Éamon Ó Cuív (Galway West, Fianna Fail)

It is a valid question and I will go further with this theory. I had this argument many times with the Department of Finance when I was a Minister and all I am doing is encouraging the Minister of State to follow in my path and continue the argument.

People talk about investment to stimulate activity and mention building schools or roads. If these are built with 100% Exchequer funding, there must be a cost to the Exchequer, no matter how much tax it gets back. I have always agreed with that; it is a rational position. I have never said the State should spend €5 billion in this time of hardship on 100% State-funded activities because there is no way to get all the money back. On the other hand, and this is a lesson we must learn, if €2 billion is cut from State expenditure, on a good day the improvement in the net Exchequer position is probably only 50% of that when extra social welfare costs and tax losses are included.

If, however, there is a 35% grant for something that would do long-term good in the economy, such as improving the thermal quality of private buildings, residential or commercial, to reduce heating bills and oil imports into the long distant future, it would give long-term savings. There was talk earlier about the real economy but there can be an absolute real economy in a closed circuit if it is not necessary to import goods. The idea of exporting allows us to buy in services but if we can eliminate the need to buy some of those services, we do not need to export as much to have a trade balance.

Presuming we gave a 35% grant to improve the thermal quality of buildings, there would be a long-term gain but what are the short-term economics? If the grant is only paid to those who are legally registered and pay taxes, when the sums are done, the savings in social welfare, and gains from PRSI, VAT, income tax and universal social charge, USC, payments, never mind the builder spending money, give a net gain in cash. The Department of Finance is caught in a mathematical corner on this and will always say it is dead weight. That would be a fair argument if people were going to do these things anyway but we know people are not doing things, that things are paralysed. There are many people who would take up these incentives if they were provided but we do not make them available.

It is important we look at this question and see how we can break out of the vicious circle we are in. We must recognise that focused grants can give a good return on expenditure. There is a fundamental difference between a grant that stimulates activity or gives other ancillary benefits and paying 100% of an investment.

A Deputy mentioned the fiscal treaty and the referendum. One positive thing that has happened, and I publicly thank the people of France for it, is that they effectively voted "No" to the Sarkozy-Merkel paradigm of cutback, cutback, cutback. As I keep saying, every €1 billion in cutbacks takes €500 million out of the tax base, meaning we are constantly chasing our tails. I am delighted that already there has been a change of attitude in Europe and that investment in jobs and job creation and economic stimulus has now come into vogue. I wish the Taoiseach well next week. I hope he comes back with a great heap of Structural Funds, which appear to be waved everywhere, and money from the European Investment Bank and so on. However, when he comes back with all this money and the big purse next week, the next question is how we spend it. Do we spend it in a way that stimulates extra activity, draws in other money and draws out a good portion of savings, or do we spend it in a way such that we do not maximise the multiplier effect? We must be careful about this.

I hold considerable reservations about the wholesale sale of State assets. I do not go along with the philosophy of some of those who believe they have a monopoly on proper thought in Europe. They seem to have an ideological hang-up about the State owning essential services and they believe these services should be privatised. I do not share their philosophy. Let us consider the sugar company. Where is it? It is gone.

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