Michael Kennedy (Dublin North, Fianna Fail)

Go raibh maith agat, a Cheann Comhairle. Tá áthas orm deis a bheith agam labhairt ar an Bhille seo.

We live in a time when citizens are greeted each morning by a barrage of bad news stories relating to the global economic climate. Daily we hear about the US Government being asked to bail out more failing banks, the US motor industry and so forth. Sadly, this bad news is unavoidable. However, this Finance Bill was crafted primarily with the aim of resolving the crisis as soon as possible. I echo the Minister's call for Ireland to be prepared to take advantage of the economic upswing when it occurs. The Minister for Finance, through this Bill, will help us to prepare for that event.

We are being hit from all sides, as the Minister for Finance pointed out yesterday. This open economy of ours has benefited in the past from its position in the global economy but it is now suffering because of that position. However, the Government is addressing this crisis. Already the public service task force report has recommended the employment of greater economies of scale in the purchasing of common materials across the public sector. This illustrates the Government's commitment to cost curbing and cost cutting.

The Government could not have done anything differently to prevent our economy reaching this point, despite what those in Opposition claim. The term "difficult choices" has been bandied about so much before and since the budget that it almost seems like a cliché to repeat it. However, the Opposition seems disinclined to accept that regardless of which party was in power during these past few months, cuts had to be made and the Government did not make its choices willy nilly.

The Minister and his officials have resolved to balance the budget in such a way that the necessary cuts are made while spending is still continued in the vital areas of infrastructure, social welfare, health and education. Underlying this balance is the aim to further strengthen the economy, which is facing a contraction both this year and next. The budget and the resulting Finance Bill represents a proactive approach to solving this country's economic problems.

The Bill encourages new business and development, protects the elderly and most vulnerable in our society, adds enormously to the current health and education budgets and increases the income of the Government by targeting those who can afford to contribute that bit more to society. In addition to these achievements, the Government has demonstrated its willingness to listen to all stakeholders with a vested interest in the economic future of this country and made the necessary changes.

As mentioned, the Minister has used the Bill to amend certain elements of the budget. In the area of income tax, the Finance Bill makes changes to the proposed income levy. I am relieved that those under 65 years of age earning less than €18,304 will be exempt from the levy. The same exemption has been granted to those over the age of 65, with the income threshold increased to €20,000 per person and €40,000 for married couples. As we all know, there is now a three-tier system of levies, where the levy paid is dependent on one's income, with the highest paid earners in our society paying the most. This is an equitable system, with the higher earners paying 2% or 3% of their incomes to the State in order to pay for the exemptions of low earners. Equally, the new levy does not apply, nor should it, to any social welfare income. The pain of paying the levy for those on middle incomes will be offset by a widening of the tax bands.

The figure of €18,304 per annum is also used as the new point of entry to the income tax system and all those earning below this will also be exempt from PAYE and PRSI deductions and will take home 100% of what they earn. This represents approximately 36% of income earners. The threshold for entry into the tax system has increased by 259% since 1997, which is a commendable record for any Government. The message of these reforms is this that those on the highest earnings should pay the lion's share of the tax income due to the State.

We remain a low tax economy and despite the fall in employment, there are still significantly more people in the workforce than when Fianna Fáil came to power. It is because of this tax system that Ireland remains attractive to international corporations, which, along with building, agriculture and tourism, have formed the backbone of this economy.

One of the most advantageous elements of this year's budget is the change to the area of research and development, where the existing tax credit has been increased to 25%. This will increase the attractiveness of Ireland to foreign investors and domestic businesses alike. A range of options is also being made available, providing flexibility in the use of tax credits. There is also a three-year exemption from corporation tax on trading profits for new companies who operate for the next year. The exemption on tax liabilities not exceeding €40,000 will last for up to three years and is yet another strategy to encourage entrepreneurship.

As a Deputy representing north Dublin, incorporating the Swords area, I particularly welcome the focus on research and development in the Bill. My area is one of the largest economic centres outside the city centre and certainly one of the biggest in the north Leinster region. While the issue of tax exemptions for research and development is complex, I intend to convey the importance of this element of the Bill to my constituents at every opportunity.

While on the subject of businesses, I wish to take this opportunity to mention the banking bail out scheme and the current squeeze being experienced by businesses. It is important for the Government in its negotiations with the banks for any re-capitalisation scheme to make it conditional on the banks freeing up credit for small and medium businesses and individual citizens. I am confident the Minister for Finance will achieve the best result for the country.

While the Finance Bill is certainly good for business development, we must not forget about the changes being made to the current system in respect of first-time home buyers.

I welcome the increase in mortgage interest relief. In this time of property market uncertainty, it must be a relief for first-time buyers that the Government is willing to take into consideration the burden of a person's first mortgage and provide a large proportion of relief. The rebalancing of the mortgage relief system in favour of first-time buyers is thankfully revenue-neutral and at the same time provides the most assistance to those who in turn are affected most by the paying of a mortgage, the young people starting on the property ladder.

One area which thankfully remained unchanged in the budget was residential stamp duty. I welcome the Minister's decision to steer clear of intervening in the residential sector. Conversely, I welcome the reduction in the rate of stamp duty on the sale of commercial property and this should go some way to reducing the strain on commercial buyers. Hopefully, once commercial markets begin to move again, the demand for development will take off and bring some refreshment to the construction industry. The income from stamp duty to the Government from the anticipated increase in commercial property sales is also significant.

Much has been said about the Cinderella rule and how a person's residency and therefore his or her tax liability, in particular wealthy people involved in sports and the arts, is determined by the number of days he or she resides in the State. I am happy that this has been changed. The Minister has now brought in the provision that a person in the country at any stage during the day will be counted as residing that day in the country. I welcome the fact that under the Finance Bill, regardless of when a person leaves the State, his or her presence here at any time, on any day, will count as a day towards determining their residency. This will not affect cross-Border workers who are employed here in the South. In the call for patriotic duty perhaps these wealthy Irish people who have been paying their taxes elsewhere should reconsider their occasional residency and instead look towards these shores as a permanent home and tax base.

As a Member representing the area where Dublin Airport is located, I welcome the lowering of the new airport tax for shorter journeys and believe the new lower tax will benefit people in the west of Ireland in particular. I will be making strong recommendations to the Minister for Finance to amend the Bill in such a way that Irish airlines are compelled to establish a special air tax client bank account and return the air tax on cancelled or no-show flights back to the Government as currently it is pocketed by the airlines on the basis that their administration fee of €20 is in excess of the airport tax. Insurance brokers in the insurance industry must set up a special designated account for clients and this rule should also apply to airlines. It is ridiculous that airlines can pocket money which was designed to be given to the Government. I will ask the Minister to consider this as it is a simple accounting procedure and it will not cause any difficulty for the airlines. If the airlines do not refund the customer, the money should be given to the Government who can put it to good use. I have written to the Minister for Finance outlining this suggestion and I hope he will consider my comments and suggestion.

As a representative of an area which is highly multicultural — I do not mean this in any offensive way — I welcome moves to tackle VRT evasion. The proposal to introduce pre-registration of imported vehicles, estimated excise assessments and the establishment of a temporary registration system for cars brought into the State for more than 42 days, should go a long way to resolving a particular problem. I refer to the meeting which the Taoiseach held today on the OECD report. I commend the establishment of a new group to examine the question of costs in the public service and to consider setting up redeployment schemes so that personnel can be transferred from one section to another and equally where there would be targeted redundancy packages. In the past, redundancy packages have resulted in the good people leaving employment. We need to get rid of the people who are not contributing as much as they could and we need to hold on to the good people who do a good job. By and large, the public service does a good job even though it is often criticised unfairly. No more than any other group in society, there are the bad apples in the barrel and we need to weed them out. The taxpayer expects to get value for money.

I welcome the fact that the Taoiseach has set up his own Cabinet committee on driving this programme. The Taoiseach has the determination to bring this about and I look forward to the packages coming on stream as early as possible, perhaps by early next summer. We all subscribe to his view that we need a lean, motivated, high-performing, responsive and effective public service and the general public is calling for this, particularly in the context of our economic downturn. We cannot afford to have any people in the system who are not giving 100%. I wish the Minister for Finance well. We need to see results and I am confident there is a determination in Government to bring this about.

I note comments from the other side of the House that this is just an Irish problem. There are reports in magazines and newspapers every day of the week. I refer to some headlines in today's newspaper which give an idea of the global nature of the problem, for example: "Germany predicting its biggest economic decline since the war". This headline should make the point that Ireland is part of the global economy. If Germany, one of the strongest economic units in all of Europe and indeed the world, is suffering, it is ridiculous to propose that the state of affairs here has been caused by the Government. There are references to moves to help free up credit in the United States. A number of banks have been bailed out or have been allowed to fail and the US Government is under pressure to bail out the motor industry. A comment in today's newspaper refers to the number of jobless in OECD member states as being 42 million, across 30 states. To suggest that our problems are brought about by our Government is quite ridiculous.

I must stress to those who do not believe we are in an economic downturn that a report from the OECD has stated the economy will remain in one until 2010. We have a major economic problem and need to take decisive action. One group of our colleagues on the other side of the House wants to increase taxes while the other wants to slash spending. They have no common approach in their commitment to being part of a future government. They cannot even agree on their tax or economic policies.

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