Olivia Mitchell (Dublin South, Fine Gael)

I wish to take the opportunity, in dealing with this Bill which relates to protection of the consumer in the financial services sector, to speak about the economy. Members will be aware that the economy is now at tipping point and, that in a sense, nobody is quite sure in what direction it will go next. While we are all hoping for the soft landing, there is another scenario about which we do not wish to speak.

What the Government does now is crucial. We cannot influence world economic trends but we can mitigate the impact of what is happening elsewhere. Ireland has actually managed to buck the trend in western Europe during the past 12 to 14 years. However, we are all conscious of how worryingly dependent we have become on the construction industry. This makes us vulnerable to even the smallest fall in output. There are almost 280,000 people in the construction industry which comprises a massive 25% of GDP. While it is our major economic driver, it is also our Achilles heel.

We have witnessed a dramatic change in housing output from a high last year of almost 90,000 units to 70,000 units this year. While Government and industry estimates in respect of output vary, I understand 50,000 units is the expected output for next year, decreasing each year after that. Housing construction accounts for approximately 12% to 14% of GDP. A one third fall-off in housing output would result in a 3% to 4% reduction in GDP. If this happened, an almost unattainable growth rate would be required in other sectors to make up for it. If we are to maintain current spending in terms of the type of services we would like to have, we need to ensure the growth rates do not fall to that extent.

What we do now is vital in determining how we weather the storm ahead. I do not believe any of us are in any doubt that there is a storm ahead. With stamp duty take-out down 14% on what was predicted and the tax take increase a full 12 percentage points behind current spending increases, it is clear that something has to give. This is simply not sustainable. Indiscriminate, untargeted current spending that does not give value for money or produce clear quantifiable outputs cannot be permitted or even contemplated. However, spending measures which do sustain employment and contribute to future saving and growth must be prioritised. The danger is that reaction to the less buoyant tax take could result in Government spending being reined in to the extent that it further decelerates an already decelerating economy.

We now have an opportunity to accelerate badly needed infrastructural projects which can take up the slack provided by the loss of housing construction and so sustain output and employment.

Many of the infrastructural projects planned in the good times have fallen behind. A number of the major transport projects in Transport 21 are far behind schedule. The joining of the two existing Luas lines, which was imminent, has been postponed, I suspect forever, but certainly until after Metro north is completed. Other projects have been postponed and are falling behind. We now have the opportunity to bring forward planned projects which may be at the other end of the timescale. Forgive me for being parochial, but the Luas line to Rathfarnham, for example, is planned and could be brought forward to replace other projects. It is important to sustain investment in such projects as these. If we do not do this the impact on the economy will not be confined to the decline in house building. We must build up this infrastructure. The Government must plan to proceed with capital spending and take advantage of the emerging labour availability, which has not existed until now, to add to projects which are already planned. Rather than fall behind, we must accelerate investment.

Several significant infrastructural projects in the area of the arts could make a difference to sustaining employment. The new national theatre, the national conference centre, the National Concert Hall extension and the Abbotstown campus projects have a big employment potential but have been painfully slow in coming to the construction stage. A new momentum must be given to projects such as these to substitute for the decline in other areas of building. Otherwise the drop in housing output could become a catastrophe, not merely for the construction industry but for the entire economy. That is a real concern.

The capital grants available to householders to switch to alternative fuels were a welcome initiative. It is worrying that this scheme appears to have stalled. It would be very short-sighted not to maintain a scheme such as this in the construction area. With construction workers becoming available, value for money could be obtained by householders. Employment could be sustained and, in the long term, energy saved and carbon output reduced. A scheme such as this must be continued. The improved housing insulation standards are welcome but will have little impact in the short to medium term as very few new houses will be built in the coming years. The housing stock has been increased in recent years and, unfortunately, new houses have been built to a very poor standard, which would not be acceptable elsewhere. Something can now be done to retrofit insulation in the existing housing stock. The existing low level of home insulation will increase householders' fuel bills and add to the cost of the country's carbon credits for many years. A carefully devised targeted capital grants scheme to bring insulation in the existing housing stock up to a standard which would reduce imported fuels and carbon emissions would be of great advantage to householders and the economy.

The Minister must be conscious of the dangers of reducing capital expenditure at a time when the economy is decelerating.

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