Finian McGrath (Dublin North Central, Independent) | Oireachtas source

I welcome the opportunity to contribute to the hugely important debate relating to the Fiscal Responsibility Bill 2012. The duty of an Independent Deputy is at all times to challenge, question and put forward alternatives in the context of dealing with the current major economic crisis. Independent Members have done this on many occasions in the Chamber. Sadly, however, we have often been ignored by the Government, which is not prepared to listen to different options in order to resolve the economic mess in which we find ourselves.

This debate is about fiscal responsibility and, above all, the future of this country, which is currently experiencing mass unemployment and immigration. It also relates to the cuts with which citizens, those with disabilities and the elderly are being obliged to deal. I accept that we must manage our finances in a sensible and practical manner. We must get our act together before it is too late. In the lead up to the budget, there will be a need for a fair and common-sense approach to be taken. That is why we must focus on fiscal responsibility during this debate.

The Minister for Finance and the Government must wise up to the fact that real progress will not be made without a deal on our debt. There is massive support on the Opposition benches for such a deal. It will not be possible to foster economic growth - the Government will be obliged to slash services further - if we do not obtain a deal on our debt from Europe. I accept that the Government is pushing an agenda in this regard. It must, however, be more robust in its efforts because otherwise we will go nowhere fast. I am not trying to score political points here, I am merely reflecting the economic reality about which ordinary people are informing me. Independent commentators nationally and internationally have indicated that we must deal with the elephant in the room, namely, our debt. If we do achieve a deal on our debt, we will then be in a position to extricate ourselves from the current mess by instigating development and growth strategies.

It is not fair for those on the Government benches to have a lash at Opposition Deputies in respect of this issue, particularly in light of the latter's support for the efforts being made to achieve a deal on debt. Of course people welcome the announcements in the past couple of days by Kerry Group and Paddy Power in respect of job creation. It is fantastic that these jobs are going to be created and I welcome the fact that some of them are quite different from the norm. This reflects the fact that people are thinking outside the box in the context of the creation of employment. Projects such as those announced by Kerry Group and Paddy Power should be warmly welcomed, particularly in the context of the impact they will have with regard to economic development. We must face up to the reality these jobs, and many like them, will be taken up by highly-skilled individuals. A large number of those who comprise the workforce are highly educated but we must ensure the needs of those in other sections of the population are taken into account.

The Fiscal Responsibility Bill 2012 provides a statutory basis for a range of fiscal policy and expenditure management reforms. It makes specific provision to the effect that the budgetary and debt rules contained in Article 3 and Article 4 of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union take effect in national law. The Bill will also establish the Irish Fiscal Advisory Council, IFAC, on a statutory basis and sets out its functions. The debate in which we are engaging is, therefore, also about these matters and does not merely relate to balancing the books.

When people come forward with constructive proposals, we must take them seriously. We must also listen to those who challenge the prevailing view. I am amazed that there was no reaction from the Government or society in general to the comments made recently by Professor Joseph Stiglitz, the Nobel economics laureate. Professor Stiglitz is quoted as stating that the European solution to the euro crisis is wrong. He challenged both the Government and Irish economists in respect of this matter and indicated that, in historical terms, the austerity cure has almost never worked. I do not get why this cure is still being administered, particularly if it has almost never been successful in the past. Professor Stiglitz informed the International Bar Association, at the opening of its conference in Dublin recently, governments have misdiagnosed what went wrong in the eurozone and are also advocating the wrong solution to the crisis. He further stated that austerity was "tried in 1929, the IMF tried it in Asia and Latin America. Each time it succeeded in turning downturns into recessions, recessions into depressions."

I am not a whizz kid when it comes to economic forecasts etc. When, however, a Nobel economics laureate such as Professor Stiglitz makes a statement, we need to examine the points he is making. The gurus in the Departments of Finance and the Taoiseach must consider the import of what Professor Stiglitz has had to say in respect of Ireland. Professor Stiglitz has also pointed out that Europe’s debt-to-GDP ratio is less than that of the US and he noted that the US can borrow at almost negative interest rates. He highlights the point that the fundamental problem in Europe is that the euro was a flawed currency arrangement that did not meet the conditions needed to establish a common currency and that a structural change of the euro arrangement is needed. Is that a common-sense proposal? I do not know. However, I do know that we must respond in respect of what Professor Stiglitz has said.

In his address to the International Bar Association, Professor Stiglitz also indicated that the reform of banking systems will be necessary. He pointed out that, at present, these systems are as strong as the governments of the countries that guaranteed them. This means that where a government is weak, confidence ebbs and money flows out of the banks, thereby reducing their capacity to lend to businesses. Professor Stiglitz stated that the latter, in turn, leads to the further weakening of economies.

I refer to the classic example which is well known to the Minister of State, Deputy McEntee, and Deputy Buttimer and that is the issue of small business. We have reduced the banks' capacity to lend to businesses.

I refer to Joseph Stiglitz who said that Europe was likely to face turmoil for some time to come. He said that another issue of concern was the growth of inequality in the major economies which has been exacerbated by the crisis. He further stated that in 2010 in the United States, for example, 93% of growth went to the top 1% of the population and that economic inequality leads to political inequality, including inequality in access to justice. He links the economic debate with the broader societal debate about justice and the economy.

Many people associate justice with citizens' rights but we need to think of economic rights. There is no point in the Government having a nice, happy-clappy debate about the children's referendum when it is slashing services to children. I note an element of hypocrisy and this policy needs to be challenged.

We all accept the need for fiscal responsibility and that there needs to be good governance of budgets. In my view, anyone who does not agree should not be in public life or politics. People have to pay their taxes. None of us likes voting for taxes or paying them. That includes all Members of the Oireachtas. There is no point in whingeing to the media. Some members of the Independent group are talking about loyalty. I will not be loyal to anyone who does not pay his taxes and is going around the country. That is my political position; it is not a personal position. It is business, it is politics. I challenge anyone on that issue.

To return to the subject of small businesses, the retail sector supports 250,000 jobs. The Government needs to realise that these small businesses are a very important part of the economy. I remind the Government of what it promised in the programme for Government:

We will reduce the cost of Government imposed red-tape on business, in part by streamlining regulatory enforcement activities out of a merger and rationalisation of existing structures.

For example, an employer who employs fewer than ten workers in a local community is often overlooked. However, such employers must be taken seriously when it is noted that together they employ 250,000 workers. We all welcome the big announcements such as from Kerry Group and Paddy Power but as an Independent Deputy I want to support the small businesses employing three to five or six people because it is a very important sector.

I refer to the costs associated with running a local shop. The annual cost of permits and licences is €5,436 a year; the time involved in ensuring compliance and completing surveys averages 50 hours; management time in the retail sector averages €24 an hour; the cost of this compliance is estimated at €1,200 per retailer; the cost of compliance for the average retailer is €6,636 a year; an ordinary small retailer can be subject to up to 18 separate licences over 17 separate inspections every year. We need to listen to the people on the ground, particularly those retailers who support 250,000 jobs.

I suggest some ideas for raising a few bob for the State. I refer to the situation in the cigarette trade. The highest individual cost to the State from blackmarket trading comes from tobacco smuggling. The illicit tobacco trade accounts for €526 million of lost Exchequer revenue annually and €500 million in lost retail sales to an industry where difficult trading conditions are putting upwards of 6,000 jobs at risk. We are losing taxes to the value of €526 million and the small business sector is losing revenue. As of 9 July 2012, the total number of cigarettes seized by Revenue this year stood at 66 million with a retail value of €28 million. That is a lot of money and these statistics are about the guys who got caught. Most of them get through the system and onto the streets.

There is a health dimension to this trade. The illicit cigarette trade also undermines the State policy of reducing smoking prevalence by means of high pricing. Whereas legitimate retailers sell cigarettes at €9 a pack, criminals can afford to sell them for as little as €3. Some of the criminal gangs in the Dublin area are directly involved in that trade because they see there is more money to be made from cigarette smuggling and it gives them less grief than dealing in drugs. One study found that the lead content in fake Marlboro Red cigarettes was 17 times higher than is found in the genuine product. This means that smoking 20 counterfeit cigarettes is the equivalent of smoking 340 genuine cigarettes. This has been described as a potential health time bomb by medical experts. I suggest revenue could be raised for the State by dealing with this illicit trade. Some of my colleagues opposite were having a go at the Opposition and saying we never bring forward proposals. Here is one proposal that would raise €526 million and another that would raise €500 million.

Deputy Noel Harrington had a go at some of the Opposition parties and members of the Independent group about the household charge. The bottom line is that people do not want a tax on family homes. I am one of those people. I do not agree with a tax on a home. I have no problem about taxing property and wealth but I disagree fundamentally with a tax on the family home. That is my position made clear. I voted against the legislation. When the Government takes a lash at members of the Technical Group and Independent Members, I remind the Members opposite of what the Taoiseach, Deputy Enda Kenny, said in the Dáil on 2 February 1994:

It is morally unjust and unfair to tax a person's home, and by so doing grind him into the ground. Indeed in cases it could probably be unconstitutional. It reminds me of a vampire tax in that it drives a stake through the heart of home ownership, through enthusiasm and initiative, and sucks the life blood of people who want to own their own home and better their position. If the Government fails to appreciate the passion with which people will defend their rights to own their home and have it looking as well as it should, it is making a serious mistake.

I will not take lectures from anyone on that side of the House about that issue. I have no problem with the introduction of taxes but let the hypocrisy and the lectures stop. I recently asked a parliamentary question of the Minister for Finance about the amount of extra revenue that could be raised by increasing income tax on couples earning €120,000 if there were a 5% tax increase. The reply stated that the figure would be €214 million with €176 million of that yield derived solely from applying the change to all married couples.

I take the point about the issue of corporation tax that people do not wish to damage foreign direct investment. However, I wonder whether it has been independently assessed to see if this is the reality. I asked a parliamentary question of the Minister for Finance about the amount of extra revenue that would be generated if the corporation tax was increased from 12% to 15%. I asked the question to find out how many extra bucks could be collected to beef up the economy and to stop the cutting of home help hours or slashing services to the disabled.

There was a large public meeting this week in Ballymun, where representatives of St. Michael's House, which delivers services for people with intellectual disabilities throughout the city, expressed their concerns regarding proposed cuts. According to the Minister's own figures, an increase in the corporation tax rate from 12.5% to 15% would raise in the region of €675 million per annum. Government Members often complain that we on this side of the House never offer constructive revenue-raising proposals. I have offered several suggestions today in regard to tobacco duty, corporation tax and other taxation measures, including a proposal regarding couples earning €120,000 per year. We all accept the need for fiscal responsibility. As such, there is an obligation on those of us who object to Government policy to offer imaginative solutions. That is what I have sought to do today. I do not claim to have all the solutions, but in the context of a required saving of €3.5 billion in the forthcoming budget, some of the options I have outlined today are deserving of consideration by the Minister.

Following the endorsement of the fiscal compact in the referendum on 13 May 2012, the Fiscal Responsibility Bill 2012 was published on 18 July 2012. Formal ratification of the stability treaty will only take place once the Bill has been enacted. The Government considers it critical in a European context that the State is in a position to meet its treaty obligations well before the deadline of the end of 2012. The purpose of the Bill is to provide for the implementation of Articles 3 and 4 of the fiscal compact in domestic law. Article 3 requires provision in national law for the budgetary rules contained therein, while Article 4 sets out the debt rules to which member states must adhere. As a consequence of the acceptance by the electorate of the referendum proposal last May, the legislative provisions required by the treaty are consistent with the Constitution. Section 2 of the Bill requires the Government to comply with the budgetary and debt rules contained in the treaty. That is the core issue in this debate.

In considering its obligations in the area of fiscal responsibility, I urge the Government to listen to ordinary people who are functioning in the real economy. Our problems require real-world solutions and commonsensical proposals if we are to bring this great country of ours out of its economic nightmare.

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