place.
The most recent flawed decision by the Government concerns NAMA. NAMA was supposed to be about ensuring a proper finance stream and credit stream for small and medium enterprises. I am delighted that The Irish Times revealed the truth yesterday. I congratulate it on obtaining Government documents through a freedom of information request that exposed the lie that the Government told the House. It totally misled the House when told by the IMF that NAMA would have no input on lending.