I welcome the Minister for Finance, Deputy Michael Noonan.
Economic Growth and Job Creation: Statements
As I am after rushing across, I am breathless.
The Minister should take his time. Looking at the other side of the House, I think a few others are breathless also.
I welcome the opportunity to speak on economic growth and job creation. When the Government took office in 2011, it had a clear strategy to restore stability to a country that was on its knees and get people back to work. Those who have lost their jobs have been hit hardest by the crisis. Over the course of the crisis, some 330,000 jobs were lost and unemployment reached a peak of 15.1% in 2012. Getting these people back to work and creating jobs and opportunities for the younger generation is this Government's priority. That is why a range of important policy measures have been undertaken since the Government took office. They have provided a solid foundation for a sustainable economic recovery to restore the jobs that were lost. Significant progress is being made. Employment growing at its fastest rate since 2007. Some 61,000 jobs were created in the last year alone. Unemployment has fallen for 20 months in a row and now stands at 12%. We must build on this level of job creation. That is why the Government's medium-term economic strategy sets full employment by 2020 as its stated objective. This will require the creation of a further 220,000 jobs in the next seven years, a task to which we are firmly committed.
It is fair to say there is a growing sense of optimism in the country. Following another year of growth in 2013, the economic recovery is set to further strengthen this year. The publication of strong employment figures last week was followed by strong retail sales figures indicating that confidence is returning. Due to our relatively small domestic market, Ireland's growth model must be export-oriented. Exporting sectors are continuing to perform well and are supported by continued reductions in our cost base and improvements in the outlook of our main trading partners. Encouragingly, we are seeing increasing signs of recovery on the domestic side of the economy. We welcome this development because our strategy, delivered through various budgets and other Government measures, is to spread the economic growth evident in the exporting sector to the domestic sector. Achieving this reoriented focus is vital as domestic demand is relatively more jobs-intensive.
The fact that our strategy is working is evidenced by the labour market recovery that is solidly under way. The release last week of the quarterly national household survey provided further evidence of this. Some 61,000 jobs were created in the economy over the year to the fourth quarter of 2013. This represented employment growth of 3.3%. This is evidence that sectoral policy initiatives pursued by the Government have begun to bear fruit. It is not often recognised that a sectoral examination of the economy is undertaken in each budget to identify the scope for job creation. This permits the implementation of targeted measures. A €500 million pro-jobs package was introduced in budget 2014, with targeted measures for the different sectors of the economy and a particular focus on small and medium-sized enterprises. I will mention some examples. Under the jobs initiative, the VAT rate was reduced for the hospitality sector. The Government continued this measure in budget 2014. The role of this measure in supporting job creation is clear, given that over 22,000 jobs have been created in the accommodation and food sector since it was launched. The Government has introduced measures to stimulate increased activity in the construction sector and boost employment. In budget 2014, the home renovation scheme was introduced, which provides home owners with tax relief on expenditure of up to €30,000, excluding VAT, incurred on repair, renovation or improvement works on a principal private residence.
Our policies are working. We have seen three consecutive quarters of annual growth in construction employment. The start your own business initiative, which was introduced to support entrepreneurs, provides that an unemployed individual who starts a new business will be exempt from income tax on the first €40,000 profits of that business for the first two years. This initiative will give people a much-needed incentive to start their own businesses and reduce their dependence on welfare payments. A new capital gains tax incentive has been introduced to incentivise entrepreneurs to invest and reinvest in assets that are used in productive trading activities. The removal of the air travel tax, the aim of which is to support the labour-intensive tourism industry, will support Irish airlines in their bid to attract an increasing number of passengers to Ireland in 2014. In direct response to this measure, Ryanair has committed to bringing an additional 1 million passengers to Ireland this year.
Following research carried out within my Department, I have further enhanced the research and development tax credit scheme by increasing the amount of qualifying expenditure to €300,000. This recognises the importance of maintaining firms that have invested in research and development here previously. Supporting research and development increases the long-term potential of the economy and boosts supply-side capacity, thereby securing higher future employment levels. To support small and medium-sized enterprises, which account for over half of total Irish employment, I introduced a ten point plan aimed at supporting small and medium-sized enterprises in budget 2013. Building on these supports, the annual VAT cash receipts basis threshold for small and medium-sized enterprises will increase from €1.25 million to €2 million from May 2014. In addition, a new subsidised financial training programme for small businesses has been introduced and lending targets to small and medium-sized enterprises have been set to promote lending volumes in support of real economic activity. Such a sector by sector examination of the economy, in addition to the implementation of targeted initiatives to support businesses in these sectors, has considerable potential to generate jobs.
We are aiming to diversify the economy and achieve sectoral strength across it in order that we will never be so dependent on one sector again.
Exiting the EU-IMF programme was a key milestone in Ireland's recovery. However, it is by no means the end in itself and my colleagues and I in government are determined to build upon the solid foundations that are now in place. The medium-term economic strategy published in conjunction with the programme exit is the Government's strategy to support growth and job creation. The strategy sets out the objectives to deliver a deficit below 3% by 2015, to eliminate the deficit by 2018 and to achieve full employment by 2020. These are ambitious targets but the strategy shows that they are deliverable.
The strategy is based on three pillars: ensuring debt sustainability; financing growth; and supporting employment and living standards. I would like to briefly talk about the importance of the work under way on each of these pillars. The deficit is on a downward trajectory and the debt peaked in 2013. At just over 120% of GDP, our gross debt levels are higher than the EU average; therefore, our strategy is to reduce this to a more sustainable level. The first important step is to run a primary surplus ino rder that we are not borrowing to fund the day-to-day expenditure of the State. We will achieve this for the first time this year. Second, we are working to maximise the value of what we own and offset the value against our gross debt levels. The policy is that when market conditions and price are right, the Government's intention is to continue to dispose of our banking assets.
Pillar 2 is financing growth. It goes without saying every functioning economy needs an adequate and efficient flow of credit and financing to grow. In Ireland, SMEs are the backbone of the economy across the country and the banking system must support these companies to grow and create jobs. Targets are being set for the banks for lending to both SMEs and mortgage customers. The Government's medium-term economic strategy builds upon the approach we have taken to grow the economy and create jobs. Through future budgets and action plans for jobs, we will seize sectoral opportunities for growth.
Let me conclude by saying things are now going right for Ireland. Progress to date has been no accident. Things are going right because we are implementing supportive policies. We recognise this and we will not be complacent. Although we have successfully exited the EU-IMF bailout, this does not mean that we will ever allow a return to past practices where expenditure grew to unsustainable levels alongside a tax base that was progressively eroded. The job is by no way complete and the medium-term economic strategy sets out the plan to reach full employment by 2020, with An Action Plan for Jobs 2014 being another important step towards this. The success of our approach will be measured against our ability to grow the economy and support business to create jobs.
I thank the Minister for his statement to the House. It is crucially important that we have this debate and that we in the Opposition keep challenging the Government in respect of commitments that were made and progress on those commitments because I am certainly willing to acknowledge progress but I am not willing to join in backslapping and self-congratulation. The Government is in danger of that from time to time and I do not think that would be in the national interest. The only congratulations that any party in government needs is a general election and the public will soon tire of self-congratulation. I have not heard that too much in the Minister's speech but it is a recurring motif of statements from the Taoiseach and Ministers.
There are a few areas that are not being properly addressed. One crucial area is the reform of professions and the sheltered sectors of the economy. The troika was very clear about this before it left. The economy is very open and much work on opening it up and allowing for the type of job creation we have was done by the previous Government, which must be acknowledged. There are not too many sectors of the economy that need to be deregulated but there are some and they are key sectors. By and large, we are talking about medical and legal professionals. Little or nothing has been done in respect of them by this or previous Governments. They have ridden out the troika and come out smiling at the end with nothing happening. There was a suggestion some time ago in The Sunday Business Post that the consultants' contract, which was the one good thing that happened under the previous Government, is not even being enforced by the Government. Those areas where costs are higher are holding us and the economy back and need to be targeted. However, they are not being addressed and many commentators have said this. My fear is that there are still vested interests who have the ear of certain people in the Government. One particular party in government seems to have made a big play in respect of the legal profession, which is a pity.
The Minister mentioned the sale of State assets under the title of ensuring debt sustainability. There was a huge debate a few years ago between the Government and the troika and between the parties in government over how much from the sale of State assets was going into the payment of debt - bringing down the debt is a good thing to do and I support the Minister in that regard - and how much was going into job creation, as it is called. I suppose Government spending is the correct way to describe it. In the Minister's speech today, he mentioned the sale of State assets and stated that he is working to maximise the value of what we own and offset it against our gross debt levels. The policy states that when market conditions and prices are right, the Government's intention is to continue to dispose of our banking assets. If there is a programme for job creation coming from the sale of State assets, I would like to know what that plan is because it is not spelt out in the Minister's statement. That seems to be at odds with much of the commentary that took place over the troika period and various victories that were claimed. We would say that Bord Gáis was massively undervalued and that there was a keen political impulse to sell it and show that we achieved something. Its sale was supposed to fund major infrastructural projects such as the national children's hospital, which is not really progressing. The sale of the national lottery licence is another issue.
Health care is another key issue relating to economic growth and reform. It is seen across the world as a matter that relates not just to the health of the public but to the growth of the economy. The market for private health insurance is collapsing. People are leaving it all the time, which makes it difficult for companies to provide insurance and to pay out when claims are made. This costs the State more money because it will ultimately pick up the tab for people who cannot pay for their health insurance. The Government seems to be at sea on this issue. Again, we know only from media reports that the Minister for Health has presented a White Paper to the Minister for Public Expenditure and Reform that based on media commentary seems to have been ridiculed by the Departments of Finance and Public Expenditure and Reform. I suppose the Minister is in a position to let us know what he thinks of it. Certainly some of the figures that were played out, for example, the figure of €1,600 a year per person for health insurance, would be pretty frightening to most people because that would buy one a pretty substantial policy in the private market. That has been made more difficult and I wonder about the Government's approach to this issue because it has been made more difficult by its changes to tax relief for health insurance. When I heard that first - it was described as affecting only the gold-plated policies - I said to myself that it was a master stroke. It was a huge amount of money to be saved from the wealthiest but, of course, we found out that this was not the case and that it is really affecting a large proportion of health insurance policies, which is a pity. It does not show a joined-up approach by Government. There seems to be a lot of delay on the part of Government in respect of its plans that will affect not only health care but the economy.
The Insolvency Service of Ireland, which we supported, is up and running. We have concerns about some aspects of it which we put on the record. Very few cases have been dealt with by the service. A citizen met me on Friday who told me that he was considering going bankrupt. The State fees alone are €1,000 or close to it. He went to professional advisers and was told that his costs would be €8,000. I know some organisations are doing it for €3,000 or for free with the State costs. The point is that it is extremely expensive for someone who wants to avail of bankruptcy or even the lesser options in the insolvency legislation. That is a pity.
It needs to be reviewed on a regular basis to ensure it is doing the job expected of it.
I do not know what the plan is in respect of repossessions. The banks were allowed to repossess properties last summer, since when there has been an avalanche of letters, threats and court dates. I know one man who is in court next week. Sustainable solutions have not been put on the table for such people. This is dreadful for them, their homes and the economy. It will not help us if people are left in limbo not knowing what they are doing. In certain estates, there are a number of houses where mortgages are in arrears. It will create a negative social impact if these houses are emptied out or banks move on them because people have stopped paying their mortgages. It is not worth paying a mortgage if one is in serious arrears, as the chances are that one's house will be repossessed anyway unless one can come up with substantial amounts every month. I know people who are paying two thirds of their mortgages per month, yet their banks do not deem that to be sustainable even though employment levels are starting to increase and there are some prospects.
We support the successes that the Minister outlined. We are delighted that quite a number of jobs have been created. However, much more could be done, yet there appear to be blockages in the system in that regard.
The Minister is welcome back. He always gives us the benefit of his time. I agree with Senator Thomas Byrne, in that none of us on this side or the other is here just to blow kisses and backslap. Any time we can make a positive intervention, it can only be of benefit to many.
We have made progress, but many challenges remain. One of the largest has probably taken up more of the Minister's time than anyone else's, that is, returning the banks to a functional state for a functional sector. How real are some of the banks' restructuring solutions? Mr. Boucher stated that the Bank of Ireland did not do write-offs. In that case, Bank of Ireland will not be in a position to resolve some people's issues. For some, there must be write-offs. On the other hand, AIB was the first to come to the table and agree to carry out write-offs under certain circumstances.
There is good news concerning the NAMA sector and its first cousin, the IBRC liquidator. Some commentators and politicians claimed that NAMA would exist for 20 or 30 years. Something similar was claimed about the IBRC liquidator. Last week saw the sale of the Projects Rock and Salt portfolios for €7.7 billion and the Project Sand sale of a financial instrument involving 13,000 or so mortgages for €1.8 billion. The latter is a cause for concern, though, as we expect the protection of the State to be available for those 13,000 mortgagors. When a representative of the Department of Finance addressed our finance committee on this matter, she expressed the Minister's opinion that, if the Central Bank was not in a position to acquire the agreement of bidders for that loan book, the Department would move with legislation. I support that approach. This House has sat early and late and would be prepared to do so again to ensure protection for people.
There are some positives. Motor sales have increased 8.9% year on year. This is pushing in the right direction. According to the Department's figures, €2.1 billion in VAT was accrued in February, representing a 7.1% increase on the same period last year. This suggests people are prepared to spend. In the past, nowhere did people spend more than on property. There is a concern that some areas of Dublin's property market are heating up too much too quickly, but the drop in prices outside the Pale seems to have concluded. The natural extension is that property prices will increase.
Ten of the 14 sectors analysed by the CSO have seen job increases, which is to be welcomed. Agriculture saw the largest increase, followed closely by the hospitality sector. The 61,000 new jobs year on year must be welcomed. Unemployment remains too high at 12.1%, of course. As the Minister stated, the unemployment rate was 15.1% when the Government took office, but everything is relative and I do not want to beat up the previous Administration. The current level of 12.1% is too high and the objective is to reduce it further.
Nothing radical has been done in respect of rates yet, particularly for small to medium-sized enterprises, SMEs. I do not suppose that the Minister or the Department of the Environment, Community and Local Government can do anything about this until local authorities put their own houses in order. It would be a pointless exercise until the cost of doing business with local authorities was reduced to its absolute minimum. The Minister has the opportunity to reduce the rate overall. While a small reduction for the SME sector would not make the difference between their staying in and going out of business, it would have an impact on the €1 billion that is accrued from rates every year. The largest ratepayer in County Wexford is Tesco. Its profits are decreasing, but it remains the most cash-rich company. We do not want to give such businesses a break. Rather, we should consider something radical in respect of SMEs with three, four or five employees, perhaps a tiered system in which the large multiples paid more and the small units paid less.
The middle sectors of all societies never get a break. They pay all of the high taxes. VAT, employer taxes and income taxes are all at the maximum. If they increased further, there would only be diminishing returns and a growth in the black market. They rarely get grant aid of any nature, yet they drive the economy. The Minister has discussed this matter previously, but if it was possible to give middle Ireland the benefit of tax reductions, we would get the money back. More people would be hired in the process, creating a loop of employment that would benefit the Government's tax take.
I wish to touch upon where we are nationally. Fitch Ratings upgraded us to BBB+. We face challenges. This year's deficit is 4.8% of GDP. We will borrow €10 billion, which will be paid back at some point, perhaps not by us but by our children or grandchildren. Our debt to GDP ratio was 124% at its peak. We anticipate that, as growth in the economy resumes, it will be easier to reduce that ratio.
Senator Sean D. Barrett has referred to financial stimuli around the country. These projects must undergo cost-benefit analyses. They cannot be the pork barrel projects of the past. It happened in every jurisdiction. Whatever money we have, we must ensure that it is well spent and employs the maximum number of people possible.
Nothing radical has been done in respect of rates yet, particular for small and medium
I would like to see that cost benefit analysis done for every stimulus package. We spoke about the children's hospital. That must happen, but there are other areas in which we are investing to employ people. The VAT rate reduction was the right thing to do but more analysis must be done to ensure we create more jobs. We would then be going in the right direction.
I welcome the Minister. I should congratulate him on being European Finance Minister of 2013. As he will be aware, in today's Irish Examiner, Oliver Mangan notes that there are 61,000 additional people at work in Ireland, which is a 3.3% increase in total employment, a 3.9% increase in full-time employment, and a 4.5% increase in private sector employment. Given that the GDP was only up by 0.1% or much less, that shows we have implemented a section in the Minister's contribution, namely, achieving reductions in our cost base. Those figures explain that. Economists used to try to explain jobless growth. Now we almost have growth-less jobs, but we are a small part of a world economy and if we can achieve those reductions in the cost base we get the good results that are evident. There is one problem, however. Page 6 of the briefing document we got from the Oireachtas service states:
Up to 2013, the cumulative decline in youth employment in Ireland was almost 60%. That represented a drop of over 350 of 7,000 employed youth in the summer of 2007 to 148,000 at the beginning of 2013. While there has been a modest increase in overall employment figures recently [the 61,000 was welcome] it has not materialised in the youth category.
That is something we have to examine. Employment programmes should get employers involved. There should be a work element involved also, perhaps involving interning. In that way we may get a better dividend on those programmes.
The big ticket increases in employment have been in accommodation and hospitality, which is up 12.8% since 2011, and the professional, scientific and technical area, which is up 19.7%. Irish tourism became bad value, and we discussed this with the Minister, Deputy Leo Varadkar, during the boom period. That area must be continuously monitored. In some of the surveys Killarney is emerging as the high cost area for tourism bed nights. If we are only just into a revival in tourism, we cannot neglect offering good value.
On the travel tax, the Minister mentioned the extra 1 million passengers promised. That was a very worthwhile project, and also the lower VAT rates for the sector.
In regard to the professional, scientific and technical area, it has been my privilege over some decades to work with young people aged 18 to 22 years. They are a splendid generation. If we can organise the economy well in this country they will work here but they will be snapped up in Canada, New Zealand, the United States and the United Kingdom. We owe it to that generation, therefore, to increase the number of places at second level, as the Minister for Education and Skills is doing, and perhaps at third level because that generation is increasing faster in numbers than we had expected. The problems in mathematics and foreign languages are being tackled. The Teaching Council, by having a professional teaching profession, will help to get more trained teachers and fewer untrained teachers in the system.
We must keep order in the public finances because disorder made the economy uncompetitive. Unattractive features included a very high cost construction sector that increased house prices in Ireland more than in any other country in the OECD - we got the unwanted gold, and Spain got the silver; a dysfunctional banking system and a bubble economy; an accountancy profession that signed for these banks; problems in pension funds; problems in credit unions; and problems in insurance.
One of the ways the economy will recover is by having a strong financial reform agenda. We cannot operate without banks. We have some Bills on the agenda on that area, and we have had discussions with the Minister's officials, but I would opt for an 80% loan to value and two and a half times the income ratio. We must get banking away from the mad era of massive multiples of people's incomes and massive multiples of the value of the property being loaned.
On project appraisal in the public sector mentioned by Senators Michael D'Arcy and Thomas Byrne, it is a pity the Comptroller and Auditor General brings his wisdom to bear only after the project has crashed. We need to do that at the outset. I would have the project appraisals done first and published for a year, and not published by the promoters of projects. We will then see if they are good value for money.
The Department of Finance is getting back into mainstream economics. Two of the Minister's officials are reading a paper at the statistical society on Thursday night. A gap did occur in that regard and it is important that the links between academic economics and the Minister's Department are as strong as they were in the days of Ken Whitaker and Louden Ryan, one of my previous bosses.
We need to reform many of the financial services. I am not satisfied that many of the banks we bought for €64 billion had their accounts validated by senior people in the Irish accountancy profession. We must tackle that as well as banking reform.
Senator Thomas Byrne mentioned competition and the sheltered sector. We had a measure to open up the general practitioners lists, which I believe was done in the early days of the troika. Some time ago we asked the Minister of State at the Department of Health, Deputy Alex White, if there had been any opening up of those general practice licences and the answer given was "hardly any". Fewer than 100 new doctors joined the general medical service. There was a very interesting section in the relevant legislation which provided that in looking at an application to provide that service, the Government would not take into account first, whether it was financially viable on the person making the application and, second, whether it was financially viable in its effects on other people who did not like the application being accepted. In a market economy we must keep that emphasis on reducing the cost base and making it competitive.
In 2016, after 84 years of preventing competition in bus services, we deregulate 10% of the market. That is, it has taken 84 years to get competitive bus services. The strict regulation of taxis, including ruling out the use of GPS, means we have approximately 5,000 fewer people driving taxis now than when those regulations were introduced in 2009, and that was after the courts had deregulated the business. We must keep the emphasis on competition.
We need much greater quantification of policies. We must cease to have an economy based on assets. That is the reason I was happy to second Senator Feargal Quinn's motion on upward only rent reviews. Everybody must be flexible and competitive and to have an interpretation of the Constitution that there is a duty on the courts to defend asset prices when wages, prices and welfare payments were falling does not help competitiveness. We need to keep an eye on the sheltered sectors mentioned by Thomas Senator Byrne.
I welcome the recent report on our ports. People having long leases over wharfage prevents competition in ports because people are secure in their leases for 25 years or, in some cases, as many as 100 years. That means they can block off the competitors. We need competitive ports.
There are many comments I could make on this area. We need regulatory impact analysis with legislation. There was no financial memorandum with the water Bill. We also need a central office of project evaluation.
I ask the Minister not to relent on the reform agenda. Tús maith leath na hoibre. We have a lot to do to make the economy as efficient as the Minister would want it to be in the next two years. I ask him not to relent to pressure groups who do not like competition because the cost will be borne by very many unemployed young people. Nobody wants this. To convert 0.1% GDP growth into 4.5% growth in private sector employment is a major achievement.
I compliment all those concerned with it. However, it is only the start of a task we have inherited from the collapse of banking, accountancy, financial services and pension funds, all of which still need reform.
I welcome the Minister, Deputy Michael Noonan. I know we have all asked for him to attend on a number of occasions. I was particularly keen to address some of the issues regarding banking and mortgage arrears with him. However, this is a more general discussion on economic growth and job creation. While we have certainly seen the headline figures mentioned in the Minister's speech, certain aspects of the programme the Government is pursuing are worth mentioning in terms of their positive developments. In particular, I highlight the changes we have made to the tax code, equalising tax over income tax and capital taxes. I regard that as a very positive development. It is also very positive that we have initiated broader forms of tax in order that we will not be so dependent on certain types of taxation. There are taxes that certain people can avoid by behaving like Cinderella and leaving the country on certain days of the year.
I do not believe we have done enough to bring the self-employed within social protection and giving them a floor below which they cannot fall. I have never been a great believer of the ethos of Mr. Charlie McCreevy that people can make a trolley load of money when times are good, but when times are bad that is too bad for them. I have always believed that the best thing we can do for the self-employed is to give them the kind of security they need to take the kinds of chances they want and need to be able to take for us to have an entrepreneurship economy. I also feel we have not gone far enough in addressing what I see as a looming pensions crisis, something that will come back to haunt us.
As the events of the week in Ukraine have shown us, it is clear we are very much a small open economy. Our recovery is momentous within the context of the economy, but within the context of the wider framework we are very much dependent on the European Union and what happens there. The Government has been to some extent engaged in crisis management - very effective crisis management. I give full credit to the Minister for this. We now need to look forward and be judged on what we do. A philosopher or historian once said that one should never waste a good crisis. For example, in the 1960s Mr. T. K. Whitaker made incredible strides in the Irish economy by moving us in giant steps rather than in small steps. Politically within Fine Gael, as the Minister knows, the "just society" document was important in moving the Fine Gael Party along a different trajectory in terms of a more equal society.
It is no longer business as usual. While we have exited the bailout with top-of-the-class gold stars, the question is where we go from here. I believe the eyes of the world are on us to see how we move forward and what type of country we build. Within that, I wish to raise a few issues with the Minister. The Taoiseach recently responded to a question on the right to housing that had been brought forward in the Convention on the Constitution by saying we needed approximately 30,000 units of housing a year but were producing fewer than 8,000 and it was all heading in the wrong direction.
As the Minister knows, homelessness is on a very significant upward trajectory, particularly in the Dublin region. It is not just a Dublin issue, but is emerging in other urban areas, including the Minister's city of Limerick. This is not just noteworthy because of the social distress it causes. It is the first time we have seen this type of homelessness emerge because of a lack of affordable housing. Although we have exited the bailout we are not in a position to stimulate investment in the economy to any great extent as previous Governments could, for example in the 1950s, 1960s and 1970s. The Minister has said we need a stimulus for the construction sector which at below 6% has fallen well below the level needed in a developed economy such as ours.
I welcomed the measures the Minister introduced in the budget when I spoke in October and again in January. I am concerned we are stimulating a construction sector that is, in effect, creating greater demand in the economy without creating more housing, which is a very significant problem. We need a very significant stimulus package of approximately €1 billion to construct about 6,000 social housing units as a starting point to bring us up to having in the region of 15% of our overall housing stock in social ownership. If we do not go in that direction, the shortage of housing will be the biggest issue the Government will face in 12 months time.
We have a major issue with mortgage arrears. I accept the Government has set targets for the pillar banks. However, I fear that the worst of this debacle is still to come. I engage with lending institutions and clients dealing with those institutions every day of the week. I have a serious concern about the level of repossessions I believe we will see in the next 12 months. I have always had a very deep concern about the balance of power in the relationship between distressed borrowers and the banking institutions with which they are dealing.
There is a lack of expert service available to people in mortgage arrears which would allow them to negotiate real and sustainable solutions with their mortgage providers. I do not believe it is enough to say we have insolvency legislation as if that addresses the issue, because I do not believe it does. I do not believe people want to or should be forced down the road of insolvency or bankruptcy to solve the problem. We very much need an expert service to assist people to come to a real resolution to their mortgage arrears.
I take the opportunity of the Minister being in the House to say there is a major issue with separated people or people who have suffered marital breakdown resolving their mortgage arrears. If we do not have a change in the legal process covering separated couples or people who were never married in the first place but entered into joint mortgages, we will end up in a very difficult position.
I know the Minister has a particular view about the buy-to-let market. Figures produced at the end of the last quarter of 2013 show that a very significant number of receivers have been appointed to buy-to-let properties. There is a very significant issue with the treatment of tenants in these properties when receivers are appointed, and the law needs to be changed in this regard.
I do not believe we will have banking as usual any time soon. I thought the Minister had made some very positive comments about a third banking force. I gather I might have misinterpreted them, but I think it will be necessary. I could see us going back to a position where people would need to lodge their First Holy Communion money with a building society to get a loan. I do not believe ordinary people will be able to avail any time soon of the kinds of banking services they have been used to for the past 15 or 20 years. It behoves us as a nation to come up with a solution to that problem.
While I know this is unpopular with Senator Sean D. Barrett, I would like us to use the tax code positively to benefit people on the lower end of the spectrum. We should use the tax code to build housing for people who are less well off and not three bedroom semi-detached houses peppered all over south County Dublin when we know we will have a greater need for housing for single people and we will have an ageing population.
I would like us to think really carefully about where we go from here. I would appreciate it if the Minister came back to us for a specific debate on banking. We could explore some of the options in the banking sector, not least what happened recently with Irish Nationwide Building Society. As somebody who worked as a solicitor, I was shocked to discover the lack of contractual protection that was going to be given to those people on the INBS loan book. I know we have all focused on the MARP and the protections in the code of conduct on mortgage arrears. Nobody has mentioned their vulnerability to mortgage interest increases.
The Senator is well over time.
The loan books will be owned by people who will have no regard whatsoever to the broad interest rates charged in this country.
I welcome the Minister. It is good to have him here, as always. I was eight years old when he first became a Minister, and even though we all wish we were in government and so on, his experience and calm, assured approach has been a lucky benefit to this country at this particular time. Regardless of what might politically divide us, the ambition is the same for both sides of the House. Not too many people would be able for the job. Notwithstanding the fact that he is not a Fianna Fáil man, we are lucky that he is here at this time.
There are certainly relative successes. We all welcome wholeheartedly the improvement in the employment figures that we have seen. That has had an impact on our competitiveness. Emigration has obviously been somewhat of a release valve, but it is too simplistic to say that explains it on its own. We still have an issue with consumer demand. To be somewhat political, the Minister presided over difficult decisions to take €10 billion or more out of the economy. His predecessor had to take out €20 billion. In the current Minister's own words, his predecessor was an "excellent fiscal manager who got poor advice on banks". While I do not accuse the Minister of this, it is frustrating to see the Government and the Taoiseach collecting accolades internationally for work done by Brian Lenihan and the current Minister, and then when returning home, to seek to blame problems exclusively on the actions of the former Minister and some of his colleagues. There is no question that mistakes were made in the past. God knows there will never be a member of Fianna Fáil who will not readily acknowledge that or who will forget those mistakes. Equally, it is only fair to acknowledge the positive contribution made in taking two thirds of the hole from the economy in recent times.
It is unimaginable to go back to 2005 and predict what we have all gone through. Of course there were bears in the markets, but there were many more of us from all sides of the House, and from industry and civil society, who could not have predicted the pain, suffering and sacrifice forced on the people in the past few years. I do not agree with the head of the European Commission, Mr. Barroso, that there was no European or euro context to this. He is fundamentally wrong to say that, because there was. However, as a father, husband and even as a politician, I welcome the exit from the bailout, the projected good fortunes for the economy, the positive ESRI outlook, and television addresses by our nation's leaders. It sounds great, but what is in it for the people? While we collect the accolades for being the poster boys for getting it together, there is a huge amount we need to try to do for people. When will that job arrive? I know we are making some progress there. When we will have restoration of appropriate full social supports? We all have anecdotal evidence of how medical card issues are being dealt with in the era of austerity. How can we get over the mortgage arrears issue? When can that daughter, son, niece or brother return from Canada or Australia?
We need to be very conscious of channelling the gains to the people who need it and I do not think we have done this. At times, we have taken the easy option and that will divide us politically. We have focused far too much on the easier targets rather than on those who could afford it. Those who have a stronger voice seem to go relatively unmolested in terms of what they could give. Those earning more than €100,000 could have given more, but we did not ask them. They were conditioned to give more, but we did not go to them. Of course, they would not have liked it; none of us would like it but they are better placed to shoulder the burden than others who did so. That is regrettable. It should not be about those aged over 70 or the respite grants, or some of the harsher cuts we have seen. Were they really necessary? I argue that they were not necessary and that we left certain people aside. If we have truly turned the corner, we must focus on channelling those savings directly into the pockets of the hard pressed families. That is best done with the help of transaction taxes, fuel rebates and so on, where people would see an immediate impact. That will help consumer confidence and consumer spending, which sadly is down 1% yet again.
When business was being ordered this morning, I did not realise that we only had five minutes to speak on this issue. That is far too little for this debate and it certainly does not do justice to the good efforts of the Minister or to what we might have been able to add to those efforts in this House.
Unfortunately, that is what was ordered. I am trying to get everybody in and it would be unfair on those who are sitting here a long time not to get to speak.
I welcome the Minister and thank him for his contribution. The Government today published its report on being in office for three years. If we look back three years, the economy was in a state of collapse, there was a fear that there would be a run on the banks and that we were going to fall off a cliff. We all remember the headlines and the fear, but three years later, we are not in that position. Things have stabilised and improved. There is confidence that we are on the right track and that we now know where we are going. Most importantly, we have the headline figures to support that in terms of job creation measures. Unemployment has fallen in the past 20 months to 12%. It is still not where it should be, but we have fulfilled targets and we know where we are going in 2015 and 2016. We have had a successful re-entry to the bond markets. There have been no increases in income tax and no cuts to the basic social welfare rates. I remind Senator Marc MacSharry that the weaker sections in society have been protected. When it came to power, the Government immediately reversed the decision to cut the minimum wage and restored it to its previous level. We forget about those things three years later, but they were all extremely positive.
The Minister mentioned the value of a jobs action plan and how it is focused on particular sectors. That has been very useful. We have all seen the construction sector and the way it has been revitalised in the last few months, following the introduction of the home renovation scheme. It has provided for a lot of activity in that area. People are benefiting from the scheme and are doing small renovation jobs in their homes which have provided local employment. Most importantly, it has moved all the activity out of the black market.
Builders, painters, carpenters and plumbers who work on small schemes have said it has benefit and there is real activity in that area. I congratulate the Minister on that initiative and on the retail sector. The ICT sector is also booming. I attended a conference on Friday which addressed the skills shortage in this area. I know that is not the Minister's problem but I am sure he hears about it. Much is also being done in the education sector and the technology visas are working in that area.
New supports will be provided in the agriculture and food sector which will be enormous in their effect. In the tourism sector the retention of the 9% VAT rate is welcome. Foreign direct investment will continue to be a major platform, but the focus is on encouraging individuals to invest in their own businesses to try to create more jobs or to start up programmes. Recently at the Joint Committee on Jobs, Enterprise and Innovation we had a presentation on the entrepreneurship report supervised by Mr. Sean O'Sullivan from "Dragons Den". The report has identified many areas where people can be encouraged to start their own business. A strategy is needed right across the education system. As we do not have a culture of business start-ups, we need to encourage it. In terms of access to talent, the report proposed the improvement of the employee stock ownership programmes to make it easier for companies to involve employees in their programmes and to make it more tax efficient for employees. It also proposed improved access to finance and incentivised peer to peer lending. It suggested that the first €10,000 of investment income for start-ups be tax free to establish diaspora supports and that capital gains tax be at the rate of 20% rather than 33%. As the Government will prepare a strategy at the end of this month I hope it will contain measures to help create jobs. It is only by helping people to create jobs that we can move forward.
In the area of competitiveness we have come a long way in improving our ranking mainly because of reduced wage costs and public sector reform. Energy and energy prices will continue to threaten that competitiveness. There is a need to keep labour costs down. The introduction of tax relief measures is probably the way forward to keep wages at their present level to ensure the success we have had in that area continues.
I wish to share time with Senator Fidelma Healy Eames.
Is that agreed? Agreed.
I welcome the Minister. As I will break from tradition and not launch any attack on the Minister or play politics, people might be shocked.
I am 25 years of age and would have considered myself relatively in touch with young people and would have thought I knew the concerns and the issues of the day. In recent months I have met many youth groups, youth organisations, people who work with young people and young people themselves and, my God, I live in a bubble. I can just imagine what it is like for Oireachtas Members who may not be as young as me.
In the first page of his contribution the Minister said there is a growing sense of optimism in the country. From what I have heard in recent months, there is not a sense of optimism, especially among young people. I am not having a dig at the Minister, but I will quote a number of comments I have heard in recent months. Yesterday, I heard from a 24 year old man in Cork. He is unemployed and cannot find any work. He has been on numerous training courses and is leaving for Australia in August. He said: "We were told in school that you can do whatever you want. You cannot do this any more. The dream is gone." That is a serious drainer of optimism from the country. A Tús worker told me that the first thing people say when being interviewed for schemes is that they are emigrating. A group of young people, when asked if they would emigrate, said they would. I asked why they were still here. They said they cannot get the money to leave but would leave if they could. I met another gentleman and the gist of what he said was that he wanted to get out of this "effed up" country. He said: "I would do any job but I cannot get anything. Some kind of job would be brilliant." The same young man who said that the dream is gone said: "At least you can afford to live when you emigrate, you make money and you can live in those countries. You work hard but you get the benefits. When I go there I will still be sending money home. I just want to actually have a life."
The reason I mention this is that for many young people I have met, be they in Cork, Donegal, Belfast, Ballinamore and Dublin, they do not have any hope for the future. They want to get out. They do not believe there is anything here for them. That is problematic going forward. I am aware there has been much talk about recovery. As people, we are ready for recovery but we have to question what form it will take. We should not leave any person or family behind and there should not be any generational scars. In his contribution the Minister mentioned that 61,000 jobs were created in the past year, that there was a fall in unemployment and that full employment is a stated objective by 2020. What I am hearing from all the young people is that there are no placements and no jobs. I have been to Gortahork where young people are sitting around and saying there is nothing here for them. The courses available are not relevant. I know this is not necessarily the responsibility of the Minister's Department but there is not that hope and they do not feel there are jobs. I ask the Minister to address young people, not in a papal way - "Young people of Ireland, I love you" - or whatever, but to tell them when the green shoots of recovery are going to trickle down to these young people and what hope can he offer them. That is the reason I am here, because young people are frustrated about when the recovery will come to them. Perhaps the Minister would address that issue.
I welcome the Minister. The topic is statements on economic growth and job creation. There is no doubt the huge strides the Government has made to restore the public finances are incredibly commendable. However, many people do not feel it. While the Government is doing it for the country, it appears to be hurting too many people in the process. It is a shame we do not marry up the public with the personal more. I know that is the Minister's intention.
That the Government is talking about broadening the tax bands is commendable. My advice would be to slow down with the charges. To introduce water charges, while it is a structural reform, is a mistake. People are not feeling the progress the Government is making because there are too many outgoings and too many stealth taxes.
On the issue of SMEs, we know that more than half the population is employed by the SME sector, even though that sector has been on the floor. I am doing some work with SMEs and the biggest issue preventing people from employing more is employer's PRSI. We must have an actuary out there who can work out the number of people for whom we need not charge employer's PRSI as long as they employ X number of people. There must be a quid pro quo. Those are my two points. There is much more I could say. Perhaps I can ask the Leas-Chathaoirleach and the Leader to apportion more time to debates such as this. I thank the Minister for his time.
That matter was agreed to on the Order of Business.
I thank Senator Kathryn Reilly for sharing time.
I had intended to discuss the conditions in the macroeconomy that led to a reduction in the unemployment register. However, it is not every day we have the opportunity to address the Minister for Finance directly. I wish to do so in respect of a topic in which I have a particular interest.
I propose to take one element and examine it on a micro level. In the British Medical Journal in 2013, a researcher called Kenneth Hawton examined the impact of recession on health, in particular on mental health, in 54 countries, in Europe and America. He used suicide as the indicator.
Other international studies show that 1% increase in unemployment is related to a 0.79% increase in the rate of suicide. Thankfully, that rate of suicide has not been evident in this country. However, there are some startling and rather disturbing figures. In 2011, when the Government came to power, it appeared the unemployment rate would breach the 500,000 mark. That would have been an appalling disaster for the country. Happily, the Government managed to turn the situation around and now the number is substantially below 400,000.
Let us look at the correlation between the rate of unemployment and the suicide rate in the past couple of years. The most up-to-date figures are for 2012 as the statistics are two years behind. In 2006, the unemployment rate was 4.1% and the suicide rate was 10.9%. It remained stable up to 2008, when the rate of unemployment increased to 6.1% and the suicide rate increased to 11.4%. There was a noticeable increase in suicide rates when the impact of the recession was felt in the economy. In 2009, we saw a major increase to 11.6% in the unemployment rate which was matched by a 12.4% rate of suicide. Some 552 people died by suicide that year. In 2012, some 554 died by suicide. The unemployment rate remained just as high. The recession has consequences. It really affects people. The figures show it in the most dramatic form. That is why it is absolutely vital, as the Taoiseach, the Tánaiste, the Minister for Finance and other Ministers have said, that we focus on a reduction in the unemployment rate.
A study in Cork in its first report on the Suicide Support and Information System examined 307 cases of suicide between 2008 and 2011. It showed that 41% of all those who had ied by suicide had become unemployed in the construction and production sectors. Lest there be any doubt of a link between the recession and suicide rates, the largest increase in the rate of suicide happened in the age cohorts where unemployment was greatest, that is, in the age cohorts of 15 to 24; 24 to 34 and 35 to 45. I hope that when the figures for 2013 become available, they will reflect the decrease in the rate of unemployment. It is important that we draw attention to the suicide rate in the context of the debate on the economy when the Minister for Finance, Deputy Michael Noonan, is in the Chamber.
I will conclude on that point as I do not have sufficient time to make further points.
Senator Mary Ann O'Brien has priority as nobody from that group has spoken.
I am happy to share my time with Senator Catherine Noone.
Is it agreed that each Senator will have four minutes? Agreed.
I thank the Minister for Finance, Deputy Michael Noonan, for coming to the House. I commend him for his work. As other speakers have said, clearly the Government and Ministers' work has started to bear fruit. I appreciate Senator Kathryn Reilly's comments in that regard.
I do not think anybody thought the economy would recover overnight. The economy was damaged when the Minister, Deputy Michael Noonan, was appointed to his portfolio. We are doing quite well, notwithstanding the fact that many in society are not yet experiencing the effects of economic recovery. An Action Plan for Jobs 2013 was very positive. It builds on the 500 measures already implemented through An Action Plan for Jobs 2012. At the recent Fine Gael Ard-Fheis, everything related to jobs was to the forefront. As Senator John Gilroy said, it is the only show in town. Unemployment, especially youth unemployment, is the central focus at European level. Youth unemployment is the priority of the Greek Presidency.
I wish to comment on the hospitality and the construction sectors. Research by Amárach Consulting shows that 30,000 jobs will be created in construction by 2018, bringing total employment to 178,000. It is still a fraction of the level in the boom, but I do not think anybody would want to go back to the level at that time. According to a spokesperson for the Construction Industry Federation, idts members are now raising concerns about future skills shortages. Senator Deirdre Clune alluded to the shortage of electricians and plasterers, which suggests there is a role for the VECs. I appreciate it is not the Minister's direct responsibility but it is interesting from the point of view of the economy generally.
Clearly, the hospitality sector is thriving. The Minister has played his part by creating the 9% rate of VAT for the services sector and maintaining it when asked to do so by the various sectors involved. Since 2011, more than 23,000 jobs, both full-time and part-time, have been created in the hospitality sector. As of today, there are apparently 3,000 unfilled positions. That begs the question of how it is that 3,000 jobs remain unfilled in the hospitality sector. I would be interested to hear the Minister's comments, although this is an issue for the Department of Social Protection.
Let me sound a positive note. Ireland was voted the destination offering the most potential for Chinese travellers at a Shanghai ceremony this morning. More than 3 million people in China made that decision and Ireland was competing against destinations such as South Africa, Dubai, Turkey and other countries. This is a real sign of Ireland's potential as a destination, as well as the potential of the market in the East. There is a commitment by Tourism Ireland to build the number of Chinese tourists from 17,000 to 50,000 visitors per year. We need to be prepared for all the people who want to come to our shores.
I thank the Minister for coming to the House. I too salute him for all he has done and the progress that has been achieved to date.
I wish to raise the issue of capital gains tax, CGT. A company called Storyful was sold for €16 million. It was a wonderful success story and very good for the Government because Storyful created 40 jobs. It paid €6 million in capital gains tax. One of the investors in that company said he would not take that risk again. It is a significant risk to invest in an enterprise as one is employing people and taking on all the work that comes with it. That investor said that in the future he would invest in property as it is a much easier game. The Minister gave entrepreneurs a boost in budget 2014 by changes in CGT, allowing companies to offset the profit from a sale of a company if it is reinvested in a company designed to create jobs. As an entrepreneur, but probably not full of brain cells, I found the measure very convoluted and desperately complicated. I still think I would prefer to invest my money in a house or building.
I did not believe it was an incentive. As far as I am concerned, it is a delaying tactic for paying capital gains tax because one does not have to pay CGT now if one reinvests. However, we all know that if one invests in ten companies that five will fail, which is the law of averages in business.
Irish people want to be creative. We talk about entrepreneurship in ourselves or young people all of the time, whether it be in schools or here in Leinster House. I do not think it is fair for someone who invests in property to receive the same CGT rate as a person who invests in business and creates jobs. Perhaps the Minister thinks that it is good to give an entrepreneur an incentive for creating ten jobs. For example, he will get "X" percent off his CGT eventually, more tax relief if he creates 20 jobs while the relief will increase on a sliding scale with further job creation. I have spoken to many entrepreneurs who wonder what is the point in their investing. What does the IDA Ireland state to potential investors when they can go to the Netherlands which has no CGT? Since 2008, capital gains tax here has increased by 65% over four tranches, from 20% to 33%.
I hope the Minister will say in his reply that we can do something about this matter, particularly for people who want to start businesses and create jobs. We might lose a little in CGT rates and tax receipts for the Government, but we will get many more people into jobs who, in turn, will pay income tax. Such an initiative would lead to much happier citizens and, hopefully, the same for some of the young people that I am very worried about. Senator Kathryn Reilly spoke about people who live in rural Ireland. We can sit here and clap ourselves on the back, but she talked about the great reality for us this evening.
Before I call the Minister, I shall allow Senator Terry Brennan two minutes to make a contribution.
I will not be able to say what I want to say in two minutes. However, I shall commence by saying that strong retail sales figures are a major indicator that confidence is returning. People are starting to spend and exports continue to increase and are performing well.
The Minister introduced a €500 million pro jobs package in budget 2014 which so far has been a great success, with particular focus on SMEs. The hospitality sector has had a reduction in VAT. That was the Minister's initiative as it was he who introduced it in 2013 and continued it in 2014. The initiative has been a great success and I ask him to consider retaining 9% VAT in the next budget.
The removal of the air travel tax will support Irish airlines in their bid to attract an increasing number of visitors to Ireland this year. As a result of the Minister's initiative, Ryanair hopes to bring in an additional 1 million passengers to Ireland this year which will greatly enhance tourism figures for the coming year. I am told that every 15 visitors to Ireland creates one additional job. That means that we now have a major opportunity to create jobs and I anticipate a significant reduction in the number of people out of work this year.
It would be remiss of me not to acknowledge - this is my personal opinion - the part that the Minister has played in bringing the country back to sustainability, stability and getting people back to work. He does not get the recognition that he deserves.
The Senator has recognised his contribution.
That comment comes from my heart. We are now all hopeful.
I am sure the Minister is delighted to have given the Senator two minutes.
I thank the Senators for an interesting debate. It is always good to come to the Seanad. It is very nice to hear people speak sincerely and address the problems without grandstanding. I have found that people speak from the heart more often in the Seanad than in the Dáil. It is impossible sitting here to distinguish the political label that attaches to party members because Senators share the same concerns.
There is another common factor that goes with the nature of the work that we do. One meets so many people in constituency clinics and one comes across so many problems in the course of a week that they tend to make the individual problem the general proposition. Therefore, it moves from the individual to the general and very often, I respectfully suggest, the generality of taxpayers can be forgotten. Nobody speaks for the generality of taxpayers because everybody speaks for some individual or group of people who are finding things very hard. That is not to say I disagree with a lot of what has been said here this evening. How much time do I have?
I shall grant the Minister five minutes. The man who made time made plenty of it.
I do not think that I shall have time to go through individual remarks, but I shall try to prioritise them.
The people who have suffered the most in the past few years are the people who lost their jobs and I think everyone will agree with this. The people who suffered after that were the families who lost their sons and daughters to emigration so the emigrants and their families have suffered. Let us look at both of those categories when considering priorities. That is the reason the Government is putting jobs first and foremost and says that the test is we have to create a lot of jobs because that is where people are hurting the most.
As Senators will know, the situation was very bad, businesses went bust, property prices declined, the banks went bust, hundreds of thousands lost their jobs, and others emigrated so we have a long way back to come. We are out of the bailout but we have a huge amount of work to do yet. I would hate if any kind of feeling emerged that because we were out of the bailout that we had succeeded or that we can fly without a map from now on. We cannot. We published a strategic economic plan immediately after the bailout but it got lost in all of the Christmas festivities.
There is a strategic economic plan for the medium term which the Government is now pursuing that is built on three pillars. First, to control and reduce the debt and continue to make it more sustainable. Making debt more sustainable means that the people who lent to us are sure that they will be paid back. That is all that means but one must get it into that position.
Second, we need credit to drive a growing economy and that means that banks and all of the things that we will do to the banks, including alternative banks, credit unions and so on. We must also go for non-bank credit. Let us look at the fact that 75% of credit used by the United States model comes from sources other than banks. We have started that initiative here now. We have the Silicon Valley Bank and it is giving equity to people. We have the Chinese. We have CIC, the big Chinese investment fund, which works in partnership with our investment and has another €100 million. The European Investment Bank came in last year and invested €1.2 billion. We have a number of private funds who are investing in industry. We have to develop all of that side of things. We must even develop the Irish Stock Exchange in order that people can raise money on the stock exchange. We need investment funds and working capital. Some can come through the banks but a lot of the investment funds must come from sources other than the banks. Therefore, we must work on the sector.
The third pillar of the medium term economic strategy is to continue to grow the economy. As I have often said to Senators before, the economy can be very complicated if one looks at it in its totality but if one breaks it down into sectors one can understand it very easily. Let me give some examples. As the tourism industry was banjaxed, we reduced the VAT rate from 13.5% to 9%, we are abolishing the travel tax, we are getting the cost base down, we organised The Gathering and suddenly we have one vital sector moving again.
In the agriculture sector there will be no milk quota after 2015. The big tax job that I must do for the sector is to reduce the cost of transferring land to the next generation. Therefore, I cut the stamp duty in order that the next generation of young farmers can take over.
We will never build an industry on the elderly. It is the dynamism, energy and imagination of youth that is going to drive that industry. They are well on their way. Any of the Senators who has a knowledge of rural Ireland knows the way farming is gearing up at present; therefore, that is another sector.
Foreign direct investment is very important, and Members know what attracts people to Ireland. There was a record year in 2012 and another in 2013, and the pipeline for foreign direct investment is going very strongly this year. We have reinforced the financial services aspect of that. Even though there were 12,000 to 15,000 redundancies across the banking system, there are more people employed now in the financial industry in Ireland, particularly in Dublin, than there were before the crisis hit and the redundancies came into the banks.
The strategy in the sectors is simple. It is to repair the damaged sectors of the economy and to build on them. The most damaged one of all was construction and development, as a number of speakers have pointed out. Not only did it get damaged and hundreds of thousands of people lost their jobs, but it became the scapegoat sector, along with the banking sector. It was very hard to do anything for the construction industry initially because the normal comment on the street was to ask, "Why are you helping that crowd of chancers?" It became a scapegoat sector, yet every other OECD country has a very strong, dynamic construction and development sector. We cannot get on without it because we need factories, houses and office blocks. It is now coming back again and property prices are coming back again too.
Very often, the rules of the market are very simple. If the price of something is below the replacement cost, nothing happens. If the price of a house is below the building cost of a house, no houses are built. If the price of an office block is below the cost of replacing it, nothing gets built. For commercial property, if the rental income cannot service the borrowing and give a small profit, nothing gets built. It is now back at a point, particularly in Dublin, where commercial property is moving again. We see the cranes beginning to emerge on the skyline and we will see a lot more of them between now and the summer.
Of course, the Senators are right that there is now a supply side problem with housing. If we were talking here a year ago, however, the Senators would all have been telling me about the ghost estates and all the houses that cannot be sold and they would have asked me what I was doing about the overhang in the market. It is amazing how quickly things switch around.
Youth unemployment is something I would seriously like to address and on which we need help from abroad. There are approximately 12 million young people unemployed in Europe. The statistic does not tell the full story, however, because the way it is calculated is as a percentage of the young people who are available for work. Therefore, it excludes those in universities and third level education, which is a refined way of addressing it. If we take it there is 25% unemployment among young people in Ireland, but that 60% or more are at third level, we are looking at an unemployment rate among the young not of 25% of 100%, but of 25% of 40%. Therefore, we are actually looking at a 10% rate of unemployment among the youth in Ireland, whereas it is the other figure that is used across Europe. The same is true when we see a figure such as that 40% of young people are unemployed in Spain. That is 40% of people who are not in third level education or in schools and colleges, whereas we get a better view if we do it the other way.
That is not to say it is not a big problem. Of course, it also then tends to be a problem of the less well educated and the less skilled. That is why the Senators' experience of young people is quite correct, because the cohort and the individuals they are talking about tend not to be the people who were lucky enough to get third level education. There is no doubt there are many very down and out young people who are depressed. On the other hand, that is not the full picture. If Senators leave the House this evening and walk a mile in any direction, even though it is early in the week, when they go into their favourite pub, they will find a lot of young people inside quite optimistic and quite happy, and this is even more the case on Thursday, Friday and Saturday nights.
There are still 1.9 million people at work in Ireland. I remember that when the recession came during the 1980s, employment went below 1 million and approximately 960,000 people were at work. It is double that now, which makes a huge difference. That is another theme I would like to develop. Nonetheless, we certainly need to have a European scheme as well as national schemes to put young people back to work. The scheme that says everybody is entitled to either a job, training or education, which is enunciated in Europe, is a great scheme, but they never put the budget under it to deliver it; therefore, that is one of the priorities we would have in Europe.
Senator Darragh O'Brien asked about capital gains tax, which has increased very significantly. The reason I put it up last was that there is hardly any capital gains coming into the Exchequer, but I want to position it such that, when the economy grows again, we will get a return on capital gains. I want to quickly erode the accumulated losses of the tax code because, if there is a low rate, no one will pay capital gains tax for the next generation. However, by raising the rate, that cuts into the carried forward losses and we can work our way down through it. However, none of these rates and taxes are fixed. We have to review everything constantly. I take the Senator's point that nobody would invest in property in recent years because it was a declining asset but many people now want to invest in property again. Investment is risk all the time.
I agree with Senator John Gilroy about the connection between the recession and suicide. It is not particularly a case of unemployment and suicide and is more a case of the recession and suicide. We have all heard of people whose business went bust who committed suicide. They had enough but it was the whole sense of failure, and was not directly due to being unemployed.
Senator Sean D. Barrett referred to youth unemployment, Senator Michael D'Arcy raised the issue of IBRC mortgage holders and so on. The IBRC problem is straightforward enough. The loan books are being sold to people who have given a commitment that they will honour the protocols from the Central Bank. I believe they will because it is in their interest to do so. The courts will not give them repossession orders, if that was what they were looking for, unless they have honoured the protocols. We have seen that with the people who have already acquired mortgage books in this jurisdiction, namely, when they went to court, they could not get anywhere.
In any case, the people who buy mortgage books are trying to make money; they do not want repossess houses. They are in a much better position to do deals with people who hold mortgages than the original holders of the books. Typically, if one buys a mortgage book at a 30% discount, one has that 30% to restructure loans and to clean up the book. That is what they do. They clean up the book by using part of the discount to get people back paying again and then they resell the book. It is not as dire as it looks and it is one way of solving the problem.
If I have to legislate, I will, but I could not legislate while the sales were going on because the risk was that I would take down the value of the mortgage books by adding additional conditions and I would be subject to legal challenge by other creditors, particularly unsecured creditors. However, it changes when they go into new hands and if I need to do so, I will.
Senator Thomas Byrne referred to the reform of the professions. The justice Bill on the legal profession is winding its way through. It has gone through Committee Stage in the Dáil and it should be coming to the Seanad very shortly. The Senator spoke about the sale of State assets. In my speech I was talking particularly about bank shares. As the bank shares are sold, the proceeds will be put back into the investment fund and will be used either for further investment or reducing the debt.
Senator Aideen Hayden referred to a general reform of the tax code, which is very important.
Protection of the self-employed and pension reform are other priority issues, and the Minister for Social Protection, Deputy Joan Burton, is doing a great deal of work in those areas. Mortgage arrears were also mentioned.
Senator Sean D. Barrett talked about youth unemployment and referred to a very low-growth economy generating a large number of jobs. There is something wrong in the statistics in that the patent cliff has artificially reduced GDP figures, which makes life more difficult for me. The pharmaceuticals sector accounts for some 5% of GDP and employs 25,000 people. Several medicines went off patent in 2013 - Lipitor was one of the most prominent - which had an impact for the companies that manufacture them. Nevertheless, output remains the same from these companies and there are still 25,000 people employed in the sector. The issue has, however, affected GDP and growth figures. In other words, GDP does not reflect the growth that is taking place in the economy. We are not dealing with growthless job creation here; it is just that the growth is disguised. I hope that situation will right itself as we work through 2014 and 2015, although there are more well known drugs due to come off patent this year and next.
I thank Senator Marc MacSharry for his complimentary remarks. I also thank Senator Deirdre Clune who set out a whole agenda. The House will forgive me for wishing the Senator every success in the European elections. It is a shameless political plug.
The other candidates will not be happy with it.
Senator Kathryn Reilly gave a very interesting speech from the perspective of a young person. I very much welcome her contribution.
I thank Senator Fidelma Healy Eames for her suggestions. Of course there are too many charges, but where do I get the money to address that? It is a case of getting the economy growing and then looking at pulling back some of those charges. We have gone through a whole series of measures that are effectively emergency measures. If we get back on solid ground, we can begin revisiting some of these issues.
I may not have responded to every point made, but I thank all Senators for their contributions.
I thank the Minister and his officials for coming to the House and for his extensive response to the queries raised. When it is proposed to sit again?
Tomorrow at 10.30 a.m.