Kieran O'Donnell (Limerick East, Fine Gael)

Does the Minister of State agree that the Government took its eye off the ball in terms of exports? Construction was booming and billions were coming in. It was easy money, but the problem was that the economy became uncompetitive. Our exports declined and the small business sector was suffering. That is what we need to understand.

With regard to the Finance Bill, I will start with the positives. The tax relief on intellectual property is a welcome measure. I refer to section 13 of the Bill. However, that is the sole element of the Bill that deals with business and getting the economy going again. I see no provision to reward employers for creating and sustaining jobs. I see nothing about dropping the VAT rate. The Minister for Finance admitted he had made a mistake in increasing the standard rate of VAT from 21% to 21.5%, but he did not reverse it. When one makes a mistake the best thing to do is to hold up one's hands, admit it and reverse the decision. Unlike Fianna Fáil and the Green Party, we suggested a stimulus of €340 million for creating and sustaining jobs. We also suggested lowering the reduced rate of VAT from 13.5% to 10% and reversing the crazy decision to raise the upper rate. In addition, there is the administrative aspect of a VAT increase.

The one person within the Government who had a fundamental understanding of business was Deputy McGuinness, but he was given the bullet. I set up in business as an entrepreneur 12 years ago and I understand what it is to be self-employed. I started with nothing. The Government cannot come along and increase the VAT rate during a VAT period. It introduced the increase on 1 December, during what was, it is to be hoped, the busiest period for retailers. It hit them in terms of sales and in terms of cumbersome administration. I was a practising chartered accountant and I know from dealing with clients over many years what they need. The Government does not understand the fundamentals of business. One of these is that credit must flow. People must have access to credit.

We supported the Government's guarantee scheme because it was the right thing to do, but it did not follow up with the necessary proposals to build on it. AIB was projecting a bad debt provision of between €2.9 billion and €4 billion for 2009, but we now find it will be €4.3 billion. Three directors stated they would resign their posts, but tomorrow they are going forward for re-election. It is a farce. The Government is providing AIB with €3.5 billion of taxpayers' money. The tail is wagging the dog. The banks have been doing this for too long with Fianna Fáil and the Green Party. What is now required is to get credit flowing.

NAMA will not work. There is enough undeveloped zoned residential land in Ireland at the moment to build 1 million units. At 50,000 units a year, that is the equivalent of 20 years' supply. The bulk of the money to buy this land was borrowed. Building costs about €50,000 per site. Of the €90 billion of development and investment loans, €62 billion - we were told this by the Financial Regulator in the Joint Committee on Economic Regulatory Affairs - is in respect of undeveloped land. Based on this we reach a figure of 1 million units of undeveloped land. NAMA cannot get the value back in time. It will lose taxpayers' money heavily and it will not bring about a flow of funds to small businesses. The Minister of State talked about telling the banks that were given the Government guarantee scheme to give out funding. This is supposed to put manners on the banks. The banks are unable to function; they cannot get access to funds in international markets because the markets do not trust them. This is reinforced by the fact that AIB is changing its figures on bad debts day by day.

Fine Gael has put forward a proposal. What the Government must do, working with the Financial Regulator, is to conduct proper stress testing of loans and then come back before the Oireachtas to update it on the situation and the long-term capital requirements. It should then look to renegotiate with the bond holders so that the losses are shared. Bond holders are trading on the international markets as we speak. The Government should establish a State-sponsored wholesale bank, funded by the European Central Bank, which would provide funds to banks so they can lend to small business. The wholesale bank could acquire those loans but allow the banks to administer them and get a management fee for doing so. This would ensure that funds flow to small businesses. NAMA will not do this. All it will do, effectively, is to take €50 billion of taxpayers' money up front, with no guarantee that the money will come back; in fact, it will probably lose money. It will not ensure the flow of funds to small businesses and mortgage holders. The measures for small businesses in this Bill are disappointing. The granting of a PRSI holiday to employers who maintain employees until the end of the year would encourage them to keep people on. There should be a Government guaranteed loan scheme and, if necessary, the Government should provide the funds itself. VAT rates should be reduced and PRSI exemptions introduced for employers who take on new employees.

These measures should be straight forward but the penny has not dropped for this Government. If credit does not flow to small businesses they cannot function. Small businessmen and women feel they have been forgotten, even though they provide the bulk of employment. They are being crucified on VAT, taxes, rates and other areas but the Government is offering them nothing to support job creation. For every 1,000 people who lose their jobs, the cost to the State is €21 million. We should be doing everything in our power to stop people losing their jobs. There might be 500,000 on the live register by the end of the year.

All we hear is the rhetoric that it is a global problem but the Government created this mess. People are losing their jobs because of a lack of leadership. People are not spending money but why would they when they know they will pay more and more tax because the Government is unwilling to put in place innovative proposals to sustain and generate employment?

Section 2 of the Bill includes the composite rate to allow for the doubling of the income levy. Now a single person on €36,400 will pay up to a 51% marginal rate. A married couple on €45,400 will pay 51%, with all tax at the marginal rate. The Minister of State, Deputy Mansergh, should admit the composite rate was a drafting error. The Government made a cock up. How can the Minister for Finance say on budget day that the increases would apply from 1 May when the detailed resolutions provide for a composite rate? People who are losing their jobs, with their income collapsing over the year, who might have got a bonus at the start of the year, will be asked to pay back-tax. Is the Government seriously saying that a person who loses his or her job in the next few months, who happened to have income that brings him or her above the increased level for the income levy, will be expected to pay more tax? The Government made a cock up and should admit it. All it is doing here is compounding the error by trying to justify the unjustifiable. Once again a mistake has been made.

Everyone knows there is a recession but the fundamental problem is they do not believe the leadership and know-how exists to lead them out of it. There is no business experience in the Government. The only person with any knowledge of business was shown the door. The problem with Deputy John McGuinness was, to paraphrase Jack Nicholson in "A Few Good Men", the Government could not handle the truth. Deputy John McGuinness was telling it as it was and he was shown the door.

The Irish people, however, agree with Deputy McGuinness, they agree the Government is making mistake after mistake and has caused a situation where we are now establishing a debt management agency for toxic debt. I cannot understand why the Government cannot say there is a problem in the construction industry, it will not foist it on to the taxpayer, it will seek innovative ways to get funds flowing to small businesses, it will put effort into getting our export markets going again to make us competitive and that it will not do this on the backs of ordinary taxpayers.

In 2005, when the Taoiseach was Minister for Finance, even though the IMF and the Governor of the Central Bank warned we were over-reliant on the construction sector, he said the fundamentals were sound and we should build on. Effectively, in league with the banks, he encouraged people to buy houses they could not afford. Many young couples are now in negative equity and worried about losing their jobs. We have people coming into us every day who are losing their jobs. Husbands and wives are both losing their jobs, and their sons and daughters are losing their jobs. Their main concern is meeting the mortgage repayments. Many of them are on fixed rate mortgages at prohibitive rates. They are wondering where alternative jobs will be generated. There is no safety valve now of emigration to Britain and America because there are no jobs there. The Government must deal with the problems it has created and come up with policies to deal with it.

Fine Gael published a pre-budget submission that offered a way to deal with the present situation. Unlike Fianna Fáil and the Green Party, which were heavily reliant on taxes, we believed there should be a balance of one third tax and two thirds savings because we cannot tax our way out of recession. The Government has shown no knowledge of business, of how to free up credit or how the ordinary man might deal with this situation.

The fact the Government could even consider removing the Christmas bonus demonstrates a complete lack of understanding of how much people are suffering. It has hit the most vulnerable, it has hit ordinary lower and middle income taxpayers, the people who are struggling.

The Government has also failed to introduce reforms. When will we see the report of Mr. Colm McCarthy's public sector review group? Why was that report not brought forward as a matter of urgency? When will there be measures to get credit flowing for small businesses or a job creation document? The Taoiseach claims he is willing to have informed debate on job creation but when will he welcome a debate in the House on the NewERA proposal document put forward by Fine Gael, which details the creation of 100,000 jobs in areas that would cover exports and the green economy? Where is this Government bipartisanship? When will the Government acknowledge its mistakes, admit it has made a mess and work with everyone to move forward?

The Government must come up with measures to support small businesses. The composite rate must be reversed and the increased levies should apply only from 1 May. The Minister for Finance stated in the Dáil they would apply from 1 May. That is exactly what he stated. It is critical the Government reconsiders the establishment of NAMA. It will not work. It will bankrupt taxpayers into the future and cost them between €50 billion and €90 billion. It will not bring about the flow of credit to small businesses and mortgage holders that is so badly needed. I look forward to the Minister's response.

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