Kieran O'Donnell (Limerick East, Fine Gael)

I welcome the opportunity to contribute to this debate. The Minister referred to the role of Government as being to create a pro-enterprise environment, a point with which I fundamentally agree.

This Bill contains many good measures in terms of tax avoidance and multinational companies, which I also welcome and with which I will deal in greater detail at a later point. However, it does not include measures to deal with the SME sector, the section of the economy which drives growth. What is important is that we have confidence, credit and competitiveness. Without confidence, people will not spend. Without credit, businesses cannot function and without competitiveness we cannot compete on world markets. We are a small open economy. We are all agreed that our return to growth must be export driven. To do this, we must be competitive. While our competitiveness has improved, we remain extremely uncompetitive in a range of areas. We must, in terms of the export market, bring about a devaluation of our currency by becoming competitive across a range of areas. I do not see measures in this regard in the Bill.

In terms of the small business sector, I welcome that the Minister has extended the relief in corporation tax for three years. Why did he not go a step further and extend this to sole traders? I will explain why. Most people who set up in business do so as sole traders rather than as companies. Prior to the introduction of the 12.5% tax relief, there was a 10% manufacturing relief at the normal rate. Many people went into companies straight away for that relief but now the 12.5% rate applies to all small companies, regardless of their activity. Most people set up as sole traders and when their tax liability moves them into the higher marginal rate, they normally decide to take the incorporated limited company route. They need relief in the early years. It is very welcome for trading companies, but small businesses face the cost of incorporating when setting up. If they are not making significant money, there is also the cost of salaries, whereas they could have a situation where they pay PAYE and PRSI, but not corporation tax. It is a recommendation of the Commission on Taxation and it would be a practical measure.

We must get an entrepreneurial culture going. I always advise clients to set up initially as sole traders and to see how they go. If the business takes off, they can then incorporate. It is a more tax advantageous way to do it and it is a simpler route. If people create limited companies initially, it can create major constraints in dealing with the Companies Office and other bodies. The Minister should bear this in mind.

Section 50 contains provisions for research and development, which we will examine in depth. Research and development should be available for offset against PRSI. Currently it is available for offset against corporation tax, but not PRSI or PAYE. It would further that high-end value economy, thus bringing about changes in that whole area.

To give credit where it is due, the Minister has brought in many changes regarding tax avoidance, which I welcome. In addition, he has amended sections dealing with capital allowances, particularly in technology and similar areas, which I also welcome. The Minister has brought in a situation where, effectively, mergers will not trigger any tax balancing charge and that is welcome.

The only way we will restore confidence is if we reduce growth in the live register figures. In the past two years alone, an extra 250,000 people have joined the live register. That 150% increase is staggering. We are probably going to breach the 500,000 mark this year. The only way to deal with that problem is to provide jobs, so we must find measures to do so. The Bill's measures concerning multinationals are to be welcomed, but the SME sector will be the major driver of our economic recovery. Small and medium-size enterprises will provide employment and will be the multinationals of tomorrow. We already have an entrepreneurial culture, but it needs to be fostered so that people link in with universities. We must move to the high-end market because we can no longer compete in the low-end market. Steps should have been taken much earlier concerning Dell in my constituency. We cannot compete on a cost basis in terms of wages so we must go to the high-end market.

We have an enormous opportunity for the SME sector to become the multinationals of tomorrow as regards export growth, but we must create the environment for it. One of the key costs for a small business is wages. We put forward a budgetary proposal to cut employer's PRSI, half at the lower end and 2% at the top end. That would have reduced the cost of employment to the employer without affecting employees' take-home pay.

In 2001, our industrial prices for electricity were at the EU average but, from 2001 to 2008, our industrial energy costs rose almost 50% higher than the EU average. Can the Minister explain that? Ireland has the second highest energy costs in the EU, which is a huge burden on both the SME and multinational sectors. Government regulation must be examined in this respect.

Credit flow to small businesses is another problem. What do the IMF and the former CEO of AIB have in common? They both believe that NAMA will not bring about a flow of credit to the economy. Mr. Eugene Sheehy appeared before the Committee on Finance and the Public Sector, of which I am a member. He stated emphatically that he expected NAMA would not bring about a flow of credit, and the IMF said likewise. Are banks going to take NAMA bonds, go to the ECB, get funds and reinvest them in Government stock? NAMA still has not been signed off on by the European Commission. Our methodology for the national recovery bank was a simple formula whereby it would serve two purposes. First, it would bring about a flow of credit through a wholesale bank to existing retail banks and, second, it would have a form of risk-sharing mechanism in place.

Recently, the Tánaiste came to the House and flew a kite indicating that she may put a bank guarantee scheme in place. A bank guarantee has been in place in the UK for the past year and it has worked. It would not require a huge amount of funding. In the UK, they put in €1.3 billion which benefited 9,000 business and saved many jobs. There is now a need for a national recovery bank with a guarantee scheme in place that will bring about a flow of credit.

We must have deadlines for particular Government projects. The Government launched the e-Government strategy which cost taxpayers a fortune through malfunctioning areas. No deadline dates have been set for the smart economy. The public want to see that what the Government is providing is fair. We will soon have a debate on public servants' remuneration, concerning the exemption from pay cuts of higher level public sector employees. During finance questions last week, the Minister indicated that a Government decision was taken - I presume at Cabinet level - prior to 18 December when the emergency Finance Bill went through the Seanad. On what precise date was that decision taken in Government? The IMF informed the Minister that it had reservations about NAMA concerning credit flow, but he did not make that public during the debate.

See this speech in context