Joe McHugh (Donegal North East, Fine Gael)

The Tánaiste wants to distract from the serious argument and challenges with regard to what is happening in our part of the world and which is affecting the economy as a whole. We have been monitoring the situation through the media but travelling southwards from Donegal today I did not need the media. We have plenty of anecdotal evidence that there is a mass migration of people to Northern Ireland to shop. In years to come there will be sociological analysis of this and it will mention people who perhaps have never been to Northern Ireland in terms of going on a shopping trip and this will be welcomed.

It is important that we have continued movement of people over and back across the Border. The problem at present is that it is one way traffic and this is for a number of reasons. There is a sterling-euro differential and we are in the geographical position of being the only eurozone country with a land border to sterling. We are in an invidious situation in terms of the currency differential.

We should examine tax harmonisation in the context of our capacity and responsibility in the North-South ministerial mechanisms. I am not discussing an ideal world and quid pro quo. I know the realities of two separate jurisdictions and Finance Ministries. However, we all, North and South, bought into the Good Friday Agreement in 1998. It is an extensive document and the Tánaiste is familiar with it. She attends North-South ministerial meetings. There is an aspect regarding integrated tax harmonisation in the document.

At present, we face moving away rather than coming close. Our VAT rate has increased by 0.5% and I commend my party for seeing this as a problem. It will be problematic for our economy. There is a 6.5% differential because Alastair Darling MP has decreased the UK VAT rate to 15%. This is a problem for one reason, which is perception. People will mass migrate to the North on the basis that they will get value for money because of a lower VAT rate. This VAT rate is on white goods and not necessarily on all consumables but there is a perception. This Saturday, buses will leave from Tralee and Donegal and cars will travel to shop in the North. This is not necessarily good for Northern Ireland. Certainly, it is not good for our jurisdiction because it is pulling the people out in large numbers. In Strabane many small businesses are suffering because of the dominance of the major multiples. Asda may benefit in Strabane but many businesses will not.

The two regional economies which are struggling economically should be examined. We are not different from many other regions in the eurozone but our two regional economies have the capacity and opportunity to work more closely together in terms of sharing resources and get away from the idea that we are in constant competition. Competition will only work effectively on a level playing field. At present, we do not have a level playing field and this is a problem we must address.

In a recent article Peter Sheridan, the new CEO of Co-operation Ireland, acknowledged that while we have a peace settlement, a peace process and integrated institutions we still have a long way to go. Many people have yet to see the peace dividend and we must be careful with the language we use with regard to going North and going South. In the Dáil, members of the Tánaiste's party have stated that we must be patriotic and not go to Newry and stay away from Strabane. This is not an argument. As the Tánaiste knows, many people from our part of the world have traditionally and historically gone across the Border to the fourth largest city, Derry. Equally, we have had a traditional and historical movement of people from the North down South. We must watch the language in this debate. However, we must examine the mechanics of the Good Friday Agreement as to how we can integrate our peoples. Somebody from Letterkenny who wants to buy a white goods appliance knows that if it is worth €1,000, there will be a €60 differential. We have a problem and must do something about it.

Where do we go as an economy? We find ourselves with a major problem in terms of getting people to spend. There are constraints. The banks tell us that they have money to lend and do not need capitalisation but people cannot get money. We have challenges but the only way to do this is collectively.

The weekend press contained a quote from the Tánaiste. There is no denying that retailers are seriously struggling. The least desirable development for them would be to be caught up in accusations, that is, to be seen as the culprit in terms of driving up prices. Many retailers in the South purchase cosmetics, for example, from suppliers in the United Kingdom. While Northern Ireland retailers are purchasing goods from these suppliers in sterling, their counterparts in Donegal, Cavan, Monaghan and Dublin are purchasing in euro. Thus, the latter are immediately at a competitive disadvantage.

The only retailers that are having a field day and laughing all the way to the bank are the multiples. At the Letterkenny branch of Tesco, for instance, €80,000 worth of goods which had not been sold were loaded onto a lorry and brought across the Border to a Tesco branch in Derry. The multiples are not losing out in the current situation and political action must be taken to challenge them in this regard. I was pleased to receive confirmation today that the Joint Committee on Enterprise, Trade and Employment has agreed to my request to invite representatives of the multiples to appear before a meeting of the committee.

We must instil confidence in consumers. Times are tight and people are struggling, with many losing their jobs. However, there are people with money to spend, but they are afraid to do so. The irony is that they are afraid to spend money in their own jurisdiction but are getting on buses as far south as Tralee, County Kerry to travel to Belfast to shop. We must address these major contradictions in the public psyche.

In regard to efforts to revitalise the economy, Deputy Varadkar has set out the difficulties in terms of our cost base. The Minister will agree that there are significant pressures on our services sector arising from health and safety regulations, particularly in regard to requirements for kitchens and other facilities. This country has been destroyed by excessive regulation, not least in regard to the farming sector, as we discussed earlier today. There is too much red tape and too many associated costs for businesses. In addition, the minimum wage is set to increase next year.

As a result, small businesses face serious difficulties. If the VAT price differential between North and South remains at 6.5%, there is a prediction within the small retail sector that projected job losses in the sector will increase from 26,000 to 36,000 within the first three months of 2009. Small business owners are looking to the Minister, Deputy Coughlan, to offer some type of fig leaf to encourage people to spend. Alistair Darling is doing so in the United Kingdom. We cannot say whether this type of initiative will be successful but it must be done because we are staring into the abyss. I am confident that progress will be made if we can instil confidence in the pubic to start spending, thus getting money moving again in the economy.

A shift to thrift is not an option. We cannot allow increasing numbers of people to decide to put their money in biscuit tins under the bed or mattress. I have heard of people putting their cash in cavity walls. The Minister has an obligation and duty to take action. She has heard the litany of crazy costs in terms of the barriers to competition. Nothing is being done to instil confidence in consumers. The Minister must act on her obligation in this regard extremely quickly.

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