Michael Noonan (Limerick City, Fine Gael)

While I do not disagree with much of what has been said, the CSO does not have the data to enable me to accept the amendment and to give two-monthly progress reports on job creation. Modern, open economies such as Ireland's are very intricate in the way they interact. It is very difficult to say what particular policy instrument either created or cost jobs because everything is so intertwined and the influences abroad are probably stronger than the influences at home. It is probably true to say that if there is a general rise in trading activity worldwide, trading activity in Ireland goes up and jobs are created; if it goes down, we will respond to that. The intention behind this initiative is to do specific things which in our political judgement and on the advice of people in business will have a job creation effect.

It is not correct to suggest, as Deputy Michael McGrath did, that it is possible to separate jobs being created by the jobs initiative from jobs that might be created by a general uplift in the economy. One of the primary purposes of the jobs initiative is to lift morale and confidence, which are also intertwined issues.

One of the principal ideas in the initiative is the reduction in the VAT rate from 13.5% to 9%. The approach of the Government and myself is that we look at the economy sector by sector and if we believe there is potential in a sector, we will try to do something to encourage further activity in it. We know that manufacturing industry is going very well at present, exports are increasing extremely well and jobs are being created in that sector. We know farming is going well and, although agriculture inside the farm gate is a small enough proportion of the economy, outside the farm gate the whole agri-food industry is going very well also. We want to encourage that because again, it is export-led and jobs are being created there.

The tourism industry is totally underachieving and has fallen in value terms over the past three years by approximately 32% with regard to the UK alone, and in terms of overall numbers it has fallen 30%. If we were to even restore it to its previous position in the coming years, there would be a huge impact on job creation in the tourism industry and the wider hospitality industry throughout the country. That is the purpose of the reduction in VAT. Members will know from their own constituencies that this initiative has been warmly welcomed by the tourism industry.

How do we measure the effect of the cut in the VAT rate, as Deputy Pearse Doherty asked? The reason we provided for it on that basis was first, that we do not know how long we will be able to afford the reduced VAT rate, so we are signalling that there are aspects to the jobs initiative that are temporary in nature and which will be subject to review in due course. That particular position is not related to whether they are creating jobs but is simply a revenue issue. The other reason it is included is that we want the reduction to be passed on. If it is not being passed on, thereby making the industry more competitive, that will be one test of whether the measure is proving effective. It will not be the only test but it will be a serious one. If it simply runs to the bottom line, if the industry does not pass on the VAT reduction to make itself more competitive and create more activity, in turn creating more jobs, we will look very clearly at this measure. If it is not effective the rate will be again increased to 13.5%.

We will make a certain assessment. The macro impact of the jobs initiative will be assessed to some extent in the wider medium-term economic outlook when we publish the pre-budget outlook later this year. I do not say the Deputy's idea is not valid but we simply do not have the data to implement it in the way he suggests. In so far as we have data, however, we will attempt to see what the overall macro effect is, particularly in the pre-budget statement.

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