Stephen Donnelly (Wicklow, Independent) | Oireachtas source

Yesterday's economic statement is an opportunity for us all to have a conversation about the country we want to live in and want our children to grow up in. Should we focus on becoming a lower-tax economy or should we invest in enterprise, in public services, like education and health, and in communities? I believe we should do the latter.

The economy is growing again and unemployment is falling and this is great news for everybody. However, in their Dáil speeches yesterday, Ministers went out of their way to convince us that this good news is their doing. It is not. Some of it is, but most of it is not. Had the right choices been made over the past four years, we would have got to this good news a lot sooner than we did. The Minister for Finance, Deputy Noonan, spoke yesterday about "the lost decade", meaning it will take approximately ten years for us to get the economy back to the level it was at in 2007. The phrase, "the lost decade" comes from Mexico in the 1980s, which went through a crisis from which it took a decade to recover. If it takes Ireland as long to recover as it took Mexico 30 years ago, the Government has not done a very good job.

The economic and jobs growth comes mainly from two sources, from the ECB and from the resilience of Irish enterprise and people. When Mario Draghi took over the Presidency of the European Central Bank from Jean Claude Trichet, he changed tack on monetary policy. Where Trichet demanded austerity, Draghi believes in using monetary policy to boost growth. In 2012, he said the ECB would do "whatever it takes" to preserve the euro. This increased confidence in the currency and drove down borrowing costs for Ireland and other eurozone countries. He followed this with quantitative easing, which in essence means the ECB is printing vast amounts of money, approximately €60 billion per month, and lending it to eurozone banks at zero interest rates. The result of this is that mortgage rates fall, businesses can borrow and invest and the euro depreciates, thereby increasing tourism and the competitiveness of Irish exports. It is interesting to note that the euro has depreciated by almost 30% against the US dollar in the past year. This represents a 30% increase in competitiveness, which is welcome but has nothing to do with the Government.

What of the resilience of the Irish people? The latest ESRI economic statement or forecast estimates that about 60% of the economic growth comes from increased labour productivity. This means both public and private sector workers have had to do more with less and have succeeded in that. Again, this has nothing to do with Government policy. To be fair, some Government policies have worked and added to employment. However, even in this area the Government is found wanting. The ESRI carried out analysis of job activation measures and found that Ireland's job activation measures are the weakest in the eurozone. That is a damning indictment of Government policy from our independent economic think tank. Far more should and could have been done.

The mortgage crisis is now in its seventh year and has become the biggest of its kind anywhere in the world. It could have been sorted out years ago, but it has been and continues to act as a massive drag on economic growth and job creation and has caused significant social harm and distress. Supports for SMEs and the self-employed could have been made stronger, for example, by improving how local authority rates are calculated, taking into account things other than the space occupied by the business. Tax treatment for the self-employed should have been equalised with that for PAYE workers long ago. Public works, such as the broadband strategy, should have been pushed sooner. Child care costs could have been reduced at zero cost to the Exchequer, something I have proposed over several years.

Budgets could and should have been progressive rather than regressive. We have now seen four regressive budgets in a row, the last of which was the worst. In the first three budgets, everybody lost, but the less money one had to begin with, the more one lost. However, in the last budget, there was a transfer of wealth from the lower income half of the population to the higher income half. Not only, therefore, is the Government implementing regressive budgetary policy, it is accelerating regression. The evidence on this is unambiguous. We all want growth and jobs, but the evidence is clear that policies that drive up inequality are bad for economic growth and job creation. I believe they are just plain wrong.

What is needed? There is a big push from the Government to reduce taxes, income taxes and wealth taxes. This philosophy, which has been implemented consistently over the past four years, is that economic growth lies with the wealthy. They are the rainmakers and masters of the universe. Therefore, if we are to boost the economy and jobs, we must increase the wealth of the wealthy. This is Thatcher and Reagan economics. It did not work in the past and does not work now, yet for some reason it is being pursued by the Government during a recession. Even billionaires do not agree with this approach any more. Last year at Davos, the world's billionaires club, the two greatest threats to society globally were identified as inequality and climate change. However, the argument in Ireland is if we return wealth to the wealthy, everybody will gain.

Ireland is already a low tax economy, but some taxes need to be altered. For example, there should be equalisation between the self-employed and PAYE workers. I do not know why the current position exists. It should not, but I understand it is a relic of past times, where self-employed people had numerous ways of lowering their tax exposure that PAYE workers did not have. Although that is gone, even in the last budget higher rates of income tax were applied to the self-employed.

A reduction in wealth tax is not required. It is important we understand what is going on. I talked earlier about ECB monetary policy. Quantitative easing will cause a significant asset bubble. That is what it does. Wherever a central bank prints lots of money and gives it to banks, the result is there is loads of money available, people get that money and want to buy stuff with it and the price of that stuff rises. We get an asset price bubble. Who owns those assets? The wealthy. Therefore, by doing nothing, the owners of capital in Europe are about to gain significantly from ECB policy. Therefore, the argument made we should reduce CGT as well is unnecessary. Wealth, due to government policy, will increase substantially. However, it will increase for a very small number of people in financial services, the owners of the capital and the people who facilitate these transactions.

What should we do instead? I believe we should keep taxes more or less where they are. Ireland is a low tax economy, significantly lower than the eurozone average, and we should stay lower. We have some competitive disadvantages, such as being on an island which makes transport costs more expensive. We must have some competitive advantages and having a lower taxation rate than the eurozone average makes sense. However, going lower again does not make sense. What should we do therefore? We should invest. We should invest in enterprise and in public services, particularly education which has been asset stripped over the past number of years. We should also reinvest in community supports.

I was at a fantastic youth outreach programme in Bray on Monday. It turns out that over the past four years, its funding has dropped by 31%. That has got to stop, and that kind of investment from the State must be some of the most important and beneficial spending. Do not reduce capital gains tax. The wealthy will get wealthier anyway, so the money should be reinvested in youth outreach, community-based care, third level colleges and DEIS facilities. That is what we must start doing, and we must invest in the future.

I do not believe people mind paying their taxes if they know those taxes are respected, spent well and invested in them, their children, communities or their country. This is a timely debate and we are at an inflection point. The entire country has come through a very difficult time and the question is where do we all want to go. We are a low-tax economy so let us keep a competitive advantage on tax. For goodness sake, let us start investing in the future as well. If we are going to compete internationally in the next ten years, we must get our house in order. That means bringing everybody out of the lost decade and ensuring we do not lose any more.

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