Michael McGrath (Cork South Central, Fianna Fail)

Every Member wishes the jobs initiative announced yesterday by the Minister for Finance well and hopes it will put a serious dent in the live register figure of almost 440,000 people. We are all acutely aware of the upheaval and devastation that unemployment brings to a family. It did not take the general election to bring it home to us but, while canvassing, we all met thousands directly affected by the blight of unemployment. It is up to Members of this House to come up with initiatives and measures that are implementable and which ultimately will be successful. In that regard, it is important we give careful scrutiny to the jobs initiative. Were those of us on the Opposition side to come into the House and simply compliment the Government on its great initiative and wish it success, we would be doing a disservice to the Government and the people we represent. It is our function to give it critical appraisal, a function we intend to fulfil.

I will deal later with the thrust of the proposal, namely, the reduction in VAT and PRSI. First, I would like to touch on the activation measures announced yesterday by the Minister in regard to the provision of approximately 21,000 additional places in training, education and internships. While in the context of a live register figure of 440,000 this might appear insignificant, these places are, however, in addition to in excess of 100,000 training and education places already in place. It is important we target the resources going into training and education to areas of need in the economy and areas wherein there are skill shortages. While there may not be a lack of training and education places, there is in certain sectors a lack of relevant places in terms of training which is directly linked to employment opportunities. There is no point in the Department of Social Protection insisting that a person on jobseeker's allowance take part in a FÁS course if that course yields no prospect of his or her securing a job at the end of it. The planned reform of the social welfare provisions in terms of linking them to employment supports and initiatives will have to be at the core of this. We all want to see these initiatives as a stepping stone to employment. There is already in place a work placement programme, administered by FÁS, which provides a nine month placement to many people in sectors of the economy that are relevant to their background, skills and qualifications.

It is hoped the additional 21,000 places, though modest, will provide greater variety and additional opportunities for people wishing to avail of those services. Also, the Government should set out clearly how this initiative is to be funded. The extra €41 million going into the activation measures will be funded by way of the levy on the pension funds. However, €33 million of the €74 million allocated to this area will be reallocated from existing resources. In the interests of transparency the Government should set out from where that €33 million will come. Similarly, on the capital side an extra €29 million is being allocated, which again is modest. Some €106 million of the €135 million which is proposed for capital expenditure projects is a reallocation of existing resources. This money is being taken from one area and put into capital expenditure. Again, we need to be told from where the €106 million will come. The Minister for Finance, Deputy Noonan, stated yesterday that every €1 million spent on capital expenditure should yield between eight and 12 jobs. If we are only spending an additional €29 million on capital expenditure then the employment yield on an incremental basis will be only 200 to 300 jobs, which is quite limited.

The main thrust of the proposal is the stimulus which is being targeted at the tourism related sector, including an €880 million VAT reduction and an employers' PRSI reduction of almost €500 million. We all hope this works. It is a risk because it is difficult to predict what the outcome will be. I assume the Government's expectation is that it will lead to additional buoyancy in the economy, greater economic activity and will allow service providers in the tourism sector to reduce their costs, thus enabling us as a country to attract more tourists to Ireland, an objective we all share.

I believe the Government missed an opportunity in not extending the VAT reduction to other areas of the economy. For example, construction services will remain subject to VAT at 13.5%. At a time when the black economy is thriving, the Government had an opportunity to reduce VAT on construction related activities which would have given people an incentive to keep such transactions within the taxable system, but it missed that opportunity. The same applies in respect of agricultural services which remain subject to VAT at 13.5%. In addition, waste disposal costs, which are a significant cost for many businesses, will remain subject to VAT at 13.5%, even though the explanatory notes issued by the Department of Finance make clear they could have been reduced to the 9% rate and that some of the other goods and services subject to VAT at the rate of 13.5%, while they could not have been reduced to 9%, could have been reduced to 12%, including VAT on gas and electricity bills. Many people would have welcomed benefiting from a reduction in VAT on their bills. However, the Government has chosen not to go down that road. I understand the rationale that limited resources-----

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