Joan Burton (Dublin West, Labour)

It is quite apparent that the Government is paralysed, and perhaps the Tánaiste more than most, by the ongoing saga of the Taoiseach's tax situation and his failure to obtain a tax clearance certificate. Were these the Celtic tiger years, it may be of less economic significance. However, since the Tánaiste introduced his budget last December, all the economic indicators have been revised downwards, setting the scenario for much more difficult economic times ahead. Unemployment is increasing, Ireland is close to the top of the European inflation league and the property market, despite the Tánaiste's botched attempts at stamp duty reform, is as flat as a Shrove Tuesday pancake.

All this means that families who work hard are worried about meeting their mortgage commitments. They are wondering whether their jobs will be safe and, if somebody in the family falls ill, what sort of health care they will be offered? Ireland has one of the highest levels of personal indebtedness in Europe, yet the Tánaiste continues to insist all is well. I refer to another indicator. In 2004, 134 summonses were issued by the courts for house repossession. Last year, 465 summonses issued, an increase of 350%. This is happening on the Tánaiste's watch.

The Bill ought to be an opportunity to think strategically about the economy and to ensure that however difficult the international situation, we look to protect our own people, our economy and our society. Previous Finance Bills from the Fianna Fail-Progressive Democrats Government created tax loopholes for the very rich when times were very good and now, when good government is required, the Tánaiste has no answers. The dogs on the street can see the economy is slowing, and has been, since this coalition was returned to government. The question is: What will the Tánaiste do about it? The Bill indicates his answer is: "Not very much – let's just hope for the best and mosey on".

The global scenario creates a number of problems for Ireland, which will suffer the knock-on effects of a US slowdown. The main domestic problem is the property market. The fall in house prices over the past year has had a major knock-on impact on construction activity. Employment in construction is falling and the live register is increasing. Exchequer returns for January highlight the effect in respect of stamp duty receipts — they have halved — which is a major source of income for the Government. The Government parties must be held accountable for their mismanagement of the property market. They failed to control prices, and, having overheated the market, they were then directly responsible for the stamp duty debacle, which sent it plummeting. Former Minister for Justice, Equality and Law Reform, Michael McDowell, started the stamp duty debate. The Minister for Finance failed to address it until after the election. I recall sitting beside him on "Questions and Answers" nine months ago when he said "I am the Minister for Finance. There will be no changes in stamp duty". He then introduced partial, half-hearted reform, which was unsuccessful. Having to return to stamp duty in the budget was an abject admission of failure to manage this crucial sector of the economy. The Government and the Tánaiste have no plan B. Do they have a view on co-ordinated European fiscal stimulus? What are they doing to address the needs of construction workers being laid off? Is the Tánaiste still promising a spend of several billion euro on the decentralisation programme or will he acknowledge that it has run into serious difficulties?

Having talked about a knowledge economy for so long, action is needed. In particular, it is time to ensure the tax code promotes high-risk, high-tech activity. Last week, the IMF offered a serious health warning to Ireland, saying a downturn in US economic activity would have a proportionally greater impact on the economy, while our own Central Bank revised its 2008 GNP growth projections downwards by 0.5%. Only yesterday, Ulster Bank stated GNP growth could be as low as 2% for 2008, based on a projection of 45,000 residential unit completions.

Given that downward revisions are trickling through across the board, the Minister's assertion last week that his budget day forecasts were still appropriate does not inspire confidence. He has tried to claim credit for injecting a greater fiscal stimulus into the Irish economy than George Bush proposes to do in the US when the reason that we are now faced with substantial budget deficits is his prevarication over reforming stamp duty. This prevarication came before he botched and redid stamp duty, in the process shattering the confidence of those seeking to buy homes. As a consequence, Exchequer income from property has collapsed. The fiscal stimulus which he talks about is therefore a result of careless management rather than careful planning.

While house price moderation will be a welcome development for the many thousands who have been priced out of home ownership in recent years, there is a real danger that people who have bought a home in the past two years using 100% mortgages could find themselves in negative equity situations. If a rise in unemployment is coupled with heavier debt burdens, we could start to see a lot more home foreclosures. The number of repossessions has already trebled since 2004, according to figures supplied by the Department of Finance. This week, The Sunday Tribune reported that the major Irish banks are sharpening their knives, with a prominent UK bad debt specialist licking its fingers at the prospect of profiting from what it called the macro-economic certainty of a steep rise in mortgage default in Ireland. We could be in line for serious home grown sub-prime problems as those who over-stretched themselves with hefty mortgages during the boom times, egged on by the financial institutions that the Minister did not bother to regulate before last Friday, face a harsher economic climate. When I spoke about sub-prime tactics in the Irish mortgage market two and a half years ago the Minister did not even pretend to understand me, such was his arrogant confidence that all would be right on the night. Large numbers of people losing their homes does not sound like the fairy tale soft landing we were promised.

The flip side of property market instability is the slowdown in house building. From peak construction of nearly 90,000 units in 2006, we are looking at the possibility of seeing half that number of units completed in 2008. To put this in perspective, every reduction by 10,000 in house completions has been estimated to cause a 1% reduction in GNP growth and a €1 billion reduction in Exchequer income. We all knew that an output of 90,000 units per year was unsustainable, particularly given the number of houses lying empty and the near sufficiency of our housing stock. However, rather than implementing measures to facilitate the transition from an economy which was over-reliant on house building, the Government chose to tinker with stamp duty, not once but twice, in the vain hope that the unsustainable could be made sustainable by waving a magic wand.

Whatever about past mismanagement, we now have to look to the future. We have to put in place measures to support the transition from house building to more sustainable and higher value added economic activities. In this regard, we support the Government's new focus on capital spending. After a decade of huge tax revenues, we are still left with a striking infrastructure deficit. If we are to regain competitiveness and provide the world-class infrastructure and public services that the Irish people deserve, this continued investment is essential. Our chronic traffic gridlock is just one example of how the infrastructure deficit not only curtails competitiveness but also impacts negatively and often severely on the quality of life of Ireland's commuters. The Labour Party supports the front-loading of expenditure for public transport under the national development plan. Delivering a public transport system that does not cause us to hang our heads in the company of our European peers is the least the Irish people deserve. Improving our public transport system, including such overdue initiatives as integrated ticketing in our cities, would help to restore economic competitiveness, improve quality of life for commuters and go a long way toward meeting Ireland's carbon emission reduction commitments.

While undoubtedly important, the switch from residential construction to infrastructure projects will not on its own provide jobs for all those out of work due to the slowdown in house building. Young men in particular are at risk of falling into the unemployment trap if clear pathways are not outlined for them to acquire transferable skills. There must be a significant focus on retraining and educational opportunities for such workers. Without further up-skilling, many of them will not be able to compete for jobs in expanding areas such as financial services and information technology or develop the specific skills required for NDP investment areas. The time for action on this is now, not in six months' time when the unemployment rate has passed 5%, as the Government predicts. We expect the Minister and his colleagues to address that issue. That is the reason they are being paid their overly large salaries and even fancier increases.

Unemployment is rising at the fastest rate in two decades but it is still far from crisis proportions. We have a highly educated and productive workforce, a healthy can-do attitude and a spirit of entrepreneurship that has served us well and will do so again. However, this is not the time to rest on our laurels. As the economic clouds gather, we have to build on our progress by looking beyond an economy that is over-reliant on low value added construction. We have to restore competitiveness while striving for social and environmental sustainability, ramp up support for indigenous industry and ensure we have a fiscal and infrastructural framework in place to support a high technology, high value added economy. In short, we have to lay the foundations for a 21st century knowledge society.

We could begin to lay those foundations with this Finance Bill if only the Minister saw fit to seize the opportunity. Unfortunately, the most striking aspect of this Bill is its complete and utter lack of imagination. It is a case of much ado about nothing. With the construction boom ending, economic growth slowing and unemployment rising, the Finance Bill gives the Dáil a timely opportunity to take the urgent corrective action needed to get our economy back on track. Ireland has the capacity to ride out this economic storm if we give her half a chance. We need to start by getting this Finance Bill up to scratch.

While the Labour Party welcomed the improvements for PAYE taxpayers announced on budget day, it should be noted that they are so modest that with inflation hovering at nearly 5%, combined with recent mortgage interest rate increases, they will have been eaten up before this Bill is even enacted. Spending power is on the wane for ordinary families, while a respite for workers in the national pay talks looks increasingly unlikely given that the Government is indicating it will take a hard line on pay rises. This is the Government that awarded its Ministers and top civil servants amazing increases. I ask the Minister to identify one recruiting agent who has offered to take Ministers or senior civil servants, bar a select few, out of the public service on a salary of €500,000 per year. I do not know where those people are and I do not see their companies head-hunting many Ministers.

I admit that there are people who have done great public service in government. However, I know of few private or public service employers who would pay the kind of money Ministers allocated to themselves in recently announced wage increases. Why the Government needed to pay almost €1 million in consultancy fees in order to obtain an answer in respect of Ministers' grandiose pay increases is beyond me. Those in government could have done the sums themselves and selected whatever amounts they wanted.

If the Bill is enacted, a single person earning the average industrial wage of approximately €35,000 will still pay tax at 41% on bonus or overtime earnings. By the end of the year, very few taxpayers will be removed from the upper tax band and placed on the lower rate of tax.

Reducing red tape and increasing the VAT registration thresholds will be a welcome boon to the Irish SME sector, which has great potential to be a growth area for indigenous job creation.

Ireland is set to fall short of meeting its Kyoto commitments on emission reductions. Those measures in the Bill aimed at reducing carbon emissions are welcome. The legislation contains several gestures in respect of climate change issues. However, it is unclear whether these tentative steps will really assist Ireland in meeting its commitment under Kyoto to reduce emission levels. For example, the Bill proposes a pilot scheme that would give 100% capital allowances to companies for the purchase of energy-efficient equipment, encouraging the replacement of old equipment. This proposed corporate tax break — unlike what the Minister promised in respect of such breaks — is completely uncosted. All we know is that there will be a three-year pilot scheme, which will be overseen by the Minister for Communications, Energy and Natural Resources, Deputy Ryan. Is the Minister for Finance serious about this tax break and will he outline exactly what is involved? Is it merely a bonbon for the Green Party or is it significant in nature?

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