Kieran O'Donnell (Limerick East, Fine Gael)

I thank the Leas-Cheann Comhairle.

My point pertained to Government expenditure on the public sector, which went out of control in 1977. On taking office, the former Taoiseach, Mr. Charles Haughey, also referred to this point.

As for the Finance Bill before the House, the main issue I wish to deal with is that Ireland will face into a difficult economic environment in the coming year. One must ask whether this Bill deals with those issues and the short answer is "no". As for the economy, the Central Bank has stated the unemployment rate will reach nearly 6%. The increase in unemployment in January 2008 of 7,800 people constituted the highest increase for 17 years. Moreover, a downturn has taken place in the US economy. The Dow Jones index fell yesterday, in part because of lower than expected factory orders. Deputy Bruton already referred to our linkage to the US economy whereby every 1% decline in the US corresponds to a 1.75% decline here. While the budget forecast for economic growth was 3%, economic commentators now state it could be as low as 2%.

I tabled a parliamentary question to ask the Minister his budget projections for the number of house completions and the reply was 55,000. At present, the Construction Industry Federation, CIF, predicts 30,000, other economic commentators predict 45,000 and, anecdotally, I have heard the figure could be even lower. Every reduction of 10,000 in house completions means a reduction in revenue of €1 billion or a fall of 1% in the growth rate. A potential shortfall in completions of 20,000 houses corresponds to the loss of €2 billion, which could have major implications for the Exchequer deficit and the general Government balance and could constitute approximately 2% of gross domestic product, GDP. As the Minister has projected a figure of 0.9%, he could go perilously close to exceeding the Stability and Growth Pact limits.

I do not intend to hold the Minister to account for issues that are outside his control. When Ireland joined the euro, it lost control over interest rates and exchange rates. However, low interest rates have resulted in massive borrowings by people in respect of the housing market despite repeated warning in recent years that 90,000 housing completions every year was not sustainable. The Government should have done something. Stamp duty reform was introduced too late and young people now face negative equity.

Furthermore, almost as many people are employed in the construction sector as in the manufacturing sector. Approximately 280,000 to 290,000 people are so employed, which is not sustainable. Ireland is a small open economy and must consider ways to become more competitive. In the context of the budget, the Minister has noted that the single area over which we have control is competitiveness. In the House today, although the Taoiseach referred to productivity, I did not hear him mention competitiveness.

Competitiveness is the key and the Government is partially responsible for our lack thereof. I would greatly welcome Ireland's recovery of its competitive advantage. At present, Ireland's exports are growing by between 5% and 6%, which is insufficient. We must return to the growth rates experienced in the early 2000s, which were in the order of 20%. The Government must take action. First, it should implement the recommendations of the National Competitiveness Council that advocated setting up a group to examine ways of bringing about greater competitiveness. Second, the Government should consider guaranteeing in future that in respect of those areas it controls, it will not allow any increases above the rate of inflation. In recent years, prices in the energy sector including gas and electricity, increased by well above the rate of inflation, which has had major cost implications for industry. Third, the Government should promote a knowledge-based economy. The skills of the workforce must be improved and Fine Gael believes this should be done while people are at work, rather than after they have lost their jobs.

I will turn to section 39 of the Finance Bill, which pertains to taxation of foreign dividends. The Minister has introduced a change whereby in effect, such dividends now are being taxed at the same rate, that is, 12.5%. My understanding is that the Minister has done so because of a requirement arising from a European Court of Justice ruling of last December. The Minister should make such dividends exempt to enhance our competitiveness and ability to encourage multinational companies to locate their European headquarters in Ireland. It is purely a cash flow measure. At present, any company that receives foreign dividends will recoup the money. It is purely a question of timing as such companies are obliged to pay by way of preliminary tax. I propose a measure that would retain our comparative competitive advantage. I will table an amendment to this effect on Committee Stage.

The budget was rudderless with regard to measures to deal with the economy's prospects. However, I welcome some other measures, including the proposals regarding preliminary tax for small companies. I welcome the increase in VAT thresholds and greatly welcome the extension to 2014 of tax credits for research and development. While I welcome the accelerated capital allowances on energy-efficient equipment, it has flaws and appears to have been rushed and ill-thought out. First, it only applies to companies although it also should apply to individuals. Second, minimum amounts of money are required which means it will be curtailed for large companies. Third, although it only pertains to specific assets, the assets list is not yet available. Fourth, the Minister must secure EU clearance in this regard, which means the measure may not come into effect until August 2008.

I refer to EU directives. It is clear that many of the measures included in the Finance Bill have been dictated by EU directives. It will be extremely important for the Government to engage in proper scrutiny of EU directives and the implications they might have for Ireland's economy. Ireland must be extremely proactive in this regard. I refer in particular to issues such as water charges, about which steps could have been taken and can be taken in future. Such scrutiny will be extremely important.

I refer to capital allowances linked to carbon emissions for motor vehicles and the VRT linked to CO2 emissions. Were the Minister's intentions genuine in respect of green policy, he would introduce them immediately. The delay is creating an element of confusion in the market and I seek such a move.

My main point is that the Finance Bill is a mishmash. It provides no answers on the direction that people seek regarding measures to deal with the economy in future. I have provided a straightforward solution, namely, Ireland must recover its competitiveness and its export industries must be allowed to operate competitively in the international market.

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