Kieran O'Donnell (Limerick City, Fine Gael)

I will have a particular message to deliver to the Deputy at that point.

I welcome the opportunity to contribute to the debate on the Finance (No. 2) Bill 2011. I will deal first with the measures it contains. The jobs initiative announced by the Government does not contain a promise to deliver a large-scale plan. We are restricted in that regard by the terms of the deal with the EU and the IMF. As with the Bible story of the loaves and the fishes, the Bill brings forward measures which are very practical in nature and which will, in my view, an exponential impact on business in Ireland.

Contained in section 1 is a change in the research and development tax credit which will place it on an above-the-line basis. This will have a major impact on multinational companies coming to Ireland. It is a simple measure but it will have an enormous effect.

The air travel tax acted as an impediment in the context of flights coming into this country. For the mid-west and for Limerick in particular, Shannon Airport is a vital part of local and regional infrastructure. To ordinary people it may appear that the air travel tax brought in a great deal of money, namely, €100 million. However, there is no doubt that it had a massively negative impact. I welcome the fact that the Minister will now have at his disposal the tools to allow him to abolish this tax. He is proceeding in that regard by obliging the airlines to bring in additional flights in return for its abolition. That is the type of governance which appeals to me because it seeks to obtain value for taxpayers' money.

I accept that in the context of the VAT rate which applies to the tourism industry, there might have been an argument to also reduce the 13.5% rate in the areas where it applies. However, the reduction is targeted at the tourism sector, which is underperforming. The number of tourists visiting the country has fallen by 25% since 2007. For the mid-west and Limerick, tourism is vital. It is responsible for bringing visitors to the region and for filling beds in hotels, guesthouses, etc. Coupled with the abolition of the air travel tax, the reduction in the rate of VAT that applies to tourism will have a massive effect.

Deputy Naughten referred to short-term visas. Again, what is proposed is integrated into the area of tourism. This will have a huge impact in terms of confidence etc. Ireland is now a country where people believe things can happen. That is certainly true but practical measures must be put in place.

The Bill does not deal directly with it but I am of the view that the loan guarantee scheme will have an enormous bearing on people's confidence. Small business is the lifeblood of this country in the context of the contribution it makes to the Exchequer and with regard to the employment it creates. If a person in business requires an extra overdraft facility of €10,000, the banks being unwilling to take a risk on him or her may determine whether jobs are retained. It is in cases such as this that the loan guarantee will come into play.

In summary, the mid-west region is heavily dependent on tourism and the multinational sector. The change to the research and development tax credit, which will make it possible to reflect it above the line, will be crucial to the latter and the abolition of the air travel tax and the reduction in the rate of VAT which applies to the tourism sector will bring people to the region.

In the context of the EU-IMF deal, there have been discussion regarding the 1% reduction we are seeking in respect of the rate of interest we are being charged. Such a reduction would have given the Government an additional €400 million to spend on the creation of extra jobs. A number of measures are required so that we might move forward. The first of these is a reduction in the interest rate. The second is the need to obtain funding from the European Central Bank in the medium term. The latter is vital.

There are two major aspects to the Stability and Growth Pact, which was put in place before the introduction of the euro. The first of these is the fact that a country's annual budget deficit can be no more than 3% of GDP and that its total national debt can be no more than 60% of GDP. These parameters were drawn up against the backdrop of the introduction of the euro, when it was obvious that there would be a significant reduction in the interest rates paid by countries such as Ireland. A measure designed to deal with the growth in credit that was about to occur should have been build into the Stability and Growth Pact. It was clear that there would be an increase in the level of credit available to countries such as Ireland on foot of the significant drop in the rates of interest they would be obliged to pay.

It is interesting that Germany and France breached the terms of the Stability and Growth Pact in the early 2000s. At that time, Germany and France were restructuring their deficits. Both countries should be aware of the mammoth task that Ireland now faces in restructuring its deficit. Responsibility on a European-wide basis must be shared for the fact that the Stability and Growth Pact did not cater for the growth in credit. In hindsight, measures should have been put in place to deal with it. In the past, Ireland did not breach deficit rules such as the ratio of the annual government deficit to gross domestic product not to exceed 3% or the ratio of gross government debt to gross domestic product not to exceed 60%. However, a massive growth in credit, particularly in the property sector, was going in under the radar and which was clearly a recipe for disaster. It is critical that other EU member states are aware there must be a European-wide solution to this problem. As the IMF stated, they must realise that to enable Ireland to deal with its difficulties, it must be given an interest rate reduction and guaranteed medium-term funding from the European Central Bank.

The jobs initiative in the Finance (No. 2) Bill is a start in the process of Ireland tackling its economic difficulties. An entrepreneurial culture must be fostered in this country. Having been self-employed for 12 years, I know it is the key ingredient to economic recovery. The jobs initiative is enterprise orientated with the reduction in the VAT rate and the provision of a microfund and a loan guarantee scheme. We must encourage more people to set up self-employed businesses. In other countries, even those that fail are admired. Many multinational companies like to take on individuals from such a background.

Measures in the Finance (No. 2) Bill will foster an enterprise culture and begin to grow confidence again in the economy. They will ensure the reward of the country coming out of recession.

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