Michael Ahern (Cork East, Fianna Fail)

This is a sensible, prudent and responsible budget which enables us to retain the gains of recent years and to consolidate and build for the future. By following the course outlined by the Minister for Finance, Deputy Cowen, our economy will continue to grow to the benefit of all our people. Certainly this is no time for pessimism and I find the negative attitude of the Fine Gael Party extraordinary. There is no basis for such pessimism. It is still unbelievable that after ten years in which 600,000 new jobs have been created, which is more than one in four of all jobs in the economy, Fine Gael should talk about a jobs crisis. Not only is it unbelievable, it is deplorable.

The ability of an economy to create new and better jobs to replace those that are lost is the real test of competitiveness. Last year total employment exceeded 2 million for the first time and net job creation in agencies such as the IDA and Enterprise Ireland was the highest since 2000. When the Fine Gael Party attempts to talk down this reality it is impossible to take it seriously. These are not the words of a Minister attempting to score partisan points. There is a real concern in the business community that we could talk ourselves into trouble. The Small Firms Association said that, "the single most important thing required for budget 2008 is for the Government to instil confidence back into the economy in the budget speech and through prudent economic management going forward". It went on to say that, "We need the Government and its agencies to speak out in support of the economy and mitigate media reporting of us being on the verge of collapse as this the very thing that will bring us there".

This budget will instil the confidence called for by the Small Firms Association. The Fine Gael Party is great to point out problems but very slow to point out solutions or to tell us what it might actually do if it had the opportunity. Last week the Fine Gael Party complained that public spending is at a level equivalent to 31% of GNP as opposed to 25%. This, according to Fine Gael, is a bad thing. Some 6% of GNP is in the region of €10 billion and as we all know the vast bulk of Government spending goes on health, education and social spending. Social welfare spending in 2008 will amount to €17 billion compared to €9 billion in 2002.

The Minister has provided for large increases to carers, pensioners and parents in recent years. Which of the welfare increases would the Fine Gael Party reverse? Where would it take the axe to spending? Would that axe include the respite grant? We did not have one when that party was last in office. Fine Gael attacks on the level of public spending are just hollow rhetoric. We know only too well that whatever Deputy Bruton might say in the wake of a budget he will be contradicted by his front bench spokespersons. For example, Deputy Enright is disappointed that more has not been spent on the welfare budget. Likewise, Deputy Brian Hayes complains of only a 9% increase in primary funding and 5% in post-primary. Deputy Bruton says we are spending too much while his colleagues say it is too little.

This country has a competitive economy and we can be confident in our ability to meet international challenges. That said, I am not complacent either. The world is ever changing and we need to be agile and flexible. Sustaining our economic growth will increasingly be innovation and knowledge driven. The value of this innovation triangle has been recognised at EU level through the substantial increase in funds for the Seventh Framework Programme and the creation of the European research area.

There is also recognition at EU level of the need to intensify the pace of the Lisbon driven reforms and to make the EU more innovation friendly by creating comprehensive framework conditions for exploiting old forms of innovation across the policy spectrum. At a recent EU competitiveness council I fully endorsed the council's conclusion calling for a strong emphasis on the importance of science, research and development, innovation, skills, training policies and better regulations. These are the ingredients of modern competitive economies. We cannot always compete on cost but we can compete on the strength of our knowledge base, innovation culture and the skills of our people.

As a small open economy we are particularly vulnerable to the external factors that weaken our cost base. The solution lies in supporting innovation, improving the productivity of labour through balanced regulation, increasing knowledge and skills and in playing to our strengths by tapping into our innate ability as networkers and for building partnerships. Success does not depend on Government policy alone, it requires a joint commitment by enterprise, society and Government to promote innovation in every sphere of business and public service. As Minister of State responsible for innovation policy, I am determined to build a national innovation agenda for Ireland which will create a greater awareness of a demand for innovation throughout the economy. I will shortly publish a policy statement on innovation which will act as a guide to our approach in fostering innovation demand and an innovation culture in the economy and society. Current research already shows that our innovation levels are rising in terms of, for example, implementation of the strategy for science, technology and innovation, and we are heading firmly in the right direction in terms of meeting our Lisbon targets.

We have excellent entrepreneurship capabilities and support and are consistently performing in a top quartile in terms of rates of entrepreneurship. The development agencies provide essential business and other supports throughout the regions and will direct supports towards better exploitation of innovation, including eco-innovation and creativity, in both manufacturing and services.

We have consistently recognised the importance of building strength and capacity among indigenous firms. Consequently, we have helped those with high potential to upskill, invest in research and innovation and use the opportunities of globalisation to internationalise their operations. This does not include the focus on export markets alone, but covers technology acquisition, finding partners and other forms of international collaboration.

Effective networking is also important as a catalyst to change and innovation that is part and parcel of the approach to business supports by our agencies, such as Enterprise Ireland. It also plays a key part in critical EU-funded programmes such as the seventh framework programme, or FP7, that is driving the research agenda across Europe and which will support our ambitious objectives to become a highly innovative and knowledge-driven economy.

I welcome the decision of the Minister, Deputy Cowen, to extend the research and development tax credits scheme for a further four years. This will encourage Irish business and research institutions to continue to build up the research and innovation base and progress towards the objective of the strategy for science, technology and innovation, namely, to put Ireland to the forefront in generating and using new knowledge for economic and social progress. I commend the budget to the House.

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