Michael Ahern (Cork East, Fianna Fail)

Last night, I listened with great interest to the contribution by Deputy Michael D. Higgins, who advocated a greater in-depth discussion on economic policy and the future direction we should take. I also listened to Deputy Joan Burton on "Tonight with Vincent Browne" where she expressed her preference for a return to Keynesian economics. In the past 100 years three main economic philosophies have impacted on our society. The first of these was Keynesian economics, which advocated a mixed economy, predominantly a private sector economy but with a large role for the Government and public sector. This served as an economic model at the end of the 1930s after the depression at that time and after the Second World War. It was a very successful model until the end of the 1960s or early 1970s when we had stagflation, due to the lack of governance over government expenditure. This caused trouble back in the 1970s, when our economy was also in great distress. It was followed by Milton Friedman, whose philosophy extolled the virtues of the free market economic system with little intervention by government. It was taken on board by Margaret Thatcher and Ronald Reagan as well as by the Russian Government. It worked for a while but lack of governance and light regulation again became a feature. There was excessive and reckless lending, and massaging of facts and figures, and we are now suffering the result of that economic policy of recent years.

Totalitarianism is the third area. It contained no lack of governance as it was governed by the centrist power which effectively destroyed all other countries which were under the control of that centre. We now witness the problems that policy created for the countries affected which are having great difficulty in rebuilding a sustainable economy. Those are the three philosophies which have had supremacy in the past 100 years.

Some of that totalitarian policy was expressed by members of the Official IRA and Sinn Féin, the Workers' Party, as well as the Workers' Party. I wonder if it has gone through the veins of those who have moved on to the centre left and are in this House today.

I agree with Deputy Michael D. Higgins that there should be more discussion on what economic policy we should follow. However, I would also contend that the Governments of this country have been very pragmatic in the policies they have followed. They have been successful, in the main, from the 1960s, with a blip in the 1970s and early 1980s, following which we improved, although we are now in trouble again. A great part of the reason we are in trouble is that there has been lack of enforcement of the substantial body of regulation contained in our legal system.

The Finance Bill is legislation that every year gives legal effect to the proposals that are outlined in the budget. Many of the contributions in the House were of a budgetary nature, which is understandable. However, there was dissent from the Opposition side, with the Finance Bill being contradicted, and it was said we were doing nothing for employment or to stimulate the economy. Of course, the Members on this side have said the opposite. What the Opposition is suggesting does not reflect the reality of Government policy and what has been done, particularly in the past year, in order to stabilise and achieve a working banking system.

There is significant investment in the economy. Over the next six years, €40 billion is earmarked for investment in infrastructure, €6 billion of which is for 2010. Some €130 million is for energy efficiency measures, €10 million is for the food industry, over €50 million is for support for new agri-environmental schemes, €120 million is for support to forestry and bio-energy and there is substantial support to employers through the stabilisation fund and the temporary subsidy scheme, which will cost in the region of €165 million in 2010.

A new scheme that will promote local employment and reduce PRSI contributions has been introduced. Under this scheme, when an employer creates a new job and employs a person who has been on the live register for six months or more, the employer will then be exempt from employers' PRSI contributions for the first 12 months of that employment. Typically, this will save approximately €3,000 per annum in the cost of employment, which is a huge saving in any business.

While many businesses have been afraid to take on new staff in the current economic climate, I hope this scheme will give them extra encouragement. It is particularly aimed at those who have been on the live register for six months or more, as these are the people who generally find it most difficult to find new employment. This is a strong, positive step by the Government to promote employment and I hope there will be significant uptake by companies and businesses.

The decision in budget 2010 to retain Ireland's corporation tax rate at 12.5% sends a clear message globally that Ireland is open for business. Given the current economic climate, it is vital a small country such as Ireland continues to attract new enterprise and employment. By retaining our attractive corporation tax rate, we are sending a positive signal to both existing and potential international investors that Ireland is the place to do business.

In budget 2009, the Government introduced a three-year corporate and capital tax exemption for start-up companies in 2009. I am pleased that in this Bill, the Minister for Finance has extended this scheme to companies which commenced trading in 2010. This will be at a cost of €6 million in 2010 and €15 million in 2011. This will be an incentive to new companies and it is vital they are given the support they need to succeed at this difficult time.

Ireland has been extraordinarily successful in attracting foreign direct investment, punching way above its weight for many years. Over the course of the past 20 years, Ireland has earned a reputation as one of the most attractive jurisdictions in which to establish an investment fund, ranking among the most flexible and advantageous international fund domiciles, due in no small part to the wide variety of funds which may be established under the Irish legal and regulatory system, as well as Ireland's ability to react promptly to the demands of both fund promoters and investors.

The latest development in Ireland's offering is the proposed new re-domiciliation process which will enable funds from other jurisdictions to re-domicile to Ireland in an efficient manner. Ireland's growth in the investment funds arena may be attributed to a number of factors, including regulation. Ireland is a regulated jurisdiction offering both UCITS and non-UCITS products across the whole spectrum from plain long-only products through to UCITS alternatives, hedge funds and FoHF, real estate and private equity schemes. The Irish Financial Services Regulatory Authority has many years of experience in authorising and regulating sophisticated investment strategies and products, and has adapted and developed its regulations to keep pace with developments in the funds industry internationally.

With regard to tax, Ireland has a favourable tax regime for investment funds, including, first, exemption from tax on the fund's income and-or gains; second, no withholding of taxes on distributions to non-Irish resident investors; and third, a wide and expanding network of double taxation treaties. With regard to the legal environment, Ireland operates under a common law legal system, with a variety of suitable fund structures - corporate, CCF and ILP. All of the leading fund custodians and administrators have operations in Ireland staffed by teams with in-depth experience across the full range of fund products. This is demonstrated by the fact that approximately 50% of all global hedge funds are administered in Ireland. Ireland's international status is also a factor. Ireland is a member of the European Union, the OECD and the Financial Action Task Force. As well as being an attractive jurisdiction for the establishment of new investment funds, Ireland now offers a relatively straightforward process for re-domiciling to Ireland an investment fund established in another jurisdiction.

Islamic finance is a growing player in the financial world and it is estimated that the fund is up to $800 billion and growing. Section 35 contains provisions which will help Ireland to attract our share of the growing market in Islamic finance.

The decision to introduce a national solidarity bond, announced in the budget, is given effect in the Bill. I congratulate the Minister in this regard. This bond will be administered by the National Treasury Management Agency, will provide alternative investment opportunity to small investors and will pay interest during and at the end of the term of investment. I welcome the provision in section 52 which clarifies that the disponer of land under compulsory purchase order has no liability to pay until compensation has been received.

The European Court of Justice requires that the VAT Act be amended to allow public bodies, including local authorities, to be subject to VAT. This has nothing to do with the Lisbon treaty despite the assertion of some people that it does. There are reports that full VAT in respect of a product or service will be added on to a bill. However, this is not correct. VAT on inputs can be offset against VAT on invoices which people receive and business customers who charge VAT can claim for any VAT charged by a public body.

In his Budget Statement the Minister said he would commence implementation of the Commission of Taxation report recommendations in 2010 and 2011. He has kept his word and has abolished six tax reliefs and extended mortgage tax relief for the benefit of mortgagees. I welcome the Minister's decision to clarify that tax relief is available in respect of private contributions made towards the cost of upkeep of an individual under the fair deal scheme. This tax relief on extra payments is welcome as our elderly population and the cost of nursing homes increases.

Section 33 introduces an amendment in respect of Deposit Interest Retention Tax, DIRT, which I welcome. This removes PRSAs from the scope of DIRT, requires a relevant deposit taker to obtain the tax reference number of the person making a specified deposit and that the financial institution will make accelerated payments of DIRT tax to the Exchequer. Also, the financial institution must automatically issue statements setting out the amount of DIRT deducted rather than honour a request in this regard as is currently the position. This amendment is welcome and timely.

I welcome the changes to the current research and development tax credit scheme. Research and development is vital to the development of our economy. The current scheme has been a draw-back to research and development in that people who invested in two sites could not, if one closed, transfer the benefit to the other site. As a result of the change where two sites are located within 20 kilometres of one another and one closes the benefit can be transferred to the other. It is vital that every assistance is given to our research and development agencies and companies.

There is much concern in regard to the housing market and people getting into financial difficulties with their mortgages. The repossession of family homes by financial institutions creates tremendous social, psychological and economic issues for borrowers and their families and places further financial pressures on the State. The Joint Committee on Finance and the Public Service heard submissions from Respond Housing and the Prevention of Family Home Repossession Group who outlined solutions to allow the borrower time and methods of addressing their debt. Following the hearings the committee submitted a report on the matter to the Minister for Finance. I was pleased to hear during the week of the decision by the Financial Regulator to make a statutory order to outlaw repossession of a house for one year. It is important that individuals who get into financial difficulty are able to approach their lending institution to discuss their problem and to try to reach an agreement which resolves it. I look forward to a more comprehensive report during the next few months from the Financial Regulator which will assist people in difficulty to work their way through these difficult times.

This Finance Bill in conjunction with the budget proceeds in the right direction and ensures that the primary objectives of budget 2010 are achieved. These objectives are to stabilise the deficit in a fair manner, to restore Ireland's competitiveness, to guard those worst hit by the recession, to stimulate crucial sectors of the economy and to sustain and create jobs.

See this speech in context