Beverley Flynn (Mayo, Fianna Fail)

I welcome the opportunity to speak in this debate, and I welcome the corrective action that has been taken by the Government in the last few days to bring the public finances into line. Public confidence is critical and we have seen great improvements over the last 15 years. As a percentage of our GDP, national debt was almost 100% in 1991, while in 1997 it was 64% and 25% in 2007. Debt interest absorbs 4% of our tax revenue compared with 27% in 1991. As an economy, we are certainly in a much stronger position to cope with the current downturn that we are facing.

The Government is carrying out a review of its capital programme, and it must focus on areas that benefit the country economically, socially, educationally and regionally. I agree with Members of the Opposition that we need to stimulate growth in our economy. In particular, it is vitally important that we continue with the schools building programme. This is critical because the programme represents a lot of small projects that are strategically placed around the country. They mainly involve local builders and keep many local construction workers in jobs. It is necessary infrastructure and it represents an investment in our future. I urge the Minister for Finance to ensure that the Department of Education and Science has the necessary funding in place to enable the schools building programme to continue.

I also think it is important to front-load spending from the national development plan on affordable housing. House prices have been reduced, and in many counties it is now cheaper to buy a house on the open market than under the affordable housing scheme. It is important to free up money at this stage when housing is cheap, and these houses could be located in towns and villages across the country.

However, the key issue is to turn the tide on sentiment in Ireland. It is currently very negative, especially in the property market and construction. Representatives from the banks have been before the Joint Committee on Finance and the Public Service and they have said that all is well, and that their loan books are strong. However, the evidence form the marketplace is that banks are effectively closed to new loans. We should get an open statement from the banks on their affairs in order to generate confidence in the economy and the banks themselves. If the banks are in a position to return to lending, we will not need any other message on their confidence in the Irish economy.

The perception is that the banks are not open for new business. This is partially due to the global downturn, but is also due to our own domestic situation. If the banks are in a position to assure the public that they remain strong and represent a good investment, then we will have to look at ways of injecting liquidity into the market. How can we do that at the moment? The banks could sell their mortgage books to third parties to generate capital. We could also look seriously at raising a rights issue through the banks. However, at a time when confidence in the market is low, this would have to be underwritten by the National Treasury Management Agency. If this were to happen, it would bring about the necessary liquidity and free up money in the market that is not there at the present time. It would also represent an opportunity for the NTMA to show confidence in the Irish banking sector. This would have a very positive influence and could create the necessary momentum to turn around the current economic situation.

The Government should look at this proposal seriously. The NTMA is independent and it is important to bring liquidity into the marketplace. There are many people in a position to buy. They are sitting on the fence, possibly because they feel house prices and commercial property might fall further. The reality is that even if they approach the banks in order to enter the sector, the banks simply do not have the money to lend them in the first place.

The Government should also examine a reduction in stamp duty on commercial property as a once-off measure. It could be a 4% reduction for one year. I ask that the Government do this as a stimulus to the market. Stamp duty on UK commercial property is at 3.5% and many Irish investors have gone overseas as it is cheaper to make such investments. This could be done as a specific contained measure for a 12-month period, purely to stimulate growth in the economy.

While it is important to take corrective action, any measures taken on capital spending should be focused on the regions. If projects have to be cut back, I would not like to see projects on the west coast suffer while projects on the east coast move ahead. Any change in capital programmes should be made on a strategic basis so that the economy of the entire country can be kept afloat. I welcome the action taken by the Government, but the banking community and the Government also need to take measures to stimulate growth in the economy.

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