Brian Cowen (Laois-Offaly, Fianna Fail)

These are choices. About 70% of the windfall elements of capital taxation went towards further reducing national debt. That is what one does with windfall taxes. One does not project forward provisional services on the basis of the windfall because it might not be repeated. When the recession hit the European and the wider economy in 2001, we saw how quickly our revenue base can dwindle. I think it was around €5 billion within 12 months, when we moved from a 10% growth rate to a 1% rate by January 2002. That highlights a point made by Deputy Burton, which is that one must be very careful before one decides to erode the tax base by that much. If the residential housing tax take for stamp duty is €1.3 billion, and Deputy Bruton's proposal was to cost €600 million, that means a 40% cut on the tax base under that tax head. That is pretty significant. As our sustainable growth rates in the future will not be the 5-7% averages that we have seen in recent years, but more towards 4-4.5%, we will have to be careful with the tax revenues we take in.

Deputy Bruton points out that the tax take has increased and is going towards the provision of services, and that is fine. That is the change in the matrix of the tax and spend that we have, which is sustainable if we keep a healthy housing market. I accept the point Deputy Barrett made that we have seen a rise in prices, but we have also seen a rise in output. We were building 33,000 houses per annum ten years ago, but we are now building 93,000 houses. This is not simply on a speculative basis, but on the basis of strong fundamentals in the economy, such as a migrant community that has come in, a rising population, greater disposable income, greater social mobility, better paid jobs, tax reforms which have put more money in people's pockets. That is what people do when they become more prosperous. They trade up and they buy a bigger and better house. They can afford the luxuries that would otherwise not have been available to them when we had unemployment rates of 15% and 50,000 people were emigrating every year. We recognise the change and we acknowledge the challenges that have come with that change.

The first-time buyer has traditionally been the life blood of the new housing market. That was always the means by which people could plan an industry. The overall policy of successive governments was to promote home ownership and we now have a very high level of home ownership here, when compared to our European counterparts. However, total housing per capita still has some way to go to meet the housing stock of more advanced European economies. The Central Bank states 60,000 to 65,000 units per year are sustainable in the mid to long term. We must now move from 88,000 units to 65,000 units with a soft landing so that we can sustain that level of growth, continued tax revenues, employment, etc., on the basis of an annual housing output which, even at that stage, would be twice the housing output of ten years ago. That is the change in the level of economic activity we sustain in this economy because of strong fundamentals, demographics, rising incomes, etc. Despite rises in interest rates in recent years, the interest rate regime is benign compared to that which applied ten or 15 years ago.

Ending discrimination so that first-time buyers get the full exemption on purchasing a new or a second-hand house increases a first-time buyer's range of choice. We must have regard to the social aspects of not having to buy in a new housing estate away from the immediate family circle if a second-hand home is available in the locale to enable people to support the family cohesion, to which Deputy Barrett adverted and which is also a legitimate policy objective in the context of all of this discussion. These are consequences that can emerge as a result of these changes, which I accept are not revolutionary but which bring certainty and stability. People understand the message and know where they are going.

The rest of the industry now can pick up. Having had this debate for the past five or six months, we can now get on with maintaining a housing policy, which — allied to the private residential market on which we are probably concentrating in the context of this discussion — will see us, under the national development plan, fully fund the NESC requirement on social and affordable housing. It will ensure that our planning mechanisms are in place and every area is prepared to take the required planning permission decisions to ensure that the housing supply does not get to the extent where one sees — in the area about which Deputy Barrett spoke — a vast increase in house prices far above the national averages. My understanding of the position in that part of south County Dublin is that it is difficult for planning permission applications to get through and the level of affordable and social housing being built in the constituency of Dún Laoghaire is not what one would expect, given the population and the demand.

In fairness to the construction industry, by which I mean everybody working in it because they depend on it, it has been able to respond to that requirement of growing output. It has responded, professionalised and improved. One does not encounter the archetypal messing builder about whom people spoke 20 or 30 years ago. Such builders cannot survive in the far more improved market, and with the far more sophisticated customer base, which they must now serve. All of that needs to be put into the mix.

We are simply honouring a programme commitment. I realise it does not meet the approval of the Opposition. All I am saying is we have had that debate and I just want to honour the commitment. Our first statement on return to office was that before the Dáil adjourned for the summer recess, we would enact this legislation so that the market and the people who require housing will know exactly where we are going after the prolonged uncertainty we had up to now.

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