Leo Varadkar (Dublin West, Fine Gael)

I welcome the opportunity to speak on this Bill. One of the most interesting things I read recently was the interview with the Minister for Finance in the Sunday Independent, where he suggested that Ireland's economy was the strongest it had been for ten years. That is a phrase to remember, like Michael Fish's famous prediction that there would not be a hurricane or Margaret Thatcher saying there would never be a woman Prime Minister in her lifetime. Most of us are starting to realise that, although many of the basic factors in the economy remain strong, the economic position in which the country finds itself is certainly more vulnerable than it has been for at least a decade. Like our finance spokesperson, Deputy Bruton, I agree we are well beyond the time for talking about wake-up calls because the warning clouds have been gathering for quite a while.

We have seen phenomenal credit growth in the economy. We often congratulate ourselves on the fact that over the past 15 years we have managed to reduce our public debt as a percentage of GDP from well over 100% to 20% or 30%. Yet what we have really seen is a transfer from public to private debt, whereby private debt is 2.5 times our GNP. In many ways, therefore, we are just as much in debt as in the early 1980s, but we are indebted in a different way. We have also witnessed an appalling over-dependence on the property market. We had a real Celtic tiger up to 2000 or 2001, but since then we have had a false boom based largely on the property market coupled with low interest rates and cheap credit. The effects of that will come home to roost. In addition, inflation is 50% higher than the rest of the eurozone and it is obvious to anyone that it is beginning to impact on people's pockets through price increases. Inflation is outstripping wage increases, which leads to further pressure to increase salaries.

Our export market share is falling and we all know how much our competitiveness is going down. I look forward to reading the NESC report next month. Meanwhile, spending is increasing at roughly twice the rate of tax increases, which is not sustainable in the longer term. The programme for Government is committed to 7% increases in current spending year-on-year which will be impossible to deliver without significant tax increases, given that the economy will only grow by 3% to 5% per annum and tax receipts will grow by a similar percentage.

As in 2002, fiscal policy is largely determined by the electoral cycle rather than the economic cycle, with major spending increases and tax reductions in the run up to elections, followed by clawbacks thereafter. The Government got away with it the last time but will not do so again.

Ireland needs a comprehensive strategy for economic renewal. We need to hang onto the old formula of low taxes, a good education system and balanced budgets in a pro-enterprise environment, but we must do much more. We need to upskill most of our labour force. Some 500,000 people are working in jobs that require little or no skills. Most of those jobs will disappear over the next ten to 15 years and, if not, they will largely go to transient immigrant labour. People in that situation need the opportunity to develop new skills. We must also consider introducing welfare reform, possibly along the Danish model, identifying the approximately 120,000 long-term unemployed people who can work, thus enabling or requiring them to develop skills to enter the work force.

We need to restore competitiveness and deliver on infrastructure. In many ways, it is unfortunate the economy has grown so fast to the extent that it has not allowed us to deliver the required infrastructure. There is a crying need for public sector reform, which could have been done relatively easily over the past ten years while there was plenty of money in the economy. It will be hard to do that now but it must be done — particularly deregulation of sheltered sectors and protected quarters in the economy. Indigenous industry should be promoted by focusing on industries that have grown up from small businesses run by self-employed operators. Sustainability is needed through the development of a green economy in preparation for the realities of climate change and increased fossil fuel costs.

A fundamental reform of the planning system is also required, particularly in constituencies such as my own. Large-scale urban areas can be developed in such a way that infrastructure and amenities, including schools and other facilities, are delivered in due time.

I broadly welcome the Bill, which is largely technical in nature. It aims to give effect in primary legislation to the Markets in Financial Instruments Directive. We do not dispute the need for such legislation. I welcome section 9, which provides for stronger penalties, including prison sentences in some cases for people breaching the reinsurance regulations. I am somewhat confused about the changes concerning the NTMA, which seems to be taking on the form of a bank. I am not sure what the purpose of that change is, but I will advance my views on the matter on Committee Stage.

Section 16 deals with ministerial pensions and most of the proposed reforms therein are acceptable. An opportunity now arises within the context of the Bill to table amendments with a view to removing the ministerial component of pensions for former Ministers who have been convicted of tax fraud, other financial offences, corruption or non-co-operation with tribunals. Such an amendment should be considered by the Minister on Committee Stage.

Although it may not require legislative change, I echo Deputy Terence Flanagan's call to address the issue of protection for depositors. In Ireland this amounts to only €20,000 or 90% of the deposit, whichever is the lower figure. However, this is vastly inferior to what is being proposed in the United Kingdom where they are talking about a level of £100,000. I am not suggesting that taxpayers should indemnify all the banks in the country to 100%, but we should strengthen that protection for depositors. We also need new measures to restrict the practice of sub-prime lending here, which thankfully is nowhere near the situation in the United States or elsewhere.

I broadly welcome the Bill and look forward to dealing with it on Committee Stage when we will have a more detailed discussion and can table amendments.

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