Margaret Conlon (Cavan-Monaghan, Fianna Fail)

I welcome the opportunity to contribute to the debate this morning. It is important when analysing the motion that we take a little time to assess our current economic position and the challenges we face. We must also examine where we have come from, both as a country and an economy.

Since 1997, the rate of economic growth in Ireland has averaged 7.25% per year, leading to an unprecedented change in the Irish economic sphere. The total number of people at work has risen by 800,000, helping to accelerate average per capita incomes in Ireland to above those enjoyed in many other economies. Unemployment has decreased from 10% in 1997 to approximately 4.5% in 2007. These are some of the vital statistics we must bear in mind.

However, there have been external shifts and development which are outside our control. The strength of the euro against both the dollar and sterling is an example, as well as international financial market difficulties such as the credit crunch and higher oil and food prices. These global economic developments play a key role in shaping Ireland's economic horizon as we are highly integrated in the global economy.

We benefited handsomely from being such an open economy for the past ten years but we are now bearing the brunt of a downturn in the international economic field. Many such open economies are cyclical and there are booms, depressions and recessions. Whereas we would all like the boom times to exist ad infinitum, we must realise dips can come about, and we are undergoing such a period in our economy now. It is important there is careful management of the challenges facing us at this time.

To focus on the specifics of the motion, our national energy policy is central to the country's future economic development. The Government's policy is based on the energy policy framework and the programme for Government as agreed with our Green Party and Progressive Democrats Party partners. These documents set out the three planks for future policy — security of supply, price competitiveness and environmental sustainability. We must adapt and be flexible in our actions to take heed of the international developments as they change and evolve. To ignore them would be folly.

Furthermore, the motion specifically mentions the issue of carbon-related windfall gains for the electricity sector. The EU's emissions trading scheme is complex and affects not only Ireland but all EU member states. It is subject to ongoing analysis by the Minister for Finance, Deputy Brian Lenihan, and the Minister for Communications, Energy and Natural Resources, Deputy Eamon Ryan. This will take account of the ramifications and efficacy of any national and EU plans. We must work with all State agencies in this regard.

If we move next to examine the proposal to reduce the lower rate of VAT from 13.5% to 12.5%, that will result in significant losses, approximately €396 million in a full year. Even if the reduction is passed on in full to consumers, the impact on the consumer price index will be only minimal.

The Government can speak from some experience. In 2001, we cut the VAT rate from 21% to 20% but the expected benefits for the consumer simply did not come about. The reduction in VAT was not passed on to the consumer and a year later, the Government rolled back the reduction.

Fuel prices are driven by a number of factors, including the price of oil on international markets, exchange rates, production and refining costs. The rise in oil prices over recent periods reflects additional factors such as geopolitical uncertainty, supply disruptions and strong economic growth in countries such as China.

The high price of oil indicates we need energy efficiency and alternative fuel sources. My colleague, the Minister, Deputy Ryan, spoke earlier on such matters, articulating why and how we must move forward with these matters. We must take into account the experience from other countries and learn from the consequences of their actions. We must look at how we can cut back on our dependency on fossil fuels and we must continue to develop and encourage the use of alternative sources.

There is no doubt the financial position has weakened from that envisaged at budget time. We should not forget that our public finances are strong, our level of debt is low and our GDP growth rates have been stronger than most other European countries. The OECD economic outlook is forecasting a GDP growth of 1.5% for Ireland, picking up to 3.75% next year. The economy has always been resilient and I am confident these growth rates will come about and we can continue with our plans in the programme for Government.

We in government have always focused on the most vulnerable in society and our measures reflect this. We have taken successive opportunities to make real and significant increases for those on social welfare and reduce the levels of tax paid by lower income earners. For example, the last Government promised to clear the €200 pension barrier by 2007, which it delivered on. We are also delivering increases through social welfare to the most vulnerable people in ways such as fuel allowances. This is being done to make a real difference in the lives of ordinary people.

There are further specific energy developments that I welcome. The ESB has put in place a new €22 billion strategic framework up to 2020, which should see the halving of its carbon emissions within 12 years. I hope it will be ahead of its schedule in achieving zero net carbon by 2035. The Minister for Transport is due to launch his sustainable travel and transport action plan soon and I look forward to its publication.

The fundamentals of our economy are sound and if we adopt a wise and prudent approach to public spending, we are well placed to rise to the challenges that face us. I am confident the Minister for Finance, Deputy Brian Lenihan, is the right person to steer the ship through these choppy international waters.

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