Michael McGrath (Cork South Central, Fianna Fail)

I thank Deputy Finneran for sharing time. I welcome the opportunity to speak on the Finance Bill 2008. I begin by welcoming the comments made by the Tánaiste and Minister for Finance in the Chamber yesterday in regard to the Cork docklands project. He stated:

The Cork project is at the beginning of a process of evaluation and we need to assess how best to devise proposals that would meet with EU state aid requirements. It is an exciting project but at this stage it is still a work in progress.

He went on to say that the Cork docklands forum is expected to report by the middle of the year and that he remained "open to looking at ways in which the tax code can be used creatively to encourage investment and change behaviour".

I take great heart from those comments. It is important to put the docklands project in context. The area comprises 166 hectares on both sides of the River Lee. The project sets out a vision for a new urban quarter characterised by high-quality design, residential, employment and leisure opportunities, and a superb quality of life in a high-density urban setting. It is a short to medium-term project underpinned by the national development plan and the national spatial strategy. It is incorporated in the Cork area strategic plan and the Cork city development plan.

I acknowledge the immense work carried out to date on the project by the lead organisation, Cork City Council, particularly the directorate set up specifically to deal with the project. I note the contribution of Mr. Pat Ledwidge, the director, and Mr. Joe Gavin, the city manager, who drove forward the Cork docklands development strategy 2001 and the Cork docklands economic study 2006. Next week, on 11 February, Cork City Council is expected to adopt the south docks local area plan. The overall docklands venture is estimated to be a €4 billion project and it has the potential to bring 20,000 additional residents to Cork city and to create up to 25,000 jobs. I look forward to the completion of the report of the Cork docklands steering forum this summer. I am sure this report will provide the template and guidance for further Government support for the project.

In debating the Finance Bill, we must consider the current economic backdrop. The projections for 2008, which underpin the fundamentals of our economy, are a targeted gross domestic product, GDP, increase of 3% in real terms, the creation of 24,000 new jobs and the maintenance of inflation at 2.4%. We are aiming for a general Government deficit of 0.9% and a debt to GDP ratio of just under 26%, which would be one of the lowest in the European Union. Thus, the Finance Bill is based on realistic but challenging targets that we must achieve if the progress of recent years is to continue. The early indications are positive. I welcome the January Exchequer returns which, although only preliminary, are in line with Government projections. We hope that trend will continue in the months ahead and that the outturn for 2008 will be in line with the budget.

It is important to acknowledge the volatility in the financial markets and the impact this has had on every open, developed economy, including Ireland. It is clear that no country can completely insulate itself against the implications of instability in financial markets. The sub-prime crisis in the United States and the subsequent credit squeeze has undermined confidence in financial markets generally and has contributed to the 26% reduction in the ISEQ index in 2007. The volatility and sensitivity of the market to emerging data was underlined this week when a company as consistently successful as Ryanair saw its share price reduced by 15% at one point as a consequence of a statement concerning trade conditions.

The World Bank this week cut its growth projection for China to 9% because of uncertainty in the global economy. Since 1997, the Irish economy has grown by an average annual rate of 7%. This puts into context the outstanding economic performance of the State in recent years. There must be stability in interest rates in the coming months, and some downward movement would be welcome. The European Central Bank is widely expected to leave rates unchanged following its meeting tomorrow. It is interesting that all 83 economists polled by Reuters last week expected the rates to be unchanged, and most expect cuts to 3.75% by June and to 3.5% by the end of the year. This would offer some relief to mortgage payers, complemented by the extension of mortgage interest relief as set out in the Finance Bill.

The Bill includes several pro-business measures. I particularly welcome the reduction in the administrative burden on small and medium-sized enterprises, SMEs, and business-friendly measures such as revised preliminary tax payment arrangements for corporation tax for small and start-up companies, the increase in VAT registration for small businesses and the enhancement of the research and development tax credit scheme. These measures will help to make our economy more competitive and to generate entrepreneurial activity. We must create an environment that encourages people to take the risk of setting up a business. There must be a pro-enterprise culture that responds favourably to people who take that risk. It is essential we continue with the low taxation regime for corporation tax and send out a clear signal again that there is no threat to the 12.5% corporation tax rate Ireland enjoys at present. The performance of the Irish economy in 2008 will have much to do with confidence and consumer sentiment. There has been far too much negativity about our economy in recent months. As public representatives, we have a duty to use our position to promote our economy and instil confidence in businesses and consumers about the future of our economy.

I welcome the changes to stamp duty in the residential sector, the further improvements in the income tax and tax credit areas for individuals, the environmental measures, the changes to VRT and motor taxation and the changes to the VAT regime on commercial property. In my former life as a chartered accountant, I was familiar with the complexity of treating VAT on long-term and short-term lettings of commercial property and I welcome the changes the Minister announced in the Bill.

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