Joe McHugh (Donegal North East, Fine Gael)

I am delighted to get the opportunity to raise this matter as it affects many of my constituents along the Border. It is also a national issue. Before I continue, I acknowledge our esteemed counterparts from Northern Ireland, the MLAs, who are in the Distinguished Visitors Gallery. This issue will also affect them in a positive way in the North rather than in a negative way here. The Minister for Finance, Deputy Brian Lenihan, has gone on public record as saying our economy has lost out on approximately €700 million since last October as a result of his fiscal instrument whereby he raised indirect taxation to 21.5% when the British Chancellor lowered indirect taxation to 15%. As a result of that fiscal instrument we have an anomaly in this country.

We need to get the Government to acknowledge that this was a mistake and to do something about it, and the Government has the opportunity to do so in the upcoming budget on 7 April. A differential of 6.5% in an area where there has always been cross-Border activity, toing and froing, is having a seriously detrimental economic effect, not alone in Border areas, but across this country. I have anecdotal evidence of this. On a Thursday evening when I head up the M1 to Donegal, while it is great to see all these cars coming from Westmeath, Wexford and Dublin, they are going en bloc to Newry and Belfast. I welcome the fact that we have a movement of people, but the problem is that it is going one way. My counterparts up there will be delighted with this. They will acknowledge that it is swings and roundabouts and has also happened the other way. We need it to operate both ways.

If we drain the Border counties of services and small businesses they will not come back. We have problems right across this country and in the capital city. It was interesting to note our Northern colleagues acknowledging that there was little congestion in Dublin today. Perhaps that can be explained by the fact that many shoppers are heading to the North rather than into Dublin. From a sociological perspective, I welcome the movement of people across the Border, as they no longer recognise it as an obstacle, which it was historically.

However, the Government has an opportunity in the upcoming budget to use its imagination. If the Minister for Finance is unable to decrease the VAT rate from 21.5%, will he consider a reduction in the higher rate of VAT on baby products, construction materials and plant machinery? He should use a little imagination and creativity because businesses are on their knees. I walked up and down the street in Letterkenny in my constituency last Tuesday and businesses were crying out for an imaginative, creative response to the problems we face.

Germany and other states have introduced tax cuts rather than tax increases. Tax increases will not get us out of the recession and businesses will go to the wall. The Minister of State was spokesperson on finance for Fianna Fáil in the previous Seanad. Will he show some creativity together with the Minister for Finance? People are worried about increases in excise duties on cigarettes and petrol and diesel because this will result in one-way traffic to Northern Ireland. A symbiotic relationship must be established where synergies could be created in order that both governments work together. We will celebrate the 11th anniversary of the Good Friday Agreement shortly.

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