Eoghan Murphy (Dublin South East, Fine Gael)

I welcome the Finance Bill 2012. I am glad to have an opportunity to speak on it. It is important to understand that this legislation is not being debated in isolation, but in the context of other measures that have been introduced by the Government. I refer not only to the announcement of the budget for 2012 but also to the jobs plan for the next four years that was announced by the Government earlier this week. The wider financial and economic situation needs to be considered in the context of some of the Government's activities, including the measures it has taken with regard to the banking sector, the significant changes in our borrowing agreements with the troika and the improvements in our lending terms abroad, which are notional at the moment. Other measures, such as those to be set out in the proposed personal insolvency legislation and the new enterprise and investment schemes for those coming from abroad, have yet to come. The general reconfiguring of the tax base will also be welcome. We should bear in mind that some positive economic indicators in the wider economy are also envisioned. This Bill is being debated in the context of the wider debate that is taking place internationally. Attempts have been made to place those involved in the debate neatly into one of two camps - the austerity camp or the stimulus camp. People have suggested that a Keynesian approach is working in the United States and starting to bear fruit as the US economy begins to come around. They have argued that the bare branches of austerity in the UK demonstrate that its economy is stagnant. I wonder what they will say tomorrow.

It is important that we remember that economics is a social science. Economists are very good at analysis, but not so great at predictions. Like any other science, economics is continuing to develop. As we do not yet have the perfect formula for managing an economy, all opinions are relevant in the current debate. I wonder whether the terms of the debate have forced us into a false dichotomy. Have we over-simplified the choices we face by saying we can take a Keynesian approach or an austerity approach? Perhaps the assumption that one cannot have stimulus and austerity together is limiting the discussion we can have on measures like those set out in this Bill and others that will come before the House. It has been proposed that we deleverage the State at the same time as deleveraging the banking sector and individual household private debt. If that contraction is considered all at once, there is a risk that it will hamper growth and lock us into a deflationary fiscal spiral. Anyone with a basic understanding of economics and of life will say that if everyone is cutting at the same time, it is not obvious where the growth will come from. At the same time, anyone with a basic understanding of finances will say that the current Government position is unsustainable. We cannot continue to spend more than we earn, particularly at a time when borrowing rates abroad are unacceptable to us.

The challenge this Government faces, as it concludes its first year in office, is to reduce the deficit responsibly without damaging our prospects for growth, or at least while allowing growth to happen. If the necessary reduction in the deficit is not made, we will be too greatly exposed to activities and events that are external to this country and its economy. Some of my colleagues have described this as a national security issue. I am sympathetic to that description. The difficulty is that we are not seeking to change how we spend our money in the overall context. We are not seeking merely to move money from column A to column B across the Government's expenditure in the economy - we are trying to reduce spending in every single column, across all lines of expenditure. That is a much greater challenge. We are not simply talking about how we spend our money - we are talking about what we spend and where we spend it. That is the great political question we face. It is important that we face it in a responsible manner. It is unfortunate and regrettable that as this debate has evolved, we have not been hearing responsible proposals from other sides of the House. The current climate demands that we examine how we can address the exact situation and commit to the challenge of reducing our deficit and our exposure to outside economic factors as best we can, while making sure we do not hamper our growth possibilities.

The Finance Bill strikes an appropriate balance between correcting the national financial situation and attempting to influence the economic position in a positive direction. When we examine the various sections of this legislation, it is clear that the Minister has tried to target spending, tax reliefs and policies in a way that creates the right environment for the economy to grow. I refer, for example, to the aspects of the Bill that relate to small and medium sized businesses, the financial services sector, the agrifood sector, the high-tech sector and new markets in other countries. These initiatives are very welcome and will prove incredibly fertile. They will not provide the answer in and of themselves, however. There is a wider context to what the Government is doing. The wider international situation is also relevant. Ultimately, employment will be the answer. It is the only way of sustainably improving our economic position and putting us on a sound footing once again. Recovery will take time. The only way for it to happen properly will be for it to come from the domestic indigenous economy. While it is right to champion exports, foreign direct investment and other measures in this Finance Bill, we must start to focus our resources on small and medium sized businesses that trade in the domestic economy. It is ultimately a question of balance. Although I would have preferred if we could have been more ambitious in the adjustment we made in the 2012 budget, I believe this Bill strikes the right balance between our current financial position and the wider economic environment, which we are hoping to grow.

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