Brian Lenihan Jnr (Dublin West, Fianna Fail)

I thank the Chair for his indulgence.

I am glad we are having this debate on taxation and energy, an important and topical subject. In this debate we must put our current economic position and challenges in context. Since 1997, the rate of economic growth in Ireland has averaged 7.25% per annum. This has facilitated a transformation of the Irish economic landscape. The total number of people at work has risen by some 800,000, helping to propel average per capita incomes in Ireland above those enjoyed in many other developed economies. Unemployment has fallen from 10% in 1997 to about 4.5% last year.

However, the economic environment has clearly become more challenging in recent months. At the time of the last budget a number of risks to the outlook were identified and these have subsequently materialised. Most of these developments are on the external side and thus beyond our control, including the prospect of lower growth in most of our major trading partner countries, the appreciation of the euro against both the dollar and sterling, more persistent international financial market difficulties and higher prices for many commodities, such as oil and food. These global developments play a key role in shaping Ireland's economic horizon as we are highly integrated into the global economy. On the domestic front, the residential house building sector is undergoing a sharp slowdown following a prolonged catch-up period. While we may experience a year or two of fairly low completion levels, it is reasonable to expect over the medium term that annual completions will return to sustainable levels, which will remain high by international standards, reflecting the strong underlying demand for housing in Ireland.

On foot of all of these developments, a period of well below-trend growth is in prospect. The consensus among economic commentators is that the rate of GDP growth this year will be about 2%. Some are taking a more pessimistic view. What is clear is that the short-term prospects are more challenging than we have become accustomed to in recent years. Beyond next year, however, there are grounds for optimism. Once the economy absorbs the housing shock and the international climate improves, the outlook is for a recovery in our economic growth rate. This is not just my view. Many other economic commentators share this view. If we respond appropriately we can expect a recovery towards trend by 2010.

With regard to public finances, there can be no denying that our fiscal position has changed from that envisaged at budget time. It is important, however, to point out that the current situation is manageable given the strong position of public finances. It is equally important to stress that despite the underlying strength of the public finances, the Government is determined there will be no unnecessary loosening of fiscal policy. We need to control current spending to keep it in line with resources and it is crucial that Departments adhere to the significant levels of current day-to-day expenditure provided for their activities this year. Energy, investment and taxation policy must be framed in this context.

Energy policy is key to future economic growth. Government energy policy is based on the energy policy framework and the programme for Government. These set out the three pillars of policy: security of supply, price competitiveness and environmental sustainability. Within that overall context, we must adapt our actions to take account of international developments. There have been a number of significant developments which must inform our energy policy into the future. Chief among these is the continuing high price of fossil fuels, especially oil, and the challenge posed by climate change. These must be addressed in the context of the wider economic and competitive needs of the economy and with consideration of emerging budgetary realities.

These factors highlight the need to promote renewable and environmentally sustainable energy sources across all areas from power generation to transport. The energy policy framework sets out numerous measures and targets designed to deliver security of supply, sustainability and competitiveness over the period to 2020. My colleague, the Minister for Communications, Energy and Natural Resources, when he speaks tomorrow morning, will describe in greater detail the progress being made on energy policy commitments and actions.

The motion refers specifically to the fact the ESB has put in place a new €22 billion strategic framework for the period to 2020 that will involve a major investment in renewable energy, a halving of its carbon emissions within 12 years, and the achievement of zero net carbon emissions by 2035. These are ambitious targets. While Deputy O'Donnell mentioned that various private interests will benefit, it is a fact that 70% of the free carbon credits are allocated to the ESB. It is not a private undertaking but one that belongs to the taxpayer. The Government is committed under the strategic plan to provide for a massive shift from the existing generation system to a new system.

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