Kieran O'Donnell (Limerick East, Fine Gael)

I refer to the measures proposed by the Tánaiste and Minister for Finance in the context of the challenges facing the economy. Today's newspapers highlight a report by NCB stockbrokers, which states growth in the service industry slowed to a four-year low in January, the level of new exports among new service providers fell for the first time in 53 months in January and business confidence levels are well below last year's averages. Consumer confidence also fell by one third over the past 12 months. Yesterday €4 billion was wiped off the value of Irish shares, with banks and the construction sector particularly affected. The biggest task the Tánaiste will face over the next year is managing the difficulties in the economy, yet the Finance Bill is rudderless in that area. It is easy for a Government to manage during good times but it is much more difficult to do so in bad times when leadership is needed.

It is often said that the Opposition does not provide strategies for the future but I have some simple suggestions that the Government should implement as a matter of urgency to deal with the difficulties we are facing. The Tánaiste's main objective should be restoring confidence in the economy by improving competitiveness. In the contribution he made yesterday, he stated that Ireland's inflation rate was slightly above the EU average. Rather than be happy with that, he should try to bring inflation below the EU average. The Government must make a commitment to keep price increases in the areas it regulates below the rate of inflation. The national programme to restore competitiveness recommended by the National Competitiveness Council in its recently published 2007 annual report should be established immediately.

With the national pay negotiations about to commence, the Taoiseach and the Tánaiste should not lecture ordinary workers on pay restraint given their own exorbitant pay increases. The Tánaiste will receive an increase of the order of €36,500, which is more than the average industrial wage. It would appear that he is the highest paid Minister for Finance in the world, even though we are one of the smallest economies. The Taoiseach will receive a salary of approximately ten times the average industrial wage. In line with the proposal made yesterday by Deputy Mansergh, I ask the Government to decouple remunerations for senior civil servants from the private sector. Furthermore, I urge Ministers to refuse the pay increases recommended by the higher remuneration group.

The Government must develop a balanced business economy. We have been too reliant on the construction sector, which produces 15% of tax revenues and accounts for 25% of GNP. The Government stands indicted — when we joined the euro and interest rates fell that encouraged people to take out loans and resulted in an unsustainable situation whereby 90,000 houses were completed annually. The bubble has now burst, prices are falling by approximately 20% and many young people are facing negative equity. I welcome the proposed provisions on stamp duty but they are being introduced too late.

This is a small and open economy, so we must return to basics. We clearly need a construction sector but it must be sustainable. We have lost 30,000 jobs in the manufacturing sector since 2001, while the construction sector experienced a similar increase in employment. We need sustainable manufacturing, service and construction sectors, as well as sustainable foreign direct investment. We need to take a balanced approach by increasing exports of goods and services by 20%. In 2006, the increase was only 4% and the Central Bank is now projecting a mere6%. In January, growth in services slowed to a four year low and new exports by Irish service providers fell for the first time in 53 months. We must reverse that decline.

The case could be made for the Tánaiste to revise his budget projections. He based his construction figures on 55,000 house completions but the Construction Industry Federation is now projecting 30,000 completions. Ten thousand completions are equivalent to 1% growth and €1 billion in tax revenue, so 30,000 houses would represent a shortfall of €2 billion and a €7 billion Exchequer deficit. That could push us close to the 3% limit under the Stability and Growth Pact. It is important, therefore, that the Tánaiste introduce measures to enhance competitiveness in other sectors.

A 2% efficiency drive in the public sector would have yielded €3 billion per year for frontline services. I note that the level of expenditure for public services in January was 20% greater than last year's figure. Unless the public sector is properly reformed, I question whether the Government can hold to its expected 9.3% increase in deadlines. There has been significant wastage over the past number of years. Approximately €420 million has been spent on e-government, even though some projects have never been delivered.

A structured review of EU directives is required to determine how Ireland can maximise the benefits from them. The climate change strategy must be implemented as a matter of urgency instead of bringing in VRT and motor tax on cars and accelerated capital allowances.

In regard to my constituency of Limerick East, I welcome the proposals made by the Tánaiste on regenerating Limerick. I look forward to seeing the measures being introduced because they will be extremely important for the area.

The budget provides for a 12.5% tax on foreign dividends on holding companies based in Ireland. An immediate measure to enhance competitiveness would be to exempt such companies. We are competing with countries such as Holland to attract worldwide companies to locate their headquarters in Ireland and we must regain our comparative advantage in order to sustain employment.

The role of a Minister is to look after jobs and the most vulnerable people in society. Success in that regard requires a vibrant and open economy rather than over-reliance on the construction sector.

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