Conor Lenihan (Dublin South West, Fianna Fail)

In framing the budget, the Minister, Deputy Cowen, had to look at what is an uncertain picture for the global economy. On the one hand, there are the fears, instability and uncertainties released by the sub-prime issue, first in the United States and then across the world banking sector, some of which remain. On the other, there are the positive developments in the global economy, particularly in China, Brazil and the central and eastern European economies, which are growing. Nonetheless, uncertainties remain and the budget reflects this fact. We do not know where the global crisis engendered by the sub-prime crisis will end but we hope there will be a positive landing and the world will not be pushed into recession.

The budget reflects the different funding picture that faces the Exchequer due to the slowdown in the residential property market. In holding the growth in spending at 8%, the Minister has done well on the current spending side. It is important, as we look toward a lower trajectory of growth in the economy, that we get public spending under control. The Minister's new device with which to achieve this, namely, the idea of pinning Ministers to their statements of spending while providing existing levels of service, is a positive development. In many ways it is long overdue that we would address the underlying reform issues that face us with regard to the public services generally, in particular public spending and how it is derived.

In his financial planning for the year ahead, the Minister is correct to put the emphasis on the capital programme, which has been allocated a significant and positive 12% increase. We are embarking on the biggest infrastructural spending programme ever seen in the State. It is genuinely historic but we need to achieve value for money in an effort to maintain our position as a successful, competitive international trading economy that makes us, according to some estimates, the fourth richest country in the world.

The Minister is managing the transition from very high growth in the domestic economy to a lower but healthy and sustainable level of growth, when one compares it to other countries in Europe. He is managing this transition but he is also managing a new transition for the economy in which it will become a value-added economy. We will have to invest in training, research and development, infrastructure and our people in the coming years if we wish to consolidate the level of affluence we have achieved in the past ten years.

The budget provisions do much to assist us in our new growth path. The economy is in good health. Growth of 3% is a strong level and twice the European average, while the harmonised index of inflation is at 2.4%, which is also positive as it is important to have a low inflation environment in order to implement our economic policies.

Given the need to pare back on Exchequer spending due to the residential construction slowdown, some people became too despairing about the state of the economy. Some 24,000 new jobs will be created next year, which is a very positive net figure. The Minister was correct to put the emphasis on keeping 32,000 people out of the tax net. It is important we protect and insulate the vulnerable, such as those on social welfare payments and very low incomes, from higher taxes and a predatory approach by the State to their incomes. It is important also that those on average industrial earnings were kept at the standard 20% rate of tax. This is what the Minister set out to achieve in the budget and he has done so. The Minister's stamp duty reform has the great value of simplicity and immediacy. One of the problems that has beset the Government with regard to the controversy surrounding such a proposed reform is that the public did not have certainty with regard to the tax regime. The Minister has now provided for that in the residential property area, which is important. Some of the statements that were made both inside and outside this House over the past year did not help to stabilise the market. In fact, they had the opposite effect of destabilising the market. Opposition parties have to take some of the blame in that regard for what I call wild, populist declarations with regard to stamp duty.

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