Martin Mansergh (Tipperary South, Fianna Fail)

I welcome the Finance Bill and congratulate the Tánaiste and his officials on it. By far the most important challenge facing the country this year is the protection of jobs and all the progress made in our economy in recent years, as well as trying to make further progress against the background of a good deal of financial turbulence in the world economy. Confidence in times like these is brittle and it is very important that we have a steady hand managing our economy and public finances.

This Bill's function is in part to implement the budget, which we can view in greater perspective two months on. The budget was mildly anti-cyclical, without taking undue risks with the public finances. Inevitably, given the existence of certain urgent spending priorities, such as the new schools in areas of burgeoning population announced by the Minister for Education and Science last week and the need to press forward with the national development plan, including both public and road transport, money will be quite tight in a number of other areas. I would not contemplate further cuts in taxes and the revenue base until conditions improve substantially again.

On income tax, the status quo was broadly maintained, with the aim, as the Tánaiste indicated in his Budget Statement, of keeping low income earners out of the standard rate band and average earners out of the higher band. Equity has been the hallmark of the Tánaiste's stewardship since he took over the Department of Finance.

The Government's pledges in respect of stamp duty for first-time buyers and mortgage interest relief were honoured. Indeed, stamp duty reform went well beyond what was promised and the tax was made more equitable and progressive, removing abrupt step changes which have long been a grievance.

We should not object to 9% stamp duty on properties worth more than €1 million. The real incidence arguably falls on sellers, who in almost all cases will have enjoyed a huge capital gain if they have held the property for long. People who can afford to pay up to €60 million on a large house on Ailesbury Road and those who sell to them can well afford the 9%.

Everyone is agreed there has been an unhealthy dependence on the housing and construction market, despite the benefits brought by the boom in many respects. The measures introduced by the Government could not have been easily introduced when the market was overheated.

As the Governor of the Central Bank told the finance committee last week, the correction taking place is both inevitable and necessary, and he stands over the prediction in the stability report signed off last September that the housing market is destined for a soft landing. The price falls that have happened, particularly since the second half of last year, will make housing more affordable for first-time buyers and budget measures will reduce mortgage repayment costs for such buyers in recent years.

Nobody now expects eurozone interest rates to rise and they may later this year begin to fall. All this is helping to ease some of the inflationary pressure on earnings coming into pay talks. There is no need for panic measures, without regard to cost or financial and budgetary stability, such as was advocated in a Sunday newspaper recently, which would be far more likely to undermine confidence rather than bolster it.

Two other criticisms have been made of the Government's economic strategy which I wish to address. The size of this year's budgetary deficit has been criticised and described rhetorically as the worst deterioration in the public finances in the history of the State. This is similar to comments just made about the most rapid deterioration of unemployment in 20 years to 4.9%. Qualitatively, this is all nonsense.

The Tánaiste has kept well within the margins of safety, with a projected general Government deficit of 0.9% of GDP in 2008 compared to the Maastricht guideline of 3%, which many of our European partners have exceeded or are in danger of exceeding. With the second lowest public debt level in the eurozone, we are entering this period from a very healthy position, in stark contrast to the state of the public finances in the early to mid-1980s.

The Tánaiste did his best to keep the economic debate during the general election on the rails, despite some of it bordering on the surreal, particularly when viewed in retrospect. I am thankful the country has been spared any repetition of what happened in 1981, when power was captured by a coalition that had promised tax reform on the grand scale, only to realise none of it could be implemented. The gloom and doom that was spread as an alibi for the non-fulfilment of promises and the large tax increases which went in the opposite direction kept confidence on the floor for the following six years.

A second criticism expressed by a distinguished former Taoiseach of those times in a newspaper column lamented that more had not been kept in reserve in good times for use now. As the Tánaiste's predecessor as Minister for Finance also observed, it is very difficult to justify enormous budget surpluses when there are pressing infrastructural and social development needs. There was an Exchequer balance of over €2 billion in 2006 and how much larger was that supposed to have been? It is important to avoid stop-go and abrupt course changes, and the continuity and firmness in economic policy management have been admirable.

Very germane to the management of the economy has been the issue of benchmarking at all levels of pay. Benchmarking was a vast improvement on the traditional disputes about relativities and we have been rewarded with some of the most peaceful years in industrial relations. Claims have been made that the public service is rewarded better than the private sector, but that is certainly not the case at the top end of the scale, in regard to either pay or pensions, where the total pay package of top executives and managers in larger companies far exceeds anything in the public sector. Even after a deferred pay rise, the Taoiseach and the Chief Justice will hardly figure among the top 13,000, as the Tánaiste and Minister for Finance informed me in a reply to a parliamentary question. As a very perspicacious correspondent to this month's Village magazine noted, "massive inequality of pay" is one of today's private sector norms, which top echelons in the public sector should not be tempted to follow.

The issue is not really whether senior public servants, be they politicians or civil servants, can command high salaries outside. Many even relatively junior Department of Finance officials can command good salaries in the private sector and there are many examples of former semi-State executives earning large sums of money. The Labour Party Members should examine how some of their former programme managers, advisers and even a former Tánaiste are doing these days in the private sector. It is wrong to give the public impression that nobody in this House or in the public service is worth very much outside.

Public service has a different ethos from private enterprise and while I defended recent pay rises, they should be the last under the current terms of reference. It is time to decouple pay in the higher public service from private sector norms because we cannot afford them and because they create inequitable and widening gaps. For 30 years we have tried to follow this course and recent controversy has shown that it is no longer sustainable and is ceasing to be publicly acceptable.

The closure of the former Barlo's plant in Clonmel brings home also that productivity and competitiveness are not only about pay. The decisive factor was the failure to invest in modern equipment, which admittedly would have reduced the workforce, but not nearly so drastically. It is highly regrettable and very disappointing when one of the most successful firms and entrepreneurs in Ireland buys up a group, fails to act on many proposals put forward to invest in it and closes it down after four years to shift production to Wales. No sensible person objects to successful Irish firms spreading their wings and establishing themselves in overseas markets, but could they please keep the home fires burning? One would like to believe that the best Irish businessmen are, among other things, committed to their own country, and most of them are most of the time, at least by their own lights.

One of the things that business chiefs seem to underestimate is the value of support and goodwill in the domestic market. Why should the Irish consumer feel the same loyalty to Irish brands, be they glassware, biscuits, sausages or designer radiators, when their manufacture has been shifted abroad? I hope that the group in question and indeed any highly profitable Irish-owned firm that closes down manufacturing in a particular town or city in this country, will actively look to reinvest in that place, using the sites they own, their connections and traditions.

As we all know, on all sides of this House at different times politicians are scrutinised and lacerated at regular intervals in the media. If businessmen are ruthless and unsentimental in closing down and stripping a good business and shifting it overseas, public representatives have every right to be equally ruthless and unsentimental in questioning and criticising such decisions and those responsible for them. A former Chief Secretary in Dublin Castle, Thomas Drummond, rebuked Tipperary landlords in 1838, when he reminded them, "Property has its duties as well as its rights", and the same applies to the entrepreneurs who have piled up unimaginable quantities of personal wealth today.

Coming to specific Finance Bill measures, those that assist the maintenance of jobs and investment in all sizes of firms are particularly important. I welcome the lessening of the compliance burden on small firms in respect of preliminary corporation tax and the tax treatment of dividends received from foreign subsidiaries and the encouragement of e-stamping.

Making the BES schemes and seed capital scheme more permanent and therefore more reliable and predictable is also welcome. I welcome the tax incentive for investment in energy-saving equipment, which will contribute to helping us meet more demanding environmental targets. A more emissions-sensitive VRT system and the excise on electricity tax, albeit not on households or most manufacturing, should also have a positive impact. Many offices and buildings leave their lights blazing through the night and no doubt other equipment connected that does not need to be. Anything that would provide an incentive to limit that sort of waste would be welcome.

Measures have been taken in recent times, including in this Finance Bill, particularly in the light of huge rises in the price of oil and gas, to tighten up the regime governing the exploitation of energy resources. I was surprised at what Deputy Burton said on that point because one cannot make retrospective changes without severe cost to confidence and something that would be regarded at the receiving end as tantamount to a breach of contract. Such changes in the regime have been sought, among other things, by the Rossport protesters and I hope they will take it into account in considering when or whether to wind up their campaign, which I hope will be soon. Several firms in south Tipperary, as well as elsewhere, will welcome the reduction of VAT on agricultural production of bio-fuels to 13.5%. While food production remains extremely important, we also have spare capacity that could be used, not just for forestry, but bio-diesel production. Reassurance may be required about the net energy benefit of such production.

Caravans and camping parks are big business in one of our most important and still buoyant industries, tourism, which has good prospects in this coming year. The extension of allowances for buildings is very welcome.

Film relief has been debated in recent years, not least in the Joint Committee on Finance and the Public Service. Incentives have to take account of the international competition. Excellent films have been made in Ireland and we have to do what is necessary to encourage this to continue.

I am a little intrigued by the reduction in VAT on condoms, which I presume is introduced to promote public health rather than promiscuity and reduce unwanted pregnancies and venereal disease. Condoms are often extolled for their sensitivity, but I do not know how sensitive they are to price. Will more potential users be feeling lucky, once they notice, assuming they notice, the reduced price?

Research and development is vitally important to investment and employment in high grade jobs and I am glad the tax credit scheme is being extended to 2013.

A final point for the Minister to consider was made to me by a tax practitioner in Tipperary yesterday. Fines for even slight delays fall on the generally compliant and the uncompliant alike. It has been suggested to me that such penalties should be applied in proportion to the taxpayer's record of compliance.

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