Brendan Smith (Cavan-Monaghan, Fianna Fail) | Oireachtas source

I am glad to have the opportunity to make a short contribution on this important Bill. While I am sure there will be a finance Bill next year enacting the measures announced in the next budget in the latter half of this year, I presume a Second Stage debate on that Bill will be a process that will be quite different from the current process due to the changes being heralded by new EU rules on budgeting. The recent agreement on the two pack virtually ensures that the next budget will be in October and will be subject to greater EU budgetary and economic co-ordination among eurozone countries. I note the remarks of the Minister, Deputy Noonan, yesterday:

I very much welcomed this morning's agreement on the 'Two Pack'. This is a key piece of the eurozone’s economic architecture and has been an Irish Presidency priority.

I compliment the Minister, Deputy Noonan, his Department officials and the officials in the Irish permanent representation in Brussels for their hard work and effort in achieving this deal.

I also take the opportunity to remind Ministers that there is always a risk associated with announcing a budget, even in draft form, in October when the economic data for that year are not available. I am sure the Department of Finance and the Minister, Deputy Noonan, are more conscious than any of us of the importance of November in regard to income tax and taxation returns in general. The risk includes the increased possibility of having to produce supplementary budgets the following year to correct for shortfalls. Perhaps the Government has already discounted this risk or weighed it against its own experience. After all, budget 2013 was held at the beginning of December last year but the Government still had to provide supplementary Estimates for the Minister for Health, Deputy Reilly and the Minister for Social Protection, Deputy Burton. Indeed, in the case of the Department of Social Protection, that supplementary Estimate was almost €700 million, which was almost furtively brought to a Dáil committee on the morning of the announcement of last year's budget. Perhaps when the Minister for Finance gets an opportunity to wrap up this debate, or during Committee Stage, he might expand on the impact of the two-pack deal, and the six-pack deal, on the preparation, time tabling and announcement of the next budget, setting out roughly how the sequencing will work and the role the Oireachtas will play.

Many analysts and observers have criticised budget 2013 as deeply unfair, unjust and regressive. Those comments came not just from political parties but from many independent economists and other analysts. Unfortunately last week's CSO statistics show that poverty is increasing. There are now in excess of 700,000 Irish people living in poverty and the proportion of our population now at risk of poverty has jumped considerably. As we all know from our everyday work in our constituencies, there are huge pressures on families, particularly those with mortgages and dependent children. There is nothing in this Finance Bill that undoes the extra pressures that were put on families with the budgetary measures such as the taxation of maternity benefit, the reduction in child benefit, the reduction in the back to school grants, the abolition of the PRSI allowance and so forth. These measures all placed additional pressures on families whose household budgets were already under pressure before they were introduced.

My colleague, Deputy Michael McGrath, in his contribution to this debate on Tuesday night welcomed some of the measures the Minister and the Government are introducing, particularly in the area of support for the SME sector. We all understand the enormous importance of creating the proper environment for much-needed job creation. Daily we are seeing the devastation that unemployment is causing to individuals, families and communities. This is a problem across the country. It is not just an urban or a rural phenomenon but a societal one. Our towns and villages are being hollowed out, not only by the numbers of well-educated, bright and intelligent young people who are leaving home and travelling abroad in search of work but by the numbers of men and women who are withdrawing from community life, having been caught in the cycle of long-term unemployment. There are now nearly 200,000 people out of work for more than a year. This is a very serious issue because we know that once someone spends a year or more out of the workforce, it becomes increasingly difficult to get back to full-time paid employment at a decent wage level. We also have the problem of many self-employed people who do not have adequate social welfare entitlements once they are no longer in the labour force. That is a particularly difficult issue and I have come across many constituents who were self-employed but who are no longer gainfully employed; they just want to get on a back-to-work scheme but they cannot because they do not qualify for an unemployment payment.

We saw in the 1980s and 1990s how difficult it was to overcome and end the scourge of long-term, almost cross-generational, unemployment which had blighted this country in the preceding decades. Unfortunately estates, communities and parishes were blighted through unemployment and emigration. Jobs must be at the heart of the Finance Bill and at the heart of most of our legislative measures and discussions in this House. Creating the conditions for job creation is the biggest single policy lever the Government possesses to end the fatal spiral of poverty. We all welcome recent significant job announcements, mainly through foreign direct investment and some, more importantly perhaps, through indigenous enterprises. Much of those job announcements are additional employment opportunities at major corporations that were established here in the past ten to 15 years. Of course, any new enterprise setting up in this country for the first time is very welcome and my party warmly welcomes any such announcements. While announcements like these are welcome, both for the jobs directly created and for the investment they bring to a locality, our unemployment crisis will not be resolved by foreign direct investment alone, welcome and important as it is. The jobs crisis will be truly tackled only by indigenous job creation, by small and medium sized local Irish businesses growing, succeeding, maintaining and creating jobs and by start-up firms who see a niche in the market and then supply that market.

There is still a great entrepreneurial spirit in this country. It exists in every county, town and parish but it needs support, backing and confidence to thrive, both from local government and central Government. It also needs a continuing reduction in regulatory costs, which are still a huge burden on enterprise. The Minister has said the SME sector will be the driver of the economic recovery across the country but we do not see enough in this Finance Bill to help create or foster, sufficiently, that entrepreneurial environment. The Minister proposes some new measures in regard to improving research and development in the area of tax credits and includes hotels in the employment and investment incentive scheme, which my party welcomes. However, these and other proposals could hardly be described as radical or far-reaching enough to make a serious dent in the unemployment figures. We are in the midst of a jobs crisis which is compounded by an ongoing slump in domestic consumption. This is the time for more creative and dynamic thinking.

As I already mentioned, the economy is suffering from very weak overall levels of consumer spending. At the same time, there is still a very significant level of saving happening, as Deputy Twomey mentioned earlier. Another major issue in the domestic economy is the significant growth in the black economy. As a Border county Deputy, representing the counties of Cavan and Monaghan, I have a particular concern about the smuggling of fuel across the Border, not just diesel and petrol but also solid fuels. Alcohol, tobacco and a range of other products are also being smuggled across the Border. Unfortunately, that economy is thriving and is doing untold damage to our revenue base here. My colleague, Deputy Michael McGrath, made specific reference in his contribution to this debate to the growing issue of the smuggling and illegal sale of solid fuel products in the Border area. The proposed extension of the carbon tax to solid fuels on a phased basis will not help to combat this illicit trade. As colleagues in the House will be aware, the Government intends to gradually increase the tax rate applied to €10 per tonne from 1 May 2013 and to €20 per tonne from 1 May 2014. As I understand it, this will add €2.50 to the price of a 40 kg bag of coal and 50 cent to a bale of briquettes, leaving an average family paying an extra €130 over the winter months. Introducing these phased carbon tax increases on solid fuels without considering their impact on poorer families and on the increasing incidence of fuel smuggling is not an example of joined-up thinking. A number of years ago, when the carbon tax was first introduced, the intention was that it would not be applied to solid fuel, that is, coal, turf, etc., until there was practically an equivalent price north of the Border. That is not the position at the moment and I know some fuel traders are very concerned about the possible impact on the trade south of the Border due to the price differential that will occur when the extra tax is imposed. I ask the Minister and his officials to examine the particular effects of this proposed tax increase and the potential loss to the Exchequer that might result.

Fuel merchants have pointed out to me that smuggling and the potential for further losses in the trade will mean having to let employees go, with a resultant loss of income tax, PRSI and other revenue to the Exchequer. I hope this issue can be examined before the Finance Bill is finalised.

Deputy Michael McGrath, on behalf of our party, offered a modest but potentially effective suggestion that could stimulate local activity throughout the country. He proposed providing a tax credit of up to €2,500 for approved home improvement work, subject to the home owner engaging a registered tax compliant contractor. This simple cost effective measure could provide a significant boost for local economies, as contractors purchase goods and spend money in their local shops. It would also help reduce activity in the black economy, particularly in small scale building jobs, home improvement and renovation work. By using the tax code imaginatively, we could bring more of this activity into the mainstream economy where it would generate additional revenue for the Exchequer rather than being a burden on the public finances. Such a measure would have the added benefit of increasing VAT and income tax receipts.

I join with other colleagues in welcoming the extension of the employment and investment incentive scheme to the hotel sector. The tourism industry is important throughout the State, particularly in rural areas where it is not easy to attract foreign direct investment or set up a major manufacturing plant. Tourism, which depends on the natural resources of a rural area, can be very important. Many hotels, particularly in the Border counties of Cavan, Monaghan and Donegal, are in significant financial trouble. Many face debt overhangs which, if not addressed, will lead to significant job losses.

Once again, the Minister could and should go further than he has. My colleagues have already suggested a number of further policy avenues and we will urge the Minister to take them on board during the course of the debate. Deputy Michael McGrath has already spoken about the possibility of setting up a hotel restructuring fund, using funds from the National Pensions Reserve Fund to purchase assets with a commercially sound prospect of profitability and growth. Alternatively, the Minister should look to setting up a qualifying investor fund for hotels that may be attractive to private investors, especially from abroad, who would like to invest in Irish hotels but do not wish to own hotels directly.

I believe we undervalue the importance of the hotel sector and infrastructure in the generation of local employment and its contribution to the economy. A good hotel can be as important to a small town as a substantial factory. This sector is under increasing pressure because of the growth in hotel numbers and bed capacity throughout the country in the past decade.

With regard to the increase in vehicle registration tax, VRT, a garage owner instanced to me the example of a run-of-the-mill car such as the Volkswagen Passat. The change in VRT in the budget amounted to an increase of almost €900 on that standard family car. People in the motor industry are concerned about possible job losses. Sales have gone down substantially. A different person, who worked in the motor industry some years ago and is now retired, asked me to urge the Government to consider a car scrappage scheme. I do not know how feasible that is, but the point made to me by this former worker in the motor industry was that many of the people who availed of the previous scrappage schemes were people who had money in the bank and were careful about spending it. He thought a scrappage scheme would give leverage and generate extra expenditure. In view of the severe difficulties facing the motor industry throughout the country, this could be given some consideration. We also know that car scrappage schemes have contributed considerably to the enhancement of the environment.

Commercial rates are a considerable burden for many small enterprises. Commercial rates are a tax which is not based on ability to pay. Owners of several small hotels and public houses have shown me their rates bills. These substantial sums of money must be paid before a business turns a single euro. This area needs major reform and we need to address it.

In recent years we have seen a substantial increase in exports in all sectors. That is welcome. There has also been relative currency stability, particularly between the euro and sterling. In the last quarter of 2008, sterling depreciated by more than 24% in the three month period from October to December. That put huge pressure on Irish businesses that were exporting to the sterling area because their prices were set and they had bought in at a different exchange rate. There has been some weakness in sterling recently and we must hope for continued stability in that currency. We export more than 40% of our goods to the sterling area, our nearest neighbour, and exports are hugely important for economic growth and job creation.

I have already welcomed the improvement in tax credits for research and development. In the past 12 or 15 years, there has been huge investment and expansion in research, development and innovation. That was provided by Exchequer funding and assisted through Government Departments and State agencies being able to draw down substantial funds from Europe. In a newspaper article early this week, Commissioner Máire Geoghegan-Quinn outlined the value and necessity of investment in research and development. She highlighted our country's success in drawing down substantial funds from the Seventh Framework Programme, FP7. Bodies such as Teagasc and the Marine Institute have been leaders in drawing down funding from the European Union. We know we need continued investment in research and development, not only for major corporations but also for small and medium enterprises.

In recent years, there has been greater collaboration and partnership between our universities or institutes of technology and industry. For far too long, we had too many institutions in Ireland. Universities, institutes and commercial semi-State bodies worked in isolation. That has changed in the past decade or so and can improve even more. Research and development in universities must be industry led as well as learning led. Some of our universities and institutes of technology are forward thinking and progressive in working with industry in their areas to ensure that research and development assists the development of product and creates added value. A representative of a major international corporation in the food industry told me they had invested in this country because of the research capacity of the Teagasc facility in Moorepark. I welcome the introduction of additional measures to assist research and development.

Research and development must not just be confined to the major players in industry and business: it is also important for the small and medium enterprise sector.

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