Seymour Crawford (Cavan-Monaghan, Fine Gael)

I wish to share my time with Deputy Coveney. I congratulate him on bringing this proposal before the Dáil with the aim, initially, of creating a fund through the unearned windfall gains to the electricity generator industry which in turn would allow the value of the tax rate to be lowered from 13.5% to 12.5%.

It is interesting to hear Government backbenchers and Ministers trying to blame other economic problems on issues outside the Government's control. It is even more interesting to hear them so quickly describe as rubbish any proposal from this side of the House when every other week they have claimed that in Private Members' time Fine Gael has failed to put forward realistic proposals and that it always opposes for the sake of opposition.

I will not go into detail on the issues already discussed by Deputy Coveney regarding windfall tax and how that might provide the necessary funding, other than to say that to date the Government has refused to claw back this money for the benefit of customers, the economy and the environment.

The current crisis in the economy needs definite and short-term action. Government proposals, while very laudable, have clearly failed in the past to come to fruition within a reasonable timeframe. For instance, the Government ignored the nitrates directive for 12 years and eventually dealt with it only when under legal and political pressure from other EU member states. Any commitments by the Government, which has been in power for 11 years, must be taken with a serious health warning.

Our country is now in a serious economic downturn with consistent high inflation, rising job losses and increased difficulties in obtaining jobs by those involved in the manufacturing business. The Government has stubbornly refused to recognise the seriousness of our economic slide and persists in blaming external factors such as the value of the euro against sterling and the dollar, the price of oil and the difficulties in the international money markets. No doubt these have had some effect but we cannot ignore the total mismanagement of our economy and the fact that we relied so much on the unsustainable house building trade and windfall taxes received by Government from ever-increasing and totally overvalued development land prices. I remember one small farm in my area that went from a valuation of approximately €2 million to a sales value of €25 million in less than three years. The Government received an unexpected €7.5 million in tax and stamp duty from that totally unexpected sale due to the early death of its owner.

We are now in a new situation and today Fine Gael is trying to give the Government a positive alternative to sitting back and ignoring the problem, hoping that it will disappear. That will not happen. A 1% VAT reduction would help to cut the cost of many necessities in life such as heating oil, especially for our elderly and disabled who have need of such products 52 weeks a year. It will also reduce the cost of diesel oil to farmers and contractors. In light of the pressures on farmers, who face cutbacks in dairy and other products as well as increased feed prices, any help that can be given by the State, however small, will show some understanding. It would give a direct boost to the domestic economy and, above all, give assistance to the flagging construction and housing sectors.

Tourism is now one of our biggest industries and is under severe pressure because of the current situation. If the 13.5% rate were lowered to 12.5%, this would be noticed immediately in the cost of accommodation, car hire, etc., and would give a clear message that the Government is committed to tourism. The reduction will affect the price of home heating oil, but also electricity, gas and coal. Above all, it will reduce the income gap as low income households will benefit more than higher income households, as they spend more income on services taxed at this rate.

I understand the Department of Finance estimates the cost of cutting the 13.5% VAT rate to 12.5% at just less than €400 million in a full year. However, taking into account the extra spending and economic activity resulting from such a cut, Fine Gael believes the net cost would be less than €300 million. This figure is, in turn, less than what the proceeds from a windfall levy in the electricity generating sector would be. Spain has already introduced a windfall levy and the UK Treasury is considering a proposal from the UK energy regulator. I have heard the Government and its backbenchers emphasising that there is no guarantee that the 1% VAT reduction would be passed on to consumers. If this is the case, what is the purpose of the regulators, consumer organisations and all other special structures put in place by the Government over the past 11 years which are supposed to protect the consumer? If the Government does not accept this proposal, as seems likely, I urge it to take alternative action now before it is too late for the many companies, jobs and all those already living on the bread line because of rising inflation, fuel prices and lack of Government concern. Only some minutes ago I heard of another company going into liquidation. We cannot ignore this situation and we must take action.

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