Beverley Flynn (Mayo, Fianna Fail)

I welcome the opportunity to speak on this motion. It is true that the economic environment has become increasingly challenging in recent months and the outlook is more uncertain. Risks that were identified in the last budget have come to fruition, such as recent developments in international financial markets, a further appreciation of the euro against the dollar and sterling, a decrease in international growth and a sharper slowdown in housing. Now is the time for us to respond appropriately and we can and will do so.

I wish to focus on the construction sector. Regarding the housing sector in particular, the Government has taken a range of effective measures to support housing affordability and facilitate the orderly and balanced operation of the market. The maximum rate of mortgage interest relief has been doubled over the last two budgets. In addition, stamp duty changes were introduced in the last budget that were the right measures at the right time. The bulk of housing output over the period of the National Development Plan 2000-06 was provided by the private sector and this will continue to be the case under the new national development plan.

There are currently 40,000 unsold houses in the country. Developers pay VAT at 13.5% when a house is sold, which represents in the region of €35,000 to €40,000 per house. At the moment, €1.5 billion worth of VAT is tied up in houses that are already built. That money would be very welcome in the Government's coffers. First-time buyers are sitting on the fence while construction workers are losing their jobs and are being encouraged to work abroad. The Government tax take in the construction area generally, not just from VAT, is down. We need to examine some areas in order to address this situation. Under the NDP, significant moneys are allocated for the provision of social and affordable housing. The current market presents an opportunity, if resources were freed up to local authorities, to enable them to negotiate deals to buy up affordable houses to satisfy current demand for social housing. This matter should be given careful consideration.

The Government should also consider introducing a first-time buyer's mortgage subsidy for anyone who buys a house within the next 12 months, to stimulate interest in the market. In addition, the Government should consider offering incentives to home-owners to improve the energy efficiency of their homes. Approximately 1.4 million homes were built before the current building regulations were put in place. Some 700,000 homes were built when no regulations were in place whatsoever. At a time of high energy costs, such measures would reduce the financial burden on households as well as reduce greenhouse gas emissions. The Government should consider taking those steps.

There is a danger that many people are trying to talk us into a recession. They seem to take delight in predicting doom and gloom for our economy. While we are encountering difficult economic conditions, so are many other parts of the world. Consumers are currently feeling the effects of economic uncertainty when they go to the petrol pumps. We are privy, as we always have been, to the whims of outside forces. International events, whether they are in the Middle East, South America or Africa, can affect the cost of fuel.

We must be pragmatic, however. Global economic developments play a key role in shaping Ireland's economic horizon. We are highly integrated into the global economy. The old saying that if America sneezes, the rest of the world catches a cold is the reality of the situation. The difficulties in the United States stem mainly from the housing market and particularly from the sub-prime mortgage segment of that market. These developments have impaired the functioning of international credit markets. Now is a time for cool heads; we must be willing to take the appropriate action to get through these tough economic times. Our economy is flexible and resilient. As a result of our sound economic management and fundamental fiscal factors, such as our low debt-to-GDP ratio and the substantial surpluses we have had for the past decade, our economy has the ability to absorb shocks in an efficient manner. Our rate of growth is much higher than elsewhere in the euro area. Financial experts are of the view that we should see a return to trend growth from 2010 onwards. Economic conditions in 2008 and 2009 will continue to be difficult, but they can be managed with sensible policies.

The Government should give priority to front-loading the infrastructural portion of the national development plan because this will help, in the short term, to absorb some of the capacity emerging from the new house building sector. Under the Government's assured stewardship, the fundamentals of the economy remain strong. As a result, we are well placed to absorb the housing adjustments and external shocks so our medium-term prospects will continue to be favourable. Our public finances are also sound, with one of the lowest levels of debt in the euro area. Our markets are flexible, allowing us to respond efficiently to adverse developments. We have a dynamic and well-educated labour force. We have a pro-business, outward looking society. The tax burden on both labour and capital is low. Not many countries anywhere in the world are facing the current global economic difficulties with such advantages. There is still very much to be positive about.

The Government will not take the soft option of cutting back on our ambitious investment programmes. The healthy state of our public finances means that we have some room for manoeuvre. We are borrowing modestly to invest ambitiously and will be well positioned to take full advantage when the world economy returns to better health. With appropriate action we can ensure that we achieve our optimum growth potential.

Now is not the time for scaremongers to set the agenda. Our economy is stable enough to come through these difficult times and we will emerge stronger and bolder to face any other challenges that may be ahead of us. After a period of unparalleled growth in our economy, there was always going to be a period when the rate of growth slowed down. This is particularly so in the construction sector where the growth in the number of units being produced — in the region of 80,000 in 2006 — was simply not sustainable in the long term. We will probably see 50,000 units per annum as the level to satisfy market demand. At present, however, we must recognise that there is a problem in our construction sector. It is important to stimulate it because when that sector does well, the economy tends to do well also.

I welcome the decision of the House to sit for an additional week. I hope it will go some way towards satisfying the calls from the Opposition to do so. It is important to recognise, however, that Oireachtas committees sit throughout the summer period. It is only in August that the House does not sit. As the Minister of State, Deputy Mansergh, said, the vast majority of Members of this House work very hard and everyone should recognise that fact.

See this speech in context