Michael Ahern (Cork East, Fianna Fail)

Since 1987, no Minister for Finance has faced such a daunting task as the Minister, Deputy Brian Lenihan, faced when he framed his first Finance Bill. The economic and fiscal challenges we currently face have not presented for decades. Moreover, they have not been witnessed globally in modern history. Corrective measures have been attempted in all major economies, such as bank guarantees, recapitalisation, consolidations and so on. These have largely been unsuccessful in overturning the turmoil in the markets and have to date failed to bring back that intangible element, confidence, which is such a necessary ingredient for recovery.

The global financial crisis leads us to review the two major economic theories of the past century. Under his theory of monetarism, Milton Friedman argued that central government could not micromanage the economy. He also stated that a steady expansion of the money supply was the only wise policy and warned against efforts by treasuries or central banks to do otherwise. Friedman opposed government regulation of all types. His political philosophy, which he considered classically liberal and libertarian, stressed the advantages of the market place and the disadvantages of government intervention and regulation.

Mr. Alan Greenspan, the most famous former chairman of the Federal Reserve of the United States of America, was a disciple of Friedman for up to 40 years. However, he recently stated: "Those of us who have looked to the self-interest of lending institutions to protect shareholders' equity, myself especially, are in a state of shocked disbelief." Mr. Greenspan thus acknowledged that his ideology, which followed Friedman's, is not working. As we have witnessed in recent months, the result of such policies, which were unregulated and allowed to run wild in some economies, has been the demise of some of the most famous banks in the world. Chief executive officers, managers and other staff were granted bonuses on the basis of perceived performances which were found, in many cases, to be fabricated. The outcome is the current chaos in world banking.

The other major economic philosophy is that of John Maynard Keynes who asserted that downturns were not necessarily self-correcting and that economies could become stuck in a downward cycle. In those circumstances, he asserted, governments should pump money back into the economy in an attempt to inject confidence. We have seen this approach in recent weeks in Britain, the United States and elsewhere, with no positive results to date. This doctrine was promulgated up to the mid-1970s but was taken to an extreme by many governments which engaged in sometimes unfettered borrowing and spending, ramping up huge deficits as a result. Consequently, Friedman's monetarist policy became the flavour of the day and was adopted by administrations such as those of Ronald Reagan in the United States, Brian Mulroney in Canada, Margaret Thatcher in Britain, Roger Douglas in New Zealand and Augusto Pinochet in Chile and, after 1989, in many eastern European countries.

The dilemma facing the Minister for Finance and his counterparts throughout the world is to find a balance between these two heavyweight theories of the past century. In the face of unprecedented fiscal and economic challenges, both nationally and internationally, such as the sudden and deep reduction in revenue, the banking crisis, the credit crunch and exchange rate fluctuations which have led to a weakening of sterling against the euro and a consequent adverse impact on our capacity to export, the Minister has produced a balanced budget which maintains public capital investment at high levels compared with national income, boosts productivity and ensures credibility and sustainability in the public finances. Equally important, the Minister has been mindful of the need to protect the vulnerable and weakest sectors of our society, as evidenced by the above-inflation increase across all social welfare programmes.

As Minister of State with responsibility for innovation policy between July 2007 and May 2008, I was privileged to be involved in the development of the policy document, Innovation in Ireland, which has as its goal the development of an innovation driven economy that maintains competitive advantage and increases productivity. The decision by the Minister to enhance the research and development tax credit regime will improve Ireland's attractiveness to small and large companies, thus helping to achieve the goal of the innovation policy statement.

I particularly welcome the decision of the Minister to increase the tax credit for incremental expenditure from 20% to 25% and to give the option to carry back unused tax credit for set-off against the previous year's corporate tax liability, thus generating a tax repayment, and a further option of claiming payment of unused credit where there is sufficient corporation tax liability in a previous year. I also welcome the provision of a tax credit on new or refurbished buildings used for or in these activities. I also commend the Minister on introducing a tax exemption with full relief where total corporation tax liability in any of the first three accounting periods does not exceed €40,000 and allowing marginal relief where corporation tax falls between €40,000 and €60,000.

The Bill confirms increases in excise duties including the rise in betting duty from 1% to 2% from 1 May 2009. Bookmakers were concerned that the original proposal would have led to the closure of many bookmakers' shops. However, the decision by the Minister to allow this betting duty to be deducted in the computing of the profits for bookmaking businesses is a wise one which will ensure that betting funds will not move outside the State and that people will hold onto their jobs.

An income levy has been employed on numerous occasions in the past at times of financial difficulty as it allows for an effective and efficient method of collecting revenue. I welcome the Minister's commitment to ensure that all social welfare and similar payments are excluded from the levy as are welfare payments from other states. It is especially welcome that holders of medical cards will be exempt as will those below the income threshold of €18,304 per annum. I hope that, as has happened in the past, the levy will be removed as soon as possible.

I take this opportunity to congratulate Professor Patrick Cunningham who successfully drove Ireland's bid to have Dublin chosen as the City of Science for 2012. This successful bid will provide the platform to showcase the best of science and research being carried out in the State across all disciplines, whether by indigenous or international partners. Professor Cunningham deserves our gratitude for this tremendous success.

This Bill represents a balance between the need to protect those on low incomes and the need to restore order to the public finances. It contains the measures that are required to promote enterprise and business so that we can return as early as possible to the path of growth on which we were set for the last ten or 12 years.

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