Dáil debates

Tuesday, 9 December 2008

8:00 pm

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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I move:

That Dáil Éireann:

notes with concern that inflation in Ireland remains higher than the eurozone average and noting in particular that the ex-tax price of diesel, petrol and home heating oil is 10% to 20% higher than the EU average;

notes the Government's failure to rein in price increases created directly by Government Departments and agencies (for example, prescription drugs, accident and emergency, school transport and hospital charges) or sanctioned by regulators (for example, the Commission for Energy Regulation; the Taxi Regulator and the National Roads Authority), and concerned at the impact that these increases will have on consumers; and

notes with concern that many consumers are travelling to Northern Ireland or overseas to purchase goods and services;

calls on the Government to:

reverse the decision to increase the higher rate of VAT in the budget;

freeze Government charges and levies imposed on businesses and consumers;

require regulatory organisations to hold public hearings prior to decision on price increases; and

outlaw surcharges imposed by retailers on credit cards, debit cards, direct debits and e-payments.

I wish to share time with Deputies Joe McHugh, John O'Mahony, Seymour Crawford, Frank Feighan and Joe Carey.

Ireland is deep in recession with 100,000 people losing their jobs in the past year and perhaps the same number will lose theirs in the year to come. Incomes are stagnant for most people and take home pay will reduce next year, largely as a result of the tax increases introduced in the budget. Inflation is beginning to fall and it is likely to fall much further in the coming months but that does not mean issues such as rip offs, value for money and consumer protection are unimportant.

As people's incomes reduce and household budgets are squeezed, consumer issues and value for money become more important. We tabled the motion in this context. It states, "Dáil Éireann notes with concern that inflation in Ireland remains higher than the eurozone average and noting in particular that the ex-tax price of diesel, petrol and home heating oil is 10% to 20% higher than the EU average". The consumer price index outlines our inflation rate but the HIPC rate has levelled off and is slightly below that. The motion further notes the Government's failure to rein in price increases created directly by Departments and agencies, for example, in the cost of prescription drugs, accident and emergency, school transport and hospital charges, to which I will refer later. It is particularly relevant in the context of the Government's amendment which "recognises the Government's commitment to tackling inflation in areas over which it has direct influence". I look forward to refuting that later.

We are concerned at the impact the increases will have on consumers and the motion notes with concern that many of them are travelling to Northern Ireland or overseas to purchase goods and services. We call on the Government to take action in this regard, first, by reversing the decision to increase VAT in the budget; second, by freezing charges and levies imposed on business and consumers; third, by requiring regulatory bodies to hold public hearings prior to making decisions on price increases; and, fourth, by outlawing surcharges imposed by retailers on credit and debit cards and e-payments.

In tabling the motion, Fine Gael seeks to draw the attention of the public to the failure of Government to pursue the pro-consumer policies and pro-competition polices that it promised. Almost two years ago, the consumer strategy group made 27 recommendations to Government. To date, only nine have been fully implemented while four are in train. In the case of another 14, or more than half, nothing has been done. When it comes to reports produced by the Competition Authority, the position is similar. Reports on barriers to competition in transport, casual trading, engineering, insurance, banking, health insurance, architecture, optometry, the legal profession and dentistry have been published in recent years and, by and large, they have been ignored and not implemented by the Government and its agencies.

In recent years, the Government has been the driving force behind inflation. Inflation on Government provided and regulated services has run at double the average rate of inflation. The relentless increase in Government-imposed prices has continued unabated. In recent months we have been subjected to massive increases in the price of electricity and gas, despite the significant fall in commodity prices. The cost of electricity reduced by 1% when these increases should have been reversed. Other regulators have got in on the act with the Taxi Regulator increasing fares by more than 8%, even though the vast majority of drivers who made submissions requested no increase.

The key question is where Ministers stand on this. The Government amendment "recognises the Government's commitment to tackling inflation in areas over which it has direct influence". The Minister for Health and Children increased accident and emergency charges by 10% in 2008 but that was not enough and she will increase them by 52% next month. Overnight fees for private patients in public hospitals will increase by 20% in the same month while public patients face a 14% hike. Potentially there may not be inflation next year. This increase equates to infinity times the rate of inflation. The Minister for Justice, Equality and Law Reform is also in on the act by increasing the fee new Irish citizens must pay on naturalisation. It is presumably part of Deputy Conor Lenihan's integration policy to tax people when they become citizens. The fee will increase by 50% from €684.70 to €950. The Minister for Transport has allowed CIE to increase fares by 5% and Luas by 4.2% to meet the cost of the pay deal and to take account of the reduction in the number of people travelling on public transport as a result of the recession and emigration. When every other company in the economy loses business, it does not increase prices. Hotels in Dublin are offering major discounts this week and next week. That is how industries and State companies should respond to a downturn. However, the Government's view on this is very different. Even the Minister for Defence has got in on the act, increasing the cost of a cruise on board The Asgard II by 15%.

Photo of Mary CoughlanMary Coughlan (Donegal South West, Fianna Fail)
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That is hardly inflationary.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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I do not imagine there will be much revenue from The Asgard II next year.

Photo of Mary CoughlanMary Coughlan (Donegal South West, Fianna Fail)
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Not unless people have taken up diving.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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Every Minister who has direct control over inflation has taken the opportunity to increase prices by between five times inflation and infinity times inflation. We should give the Government amendment the respect it deserves.

Retailers, professionals and businesses, large and small, are not to blame for price increases in recent years. They are only responding to the example set by Ministers, State agencies and regulators and, in many cases, they have passed on to consumers the increases the Government has imposed on them in rates, taxes and utility charges.

In the coming weeks, Fine Gael will relaunch its Rip-Off Ireland campaign. As part of that campaign, we will put forward a series of measures to reduce the cost of living and strengthen consumer protection, among which will be the reversal of the 0.5% increase in VAT. This is a big mistake and it will not bring in more revenue nor will the 50 cent increase in the price of a packet of cigarettes or the increase in capital gains and capital acquisitions taxes. Contrary to the Minister for Finance, I anticipate revenue in all these areas will reduce next year and the Government's tax increases are counterproductive. Instead of increasing taxes, the Government should pare back day-to-day spending. While some people may believe the Government is engaged in spending restraint, that is not the case. It has cut the capital budget and day-to-day spending will increase by 7% or €3 billion next year. That should not happen and the Government should not use tax increases to pay for that.

The Government should reverse its plans to increase charges and levies to help restore stability to the economy and confidence to the business sector and consumers. We also need a major pro-consumer reform of the regulatory structure for energy and communications. Instead of taking written submissions, the regulators should hold oral hearings on proposed price increases similar to those held in Canada and America. The energy regulator has made a start in this regard but none of the other regulators has. The formula for calculating price increases should be published in order that we can see how the regulators justify increases. A level playing field is needed between consumers on one side and producers on the other. Producers can approach any regulator for a price increase but consumers do not have a mechanism by which they can petition him or her for a price decrease. That should change.

The Minister for Finance should use the payments services directive, which will be transposed into Irish law next year, to outlaw surcharges imposed on people using efficient means of payment such as credit cards, debit debits and e-payments. It should not be legal to surcharge for these types of payments.

The Tánaiste should amend the Consumer Protection Act to outlaw expiry dates on vouchers. This is particularly relevant at this time of year. As Christmas approaches people will spend hundreds of millions on vouchers.

Photo of Mary CoughlanMary Coughlan (Donegal South West, Fianna Fail)
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What is Deputy Varadkar getting me for Christmas?

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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I am trying to think of a smart answer. I will come up with one later.

Photo of Mary CoughlanMary Coughlan (Donegal South West, Fianna Fail)
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Sorry about that.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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The Government has adopted our policy of merging the National Consumer Association with the Competition Authority and I welcome this decision. However, it is important that the sum of the two parts of these agencies should be greater than the whole. I would like this new agency to have an expanded role. It should represent consumers in the social partnership process as they are not properly represented in it at present. The new body should be given the role of ensuring that tax decreases and increases are not used by retailers and service providers as an excuse to increase prices or not to decrease prices as the case may be.

The new agency may also have a role in monitoring currency fluctuations. There is great concern at present among the public that the effect of the fall in the value of sterling is not being passed on to them in terms of lower prices. I understand it is not as straightforward as this and that other factors are involved, such as different costs of doing business and different tax rates and the fact that people bought their products many months ago.

A couple of points in the Government's amendment are amusing. The Government commends itself for the prudent management of the economy. Not even its supporters who are not members of Fianna Fáil believe it has been prudent. They may defend the Government but they certainly will not state it has been prudent. I do not think a single commentator, economist or international body will state the Government has been prudent.

I already mentioned the point about tackling inflation on which the Government has direct control. The Government commends itself for its continued investment in the NDP but it has cut spending on the NDP by €1 billion this year. The motion welcomes the fact that the energy regulator has not increased the price of gas and electricity. This is not good enough. It also commends the Government on its 25% target for reducing the burden of regulation on business. However, as we all know it has not worked out what 100% is so how can it cut it by 25% if it still has not worked out what the base line cost of regulation is in Ireland?

The rip-off is alive and well in Ireland. Falling inflation in 2009 must not be used as an excuse for further increases in Government charges and Government regulated prices. In 2009 we will continue to prosecute the Government when it comes to rising prices, rip-off and consumer protection and we will continue to put forward positive suggestions in this regard. I commend the motion to the House.

Photo of Joe McHughJoe McHugh (Donegal North East, Fine Gael)
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I welcome the Tánaiste to the House but first I want to commend my colleague, Deputy Varadkar, for tabling this timely motion. We are in challenging times. Having a county colleague and comrade of mine here——

Photo of Mary CoughlanMary Coughlan (Donegal South West, Fianna Fail)
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Comrade?

Photo of Joe McHughJoe McHugh (Donegal North East, Fine Gael)
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I would hope so in terms of a fellow Donegal citizen.

Photo of Mary CoughlanMary Coughlan (Donegal South West, Fianna Fail)
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Deputy McHugh uses a different term at home.

Photo of Joe McHughJoe McHugh (Donegal North East, Fine Gael)
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The Tánaiste wants to distract from the serious argument and challenges with regard to what is happening in our part of the world and which is affecting the economy as a whole. We have been monitoring the situation through the media but travelling southwards from Donegal today I did not need the media. We have plenty of anecdotal evidence that there is a mass migration of people to Northern Ireland to shop. In years to come there will be sociological analysis of this and it will mention people who perhaps have never been to Northern Ireland in terms of going on a shopping trip and this will be welcomed.

It is important that we have continued movement of people over and back across the Border. The problem at present is that it is one way traffic and this is for a number of reasons. There is a sterling-euro differential and we are in the geographical position of being the only eurozone country with a land border to sterling. We are in an invidious situation in terms of the currency differential.

We should examine tax harmonisation in the context of our capacity and responsibility in the North-South ministerial mechanisms. I am not discussing an ideal world and quid pro quo. I know the realities of two separate jurisdictions and Finance Ministries. However, we all, North and South, bought into the Good Friday Agreement in 1998. It is an extensive document and the Tánaiste is familiar with it. She attends North-South ministerial meetings. There is an aspect regarding integrated tax harmonisation in the document.

At present, we face moving away rather than coming close. Our VAT rate has increased by 0.5% and I commend my party for seeing this as a problem. It will be problematic for our economy. There is a 6.5% differential because Alastair Darling MP has decreased the UK VAT rate to 15%. This is a problem for one reason, which is perception. People will mass migrate to the North on the basis that they will get value for money because of a lower VAT rate. This VAT rate is on white goods and not necessarily on all consumables but there is a perception. This Saturday, buses will leave from Tralee and Donegal and cars will travel to shop in the North. This is not necessarily good for Northern Ireland. Certainly, it is not good for our jurisdiction because it is pulling the people out in large numbers. In Strabane many small businesses are suffering because of the dominance of the major multiples. Asda may benefit in Strabane but many businesses will not.

The two regional economies which are struggling economically should be examined. We are not different from many other regions in the eurozone but our two regional economies have the capacity and opportunity to work more closely together in terms of sharing resources and get away from the idea that we are in constant competition. Competition will only work effectively on a level playing field. At present, we do not have a level playing field and this is a problem we must address.

In a recent article Peter Sheridan, the new CEO of Co-operation Ireland, acknowledged that while we have a peace settlement, a peace process and integrated institutions we still have a long way to go. Many people have yet to see the peace dividend and we must be careful with the language we use with regard to going North and going South. In the Dáil, members of the Tánaiste's party have stated that we must be patriotic and not go to Newry and stay away from Strabane. This is not an argument. As the Tánaiste knows, many people from our part of the world have traditionally and historically gone across the Border to the fourth largest city, Derry. Equally, we have had a traditional and historical movement of people from the North down South. We must watch the language in this debate. However, we must examine the mechanics of the Good Friday Agreement as to how we can integrate our peoples. Somebody from Letterkenny who wants to buy a white goods appliance knows that if it is worth €1,000, there will be a €60 differential. We have a problem and must do something about it.

Where do we go as an economy? We find ourselves with a major problem in terms of getting people to spend. There are constraints. The banks tell us that they have money to lend and do not need capitalisation but people cannot get money. We have challenges but the only way to do this is collectively.

The weekend press contained a quote from the Tánaiste. There is no denying that retailers are seriously struggling. The least desirable development for them would be to be caught up in accusations, that is, to be seen as the culprit in terms of driving up prices. Many retailers in the South purchase cosmetics, for example, from suppliers in the United Kingdom. While Northern Ireland retailers are purchasing goods from these suppliers in sterling, their counterparts in Donegal, Cavan, Monaghan and Dublin are purchasing in euro. Thus, the latter are immediately at a competitive disadvantage.

The only retailers that are having a field day and laughing all the way to the bank are the multiples. At the Letterkenny branch of Tesco, for instance, €80,000 worth of goods which had not been sold were loaded onto a lorry and brought across the Border to a Tesco branch in Derry. The multiples are not losing out in the current situation and political action must be taken to challenge them in this regard. I was pleased to receive confirmation today that the Joint Committee on Enterprise, Trade and Employment has agreed to my request to invite representatives of the multiples to appear before a meeting of the committee.

We must instil confidence in consumers. Times are tight and people are struggling, with many losing their jobs. However, there are people with money to spend, but they are afraid to do so. The irony is that they are afraid to spend money in their own jurisdiction but are getting on buses as far south as Tralee, County Kerry to travel to Belfast to shop. We must address these major contradictions in the public psyche.

In regard to efforts to revitalise the economy, Deputy Varadkar has set out the difficulties in terms of our cost base. The Minister will agree that there are significant pressures on our services sector arising from health and safety regulations, particularly in regard to requirements for kitchens and other facilities. This country has been destroyed by excessive regulation, not least in regard to the farming sector, as we discussed earlier today. There is too much red tape and too many associated costs for businesses. In addition, the minimum wage is set to increase next year.

As a result, small businesses face serious difficulties. If the VAT price differential between North and South remains at 6.5%, there is a prediction within the small retail sector that projected job losses in the sector will increase from 26,000 to 36,000 within the first three months of 2009. Small business owners are looking to the Minister, Deputy Coughlan, to offer some type of fig leaf to encourage people to spend. Alistair Darling is doing so in the United Kingdom. We cannot say whether this type of initiative will be successful but it must be done because we are staring into the abyss. I am confident that progress will be made if we can instil confidence in the pubic to start spending, thus getting money moving again in the economy.

A shift to thrift is not an option. We cannot allow increasing numbers of people to decide to put their money in biscuit tins under the bed or mattress. I have heard of people putting their cash in cavity walls. The Minister has an obligation and duty to take action. She has heard the litany of crazy costs in terms of the barriers to competition. Nothing is being done to instil confidence in consumers. The Minister must act on her obligation in this regard extremely quickly.

Photo of John O'MahonyJohn O'Mahony (Mayo, Fine Gael)
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I welcome the opportunity to contribute briefly to the Fine Gael motion. I thank our spokesperson, Deputy Varadkar, for bringing it before the House. Many people are concerned about the economic challenges facing them, but the plight of our consumers, and the businesses that supply them, is at the top of the list. The plain people of Ireland, who are already dealing with spending cuts in education, health and agriculture, have also been hit in their pockets as a result of the increases imposed in the budget and the ill thought out and short-sighted policies of the Government. Instead of stimulating the economy, these policies are crippling it.

In recent weeks, our neighbours in Britain announced a VAT rate reduction of 2.5%, from 17.5 % to 15%, in an effort to stimulate their economy and encourage spending. We have gone in the opposite direction and increased the VAT rate, with the result that the differential between the two states has increased from 3.5% to 6.5%. This one change alone has made it more difficult, if not impossible, for small businesses in particular to compete with their counterparts in the North. It has led to an exodus of shoppers north of the Border, at great inconvenience to those concerned, which is crippling businesses in the South. The VAT increases also mean that businesses are paying increased transport charges to get their goods to shops.

There have been calls on businesses in this jurisdiction to drop their prices in an effort to stop this outflow, but they need help to do so. Both consumers and businesses are being hit from all sides by Government charges. It was confirmed recently that Government service charges are now running at ten times the rate of inflation. This gives the lie to the claim that all our economic problems have arisen because of global developments.

It is easy to understand why consumers are infuriated that they are still paying €1 for a litre of petrol or diesel when the price of a barrel of oil has dropped from $147 to less than $40. Increased taxi fares are in place since November even though the price of oil is tumbling and taxi drives did not even seek these increases. One taxi driver told me last week that he and his colleagues would be before the courts if they did not implement the increase in fares. Instead of encouraging more people to use public transport, as is the Government's stated aim, the Minister for Transport has sanctioned increases in bus and train fares, despite falling fuel prices, to help meet the cost of the pay deal and a reduction in public transport usage because of the recession. Instead of stimulation, the Government is encouraging stagnation. Why is the pre-tax price of petrol in Ireland 24% higher than the European Union average, with corresponding figures for diesel and home heating oil of 18% and 19%, respectively? My colleague, Deputy Bruton, pointed out last week that these gaps in prices are costing Irish consumers €30 million per month.

Before coming into the Chamber to speak on this motion, I received a telephone call from a member of the chamber of commerce of a town in Mayo. He told me of the visits he paid to local businesses today, of the apprehension and fear for the future on the part of business owners as sales figures continue to tumble. They have lost confidence as they see customers either not spending or travelling to the North to shop. It is a hollow gesture to ask people to be patriotic when they are not getting the help and stimulus they need.

What is needed is leadership from the Government. When faced with a similar crisis in the United States in the 1930s, US President Franklin D. Roosevelt opted to invest in public projects in an effort to restore confidence. We all know that confidence is a strange animal. In all walks of life, it helps people to think and behave differently. The Government must restore confidence in the business sector. I commend the motion to the House.

Photo of Seymour CrawfordSeymour Crawford (Cavan-Monaghan, Fine Gael)
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I thank the Tánaiste and Minister for Enterprise, Trade and Employment for participating in this debate. She is no stranger to the difficulties experienced in Border areas and she is also in a position to do something about them. Whether we like it or not, consumers are travelling north of the Border to shop. Like the Minister, I would like to encourage them to be patriotic. However, one need only look at the photographs in the newspapers and hear the stories about what is happening to know that this call has fallen on deaf ears. Perhaps the photographs of the queues on the road to Newry will persuade some people not to do the same. However, it is a reality. When one considers that the shops in Enniskillen had to lock their doors while the shops in Cavan had no customers, it is frightening. What will happen? Jobs will be lost. In addition, income will drop. The Minister will say, as the former Deputy Garret FitzGerald said previously, that there is no VAT on food. I recall the Minister's late predecessor, the great footballer from Cavan, the late Mr. John Wilson, responding on the radio and television a few minutes after Garret made that comment. Garret had to rue it and we lost that election. However, they were different people in different times, although the issue has not changed. I still remember what happened.

Towns such as Newry, Portadown, Belfast and Enniskillen are crowded with shoppers but I wish to pay tribute to my local SuperValu shop in Monaghan town and all the SuperValu stores in the area. They came together and bought biscuits, Cadbury's Roses and the like, items I like to buy for my friends.

Photo of Mary CoughlanMary Coughlan (Donegal South West, Fianna Fail)
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I will be expecting some.

Photo of Seymour CrawfordSeymour Crawford (Cavan-Monaghan, Fine Gael)
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They are much cheaper than in Northern Ireland because they went about their business in the right way. It is important to see people making an effort. However, the smaller shops are in dire straits. The big multiples can make money on either side of the Border and are not too worried. They will balance their books, which is all they want.

Even at this late stage, the Government can do something about this problem. It increased VAT by 0.5%. We had shown the Government how it could decrease the rate by 1% only a few months earlier but it laughed at us. Prime Minister Gordon Brown, however, could decrease the VAT rate by 2.5%. That differential is massive. I urge the Minister to examine this issue.

The energy situation is a joke. We have a so-called regulator who is independent of the House and no longer answerable to Members. Despite the price of oil falling through the floor, he has increased the price of petrol and gas. It is a joke. A constituent visited my clinic a few days ago. She is a very ill lady who is dependent on gas for central heating and cooking but she can no longer afford to pay the bill. She has now reverted to gas heaters. She puts on one bar of the heater and sits with that. As she suffers from asthmatic problems, this is the worst thing she can do but she cannot afford anything else. I beg the Minister to use the great position she holds to do something about this issue.

Finally, the health issue is a joke, with problems in the service increasing. However, look at what is happening in Northern Ireland. A Minister has taken the issue in hand, seen where cuts could be made and improved the service in a very short time. We could learn from that.

Photo of Frank FeighanFrank Feighan (Roscommon-South Leitrim, Fine Gael)
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I welcome this important debate. The Minister comes from a very different background from mine. She has a political background, whereas I have a business background. Political futures are uncertain but the future for small business is certain. It consists of turning the key in the door.

I am from a town like any other small town. It had pubs, shoe shops, newsagents, butchers and so forth. Most of the people in those premises worked up to 70 hours per week, with barely a return. My business in Boyle will be 100 years old next year and I am just keeping it going for family pride and the fact that my mother, who is 80 years old, has worked in the shop for 65 years. From the outside the business appears to be making money, but it has been losing money in the last two or three years because of high costs and rates. I have a very dedicated and honest staff but the business will not survive unless I invest in it. Today I went to the Revenue Commissioners to pay €3,700 in VAT, which was two or three weeks late. I had to take the money out of my own account.

That is happening throughout the country. The Revenue Commissioners eventually will close down businesses. Granted the money is owed but the businesses do not have the money. However, there is a pride among the businesses. They have used up most of their cash reserves and in the next six months many more of them will go to the wall.

Look at what is happening as a result of the VAT changes in Northern Ireland. I can point to the experience of two ladies who left Manorhamilton to go shopping. One went to Enniskillen while the other went to Sligo. One went to Asda and Marks and Spencers. She spent an hour trying to park her car. Eventually when she could not she returned to Manorhamilton. Her friend who went to Sligo was back within an hour. There is a frenzy and the Government has done nothing to avert it. Unless something is done, we will be left with just bookmakers' premises and hairdressing salons on the streets of our small towns.

My mother has worked all her life. If the clothes shop closes, she will probably get the pension and some social welfare payment. She does not wish to do that, like most of the proud shopkeepers and business people throughout this country. They have been hammered by this Government for the last 11 years. They have not been protected. The sooner something is done for them the better. These are the people who invest in their communities, schools, sports clubs and so forth. If they go, there will be nobody to take up the slack.

This issue is about customer loyalty. It is also about the Government not hammering small businesses, as has happened in the last 11 years. There must be some protection for these businesses to ensure they can prosper. They will not prosper in the next six months. When they close their doors the social welfare system will have to pick up the tab. That is already happening.

Photo of Joe CareyJoe Carey (Clare, Fine Gael)
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On the radio news last Monday I listened with interest to the Minister for Justice, Equality and Law Reform speaking from his constituency of Louth about the dramatic increase in cross-Border shopping. It reminded me of King Canute trying to keep the waves back. Does the Minister for Justice, Equality and Law Reform and his colleagues really believe that people are travelling these distances without having established the benefits? The addition of 0.5% to our VAT rate and the subsequent reduction to 15% of the VAT rate in the UK has introduced a significant 6.5% difference in the price of products. That is before our rip-off economy is even factored in.

Anybody who shops in one of the large department stores in Ireland where dual pricing is used can see that goods are significantly more expensive here than elsewhere in the eurozone or in the UK, even when the euro is converted to sterling. From a consumer's point of view, the price of oil and its associated products offers a good example of how they are being ripped off. From January to early August the price of crude oil increased from $100 a barrel to a peak of $147 a barrel. According to the AA, the average price of a litre of petrol increased from €1.18 to €1.33 and the price of a litre of diesel increased from €1.19 to €1.43 over the same period. Throughout that time one would hear in the early morning news how the price of the barrel of oil had increased. Day by day prices at the petrol pumps rocketed.

Since August, the price of a barrel of oil has plummeted to approximately $40. However, the rate of decrease passed on to the consumer has been abysmal. Getting the industry to react has been like pulling teeth. We have heard every excuse as to why prices cannot come down. Undoubtedly, there has been vicious profiteering during this debacle and the Irish consumer is the victim. There has been no reaction from Government

It is my understanding that, to a large extent, the function of regulators has been to ensure the provision of a better or even guaranteed level of service to the Irish public. Energy, taxi, aviation and financial regulators are often on our airwaves reminding us in advertisements of the role they are fulfilling on our behalf. The recent banking crisis has shown that these organs of the State must be studied. Basic questions must be asked of these bodies to determine how effective they are. These questions include asking how much of their budgets is spent on consultancy fees, advertising and promotion. Answers to these questions would give a good indication as to the effectiveness of these bodies. This process is long overdue and the practice of establishing and staffing these bodies with people from industry should be closely examined. At a minimum, a statutory requirement should be imposed on regulators to accept submissions from members of the public before approving price increases and to explain subsequently the basis of such decisions.

The basic point being made in the motion is that the Government is not a detached body in economic matters. It must spend less time seeking to pass on blame and face up to its responsibilities, measure its response towards the consumer and, above all, refrain from referring to or calling for patriotic action. It would do well to remember the refrain that action speaks louder than words.

Photo of Mary CoughlanMary Coughlan (Donegal South West, Fianna Fail)
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Tairgim leasú a 1:

To delete all words after "Dáil Éireann" and substitute the following:

commends the Government on the prudent management of the economy in the face of difficult domestic and international trading conditions;

welcomes the continued job creation and confidence expressed in our economy by business investors and the number of recent investment decisions taken across a range of sectors in the regions;

welcomes the Government's commitment to a low corporate tax base and the positive contribution that Ireland's low tax base has had, and will continue to have, on our competitiveness;

recognises the Government's commitment to tackling inflation in areas over which it has direct influence;

supports the Government's commitment to make Ireland a leading knowledge and innovation economy through its implementation of the strategy for science, technology and innovation;

commends the Government for the continued training and upskilling of the workforce in accordance with the national skills strategy;

commends the Government's continued investment in critical infrastructure in the context of the national development plan, which will enhance the productive capacity of the economy;

notes that the current and prospective easing in inflation will be of benefit to consumers and will underpin an improvement in our competitive position;

welcomes the recent decision of the Commission for Energy Regulation not to increase the price of gas or electricity;

commends the Government on its target for reducing the burden of regulation on business by 25%;

commends the Government on its strategy of supporting the upscaling of indigenous Irish companies with a view to increasing our exports of goods and services;

welcomes the establishment of the special group on public service numbers and expenditure programmes, which will reduce our cost base and enable the Government's business to be conducted more efficiently; and

supports the Government's efforts in providing value for money for consumers and supporting the Irish retail sector.

I will share time with the Minister of State at the Department of Finance, Deputy Martin Mansergh.

In welcoming the opportunity to address the House, I wish to specifically mention three major themes, namely, prudent management of the economy, investing in people and reform where needed. The Government is managing the economy prudently, strategically and with foresight. We are investing in people and business by building up capacity, skills and business infrastructure. We are tackling reform where it is needed by cutting red tape, eliminating inefficiencies and giving better value for money to the taxpayer.

Despite the severe economic challenges we face, entrepreneurs and established businesses are making investments now which will provide significant jobs and growth potential for the future. Since the beginning of November alone, the IDA has made announcements which are expected to provide a total of 1,000 new jobs in a variety of sectors, across a range of skills and spread throughout the country. This is a strong, real vote of confidence in our economy. Investors see Ireland as a very good place to do business.

Much has been made of our cost structure. Ireland is no longer a low cost economy. We have come a long way and can now ensure that a high and rising standard of living can be achieved by our population. The United Nations human development index ranks Ireland fifth in terms of quality of life out of 177 countries. Achieving a good quality of life is ultimately the goal of our policies to maintain and strengthen our competitiveness.

A welcome factor has been the easing off in the inflation rate. Figures for November to be released shortly will show that this trend is continuing, with price pressures in Ireland levelling off. Ireland's cost competitiveness is also supported by relatively low taxes on labour and enterprise. Lowering costs and easing demand will assist the economy in regaining cost competitiveness, especially for our internationally trading sector.

We face substantial competition from other countries for everything. Competing on price alone is no longer an option. For this reason, we are moving to develop sustainable competitive advantage which reflects this reality. This is based on increasing productivity and stimulating innovation. In addition, there are other means of stimulating the economy. The Government is providing a long-term fiscal stimulus through NDP capital investment of approximately 5% of GNP, which is twice the average in the European Union. This fiscal stimulus will not only support jobs in the short term but will also add to our long-term productive capacity and competitiveness.

The Government is working with the social partners on the issue of inflation during this period of unprecedented change. All parties are agreed on the critical importance of tackling inflation and ensuring inflation rates are maintained at or below the eurozone average to secure jobs and protect living standards. I welcome the recent fall in our inflation rate and I am pleased to point out that in the October annual inflation figures from Eurostat, Ireland had the fourth lowest inflation rate in the euro area.

Concern with the loss of cost competitiveness in recent years should not obscure the fact that other factors which have underpinned our competitiveness and made Ireland an attractive location for investment during the period of rapid growth remain in place. Recent international rankings include the Lisbon Council's European jobs and growth monitor which ranks Ireland the second most competitive economy in Europe in 2008. Ireland ranks 11th out of 82 countries in the Economist business environment ranking for the period 2008 to 2012 and seventh out of 181 countries in the World Bank's ease of doing business 2009 ranking.

Other advantages which we have developed over the years include favourable demographics; a skilled and flexible workforce; a business-friendly taxation regime; a "light touch" regulatory environment; a developed capacity, arising from the openness of our economy, to identify and exploit opportunities in international markets; and agility and flexibility in responding to global conditions and business needs. I am aware, however, that we must develop new sources of competitiveness, particularly in the accumulation and exploitation of knowledge and enhancement of our skills base. To this end, we are looking to the longer term and have made unprecedented levels of investment in science, infrastructure and skills.

The competitiveness model Ireland has to follow is one where innovation, talent and flexibility are our acknowledged core competences. We have a number of key policies which I will outline, drawing particular attention to our investment in research and development, successful foreign direct investment policies and supports to foster export led growth, improving the business environment and widening and deepening the skills of our people. I will also propose to discuss the services sector as it is one of the success stories of recent economic growth.

Ireland continues to be one of the world's leading service exporting countries and is currently ranked the tenth highest exporter of services in the world. In the years immediately ahead, innovation in services will be a key driver of performance and competitive advantage not only in services industries, but in the economy as a whole. The very size of the services sector means services innovation can have a greater leveraged value across the entire economy. Higher productivity and product quality can act to counterbalance costs for firms. The enterprise development agencies under my Department — Science Foundation Ireland, Enterprise Ireland, the Industrial Development Agency and the county and city enterprise boards — have a capital allocation of €495 million in 2009, which will be spent on productivity enhancing investments such as research and development, innovation, better use of ICT, and training and management development.

I will now discuss our work, through IDA Ireland, in fostering the growth and development of business and employment. Over the past decade our success has consistently demonstrated that Ireland's peripheral geographical location was not a barrier to attracting foreign investment and we continue to punch above our weight in attracting the highest value new foreign investment, even in the current economic climate. The strong flow of substantial new research and development investments by knowledge-based multinational companies demonstrates that Ireland is a major global competitor for research and development and services innovation activities.

The IBM global location trends annual report in October 2008 ranks Ireland tenth overall for attracting foreign direct investment and fourth for attracting service jobs. Ireland is also one of the top performers, at third place, for attracting research and development investment. There have been several announcements of strong investment by firms in recent days. Today, Aon Corporation announced a significant first of its kind research and development investment for Ireland in the financial services sector, which will create 100 highly skilled jobs. Synopsys announced on 8 December that it will expand its research and development operations at its Blanchardstown facility by adding up to 50 new high level software and electronic engineering positions over four years. Option Wireless Limited announced on 4 December that it will, in an addition to its manufacturing and services facility in Cork, add 145 new high quality production jobs over the next three years and undertake leading edge process development activities in that period. Renishaw in Dublin announced on 30 November that it will establish a new research and development function with 60 new jobs to research and develop expertise in the treatment of neurological disease.

On indigenous sectors, the Government is focused on the needs of manufacturing and the services sector. We have strategies in place to deliver growth, strengthened productivity and improved competitiveness. The report of the high level manufacturing group launched earlier this year contains some 26 recommendations directed at key areas of innovation and productivity, leading to transformational change, reskilling and management development, which will ensure Irish manufacturers can continue to compete successfully on international markets and provide high value sustainable employment. These recommendations will be actioned by a new manufacturing forum I will shortly be establishing. It will bring key representatives from the manufacturing industry together with the relevant Government people and employee representatives and will also act as a strong champion and advocate for the evolving manufacturing sector.

The services sector and the growing services element within manufacturing companies are vital to the next stage of our economic performance. We recently carried out an evaluation of the specific needs of the services sector. The report of the services strategy group, Catching the Wave: A Services Strategy for Ireland, was published on 12 September 2008 and will guide the development of our services strategy into the future to exploit the opportunities this sector presents.

As well as growing and diversifying our internationally-traded services, the report also recognises that locally-traded services are a powerful source of wealth creation and employment in their own right, and play a pivotal role in determining the performance of the economy. It sets out new policy proposals on how we can ensure the continued development and growth of Ireland's services sector and outlines how to maximise the future returns to the country from services activities in all enterprises, both current and potential. The implementation of these recommendations will enable Irish service companies to exploit new and exciting opportunities, such as e-learning, business and financial services, professional and consultancy services and others. My Department is working in conjunction with other Departments to progress the implementation of these recommendations.

We are fully committed to strengthening the competitiveness and productive capacity of the economy. Our priority remains the creation of high quality, sustainable employment, driven by companies with higher profitability, which are technologically advanced and prove a better fit with the competitive characteristics of our economy. Yesterday I announced a €24 million investment by Diageo over the next three years to expand its research and development activity across an extensive range of innovative project areas. This project makes the Dublin operation the innovation core of Diageo's research and development activity within the global beer technical centre, and signals the very high value the company places on Ireland for its innovative capability.

The retail sector continues to play a pivotal role in the Irish economy and employs more than 200,000 people. I recently met a cross-section of retailers and we had a good exchange on the preliminary findings of the Forfás study on the relative cost of doing business North and South. The preliminary findings of that study show that higher operating costs for labour, property, energy and other utilities in the retail sector here would justify a price differential of approximately 5% with Northern Ireland for grocery items and 7.5% for goods in department stores. The actual gap, however, is far greater in many cases, even for goods such as foodstuffs where there is no difference in VAT rates between North and South.

I can understand that there are concerns regarding the recent VAT reduction in Northern Ireland which has resulted in calls for a similar reduction here. Although the reduction in the UK standard VAT rate will have an impact on the price differential on some goods between the North and the South, the UK has increased excise on alcohol, cigarettes, petrol and diesel to offset the 2.5% reduction in VAT on those items.

Approximately half the value of goods and services purchased in the State are not subject to the standard rate of VAT and are unaffected by the change in the standard rate. All Government services, local authorities, hospitals and schools are exempt from VAT. The majority of foodstuffs, oral medicines, books and children's clothes and shoes are at the zero rate of VAT. Housing, electricity, gas, domestic fuels, restaurant services and labour-intensive services such as hairdressing and shoe repair are applicable at the 13.5% reduced rate of VAT.

Where retailers are imposing significant differentials in the price of goods in the South vis-À-vis the price of such goods in their retail outlets in the North, the UK or elsewhere, they have a duty to their customers and to the Irish economy to explain why they are charging such price differentials. I will continue my engagement with retailers over the coming weeks and my primary objective remains having a strong and vibrant retail sector that secures jobs in Ireland.

We are entering a new stage of economic development when we will again become dependent for growth on successfully competing in international markets. We embark on this juncture with an enterprise base that has been greatly expanded, strengthened and modernised over the last decade. We are focussed on policies which will provide a competitive operating environment for our key exporting sectors and will place us in the optimal position to benefit from the eventual upturn in the international economy as well as from our longer-term investments.

We are working consistently and successfully, despite harsh global economic circumstances, to build Irish exports in world markets. Our export promotion policies are exerting a direct and positive influence on the ability of Irish exporters to grow their overseas business. Last week I was in Dubai leading the Enterprise Ireland trade mission where contracts worth €40 million in new export sales were signed by Irish companies. Enterprise Ireland has also made a number of recent announcements which will create 584 jobs in Norkom Technologies, Glanbia and Houghton Mifflin Harcourt, formerly Riverdeep, 880 new jobs in high potential start-ups and €50 million in regional enterprise funding through the institutes of technology.

The issue of banishing red tape has been raised by all Members of the House. We have historically been regarded as a lightly regulated, good place to do business, but we can do better and make ease of doing business one of our key competitive advantages. It is important to encourage dynamism and innovation in the enterprise sector with a responsive regulatory regime that maintains Ireland's reputation for sensible and prudent regulation.

The Government and I are committed to cost efficiencies, responsiveness and the ability to facilitate innovation, competitiveness and growth, embedded in the Irish regulatory approach. I am committed to reducing the administrative burden on Irish business by 25% by 2012. It is a demanding target but is a key priority to keep costs for enterprise under control. The high level group on administrative burdens is focusing on concrete measures in specific policy areas, including taxation, statistics, environment, health and safety, employment and company law. Its first report sets out a number of instances where procedures have been simplified, making it easier for business to deal with Government. A consequence of this is a saving of approximately €20 million to Irish businesses in administrative costs.

Responding to current challenges requires action on many fronts. The Government is emphasising the correct economic priorities for this time and I highlighted some of my policies designed to support the future growth of high value employment and development of the enterprise sector. These policies are essential for the future competitiveness of the economy. Our priority remains the creation of high-quality, sustainable employment, driven by companies with higher profitability that are technologically advanced and prove a better fit with the competitive characteristics of our economy. The range of investments made recently by companies proves that the strategic choices which we have taken to ensure our long-term competitiveness were the correct choices and are working well in terms of attracting and maintaining investment and growing jobs.

9:00 pm

Photo of Martin ManserghMartin Mansergh (Tipperary South, Fianna Fail)
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I thank the House for this timely debate, and would like to add to it by commenting on competitiveness and inflation, and discussing developments in public service reform.

There is no point in denying that the economy's competitive position has disimproved in recent years and that this deterioration has been driven by a combination of factors. These include a strong euro, wage increases in excess of productivity, and a relatively high inflation rate. While here has been much talk of falling prices and negative inflation, the level of prices here stand at more than 20% above the euro area average.

Improving national competitiveness is essential if we are to successfully rebalance the economy towards sustainable, export-led growth and to maintain our attractiveness as a location for inward investment. The weakness in the international climate means that improving our export performance and repositioning ourselves further up the value chain will be a difficult task, making it all the more necessary to regain lost competitiveness. While external factors such as exchange rates have an impact on domestic costs, these are beyond our control. We must seek to control those factors which we can influence, principally wages and prices. We must also take steps to improve productivity.

In support of these objectives, and notwithstanding the need to underpin the sustainability of the public finances, the Government has and will continue to take steps to support competitiveness. These include maintaining a low burden of taxation on capital and labour. In the recent budget, the Minister for Finance reaffirmed the Government's commitment to the 12.5% rate of corporation tax, to maintaining and enhancing our pro-business tax policies, and to ensuring that Irish workers continue to face a lower tax burden than workers in other EU and OECD countries. The 12.5% rate of corporation tax has been a key component in our industrial development over the past decade. Our economic prospects are dependent on a vibrant and modern business base, and our low rate of corporation tax is essential to this. As a country, we attach a great deal of importance to tax sovereignty and tax competition. Naturally, it can cut both ways, and where to lay the emphasis in the distribution of taxation is a choice that is made differently between countries. There is likely to be a revenue flow in both directions at land borders. The decisions that individuals, families and businesses make in the light of different market signals depends on their judgment of where their best interests lie.

The Finance Bill 2008 includes a number of significant changes to the research and development tax credit scheme. These include measures to improve the delivery of the benefits of the tax credit, which removes any uncertainty about its availability to businesses. These changes should encourage further research and development activity here. The Government is also continuing to prioritise productivity enhancing investment under the national development plan. The Department of Transport will invest more than €2.8 billion of Exchequer money next year in enhancing our national road network and developing our public transport system. Yesterday, I had the pleasure of attending the opening by the Minister for Transport of the Cashel to Cullahill motorway, completing a 60 km stretch between Cullahill and Mitchelstown, which follows the opening of the Cahir to Mitchelstown motorway in July. Progress continues to be made, even in difficult times.

The Department of the Environment, Heritage and Local Government will spend €2.1 billion of Exchequer money in providing social and affordable housing, improving our water services infrastructure and other projects at local and community level. The Department of Education and Science will spend its increased capital allocation of €889 million on building schools at both primary and secondary level and on supporting the development of higher education. Furthermore, these capital projects will continue to support economic activity and will be a welcome benefit to overall investment. These measures, along with those outlined earlier by the Tánaiste for the Department of Enterprise, Trade and Employment, will equip the Irish economy with the skills, infrastructure and operating environment needed, so that we can take full advantage of the global pick-up when it emerges. They represent the stimulus that we need at the moment.

Ireland's national reform programme for 2008 to 2010 brings together a broad range of structural policies and initiatives which aim to support economic growth and employment over the medium term. The measures put forward in the programme will enhance competition in product markets and flexibility in the labour market, as well as promoting social inclusion. The highly uncertain domestic and international climate we face underpins the importance of undertaking such reforms. I am confident that the measures set out in the national reform programme will make a major contribution to the implementation of the Lisbon Agenda in Ireland, and will deliver significant benefits to the people.

National competitiveness is not solely a matter of Government policy. It is a shared responsibility of all in society and of social partnership. The Government, employers and unions must work together to secure long-term gains. Regaining our competitive position — which as a small open economy is critical to our economic success — will require each of us to play our part and work together to this end. A key aspect of this is to ensure sensible wage developments over the coming years. The willingness of the various parties to adopt a realistic approach to wage developments is needed to ensure that we address the changed economic circumstances which we now face.

A further aspect will be to ensure that where there are improvements in external factors, such as falling oil prices, interest rate cuts and a strong euro, that these are passed on promptly to consumers and business alike. The National Consumer Agency is currently carrying out a price survey on fuel costs. The agency will issue a report to the Tánaiste, which will contain the results of an examination of the wholesale costs of fuel and oil and the retail prices charged in the forecourts. The decision by the Commission for Energy Regulation — following a public consultation process — not to increase the price of electricity or gas next January is also very welcome. Working together along these lines will help to improve Ireland's competitive position in the years ahead. The current and prospective easing of inflation will also be of benefit, especially to consumers.

Ireland's inflation rate has now been below the euro area average for five consecutive months. As measured by the CPI, inflation has fallen from an annual average of 5% in June to 4% in October 2008. The recent falls in the price of oil on global markets are a welcome development from both an inflation and competitiveness perspective. Oil is currently trading at under $45 per barrel, down from almost $150 during the summer. While the timing and coverage of surveys differ, it is clear that these lower oil prices are now being reflected in prices at the pump. The latest CPI data shows that in October alone, a sizeable price decrease of 5.2% was recorded for diesel, 5% for petrol and 11% for home heating oil. Further declines are expected in the coming months.

A further significant easing in the average rate of inflation in 2009 is anticipated, due to a combination of moderating commodity prices, favourable base effects, such as the fallout of the large increases in food and oil prices that occurred in 2008, and an easing in economic activity. The recent ECB interest rate cuts will underpin an easing in the rate of CPI inflation, and provide timely support to the economy. Some commentators are now suggesting that CPI inflation could even temporarily turn negative over the course of next year. Inflation in the year to date has been driven mostly by external factors, namely, the global rise in oil and food prices and increases in mortgage interest rates. Given this, it is misleading to suggest that Government charges are significantly increasing the rate of inflation. The Government is committed to achieving a moderate rate of inflation. In light of this, when developing public policy be it at budget time or during the year due consideration is given to any potential inflationary impacts. At the current juncture, such impacts must also be balanced against the need to underpin the sustainability of the public finances.

The Government is currently in the process of looking at the public service with a view to reducing our cost base and enabling Government business to be carried out more efficiently. As part of this process, the Minister for Finance announced the establishment of a special group on public service numbers and expenditure programmes in his recent budget. This group will review the scope for reducing or refocusing the existing range of expenditure programmes. It will critically consider the number of public servants employed across all areas, in order to assess the scope for transferring staff to priority areas and for reducing total numbers, and to identify surplus staff. The overall efficiency of the public service will be examined, including ways of doing business that are out of line with the needs of a modern, responsive public service. The group will also make recommendations for the further rationalisation of State agencies beyond the measures announced in the budget, on which the Government will make the decisions.

Major savings have been achieved on public expenditure during the course of this year and projected savings have been integrated into the Estimates for 2009. More work is to be done in this regard, as in every area of public service reform. A new operations unit in the Office of Public Works designed to improve the performance of public procurement will be operational by mid-2009. Its immediate focus will be to improve value for money in public procurement, to reduce the cost of procurement to the Exchequer, as well as to seek to establish a better procurement capacity. It will aim to encourage appropriate cross-Border co-operation and in this regard, I thank the Northern Ireland Finance Minister for making one of his experts available to us at my request. A workshop with experts is scheduled to take place tomorrow. It is intended that significant benefits will accrue from the enhanced use of best practice procurement techniques, including electronic procurement and the employment of e-auctions where appropriate. This approach is already in existence to some degree.

Similar to most of the world's advanced economies, we are facing significant economic and fiscal challenges in the immediate future. In the case of a small open economy like Ireland, it is all the more important that we improve our competitive position in the difficult period ahead. If we do so, we will help to lay the foundations for recovery and future economic success. It will not be easy or pain-free to regain national competitiveness. We will all need to work together to this end. The Government has and will continue to take steps to support competitiveness and the wider economy. We are doing this while underpinning the sustainability of the public finances.

While Fine Gael is demanding more stringent borrowing levels, in general, it is also seeking a reversal of almost all unpopular Government decisions, which would further widen the gap that, in theory, it wishes to see narrowed. While I do not question the credibility of esteemed individual Deputies on the Fine Gael Front Bench, I see no evidence of an attempt to create a coherent response at local and national level to the country's difficulties. I have not seen anything that would help voters to predict what Fine Gael would do in government if it had the chance.

Photo of Olwyn EnrightOlwyn Enright (Laois-Offaly, Fine Gael)
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I would like to share time with Deputies Perry, Morgan, Penrose and Costello.

Photo of John O'DonoghueJohn O'Donoghue (Kerry South, Ceann Comhairle)
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Is that agreed? Agreed.

Photo of Olwyn EnrightOlwyn Enright (Laois-Offaly, Fine Gael)
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I welcome the opportunity to speak on Deputy Varadkar's important motion, which needs to be discussed in the House. It is clear from the Government amendment that it has failed to take on board many of the issues outlined in the Deputy's motion. Having read the amendment, it is clear that the members of the Government are not living in the same world as the rest of the Irish public. The amendment makes it clear that the Government does not appreciate that retailers and small businesses throughout the country are being squeezed. The Government's trite response indicates that it is not willing to show any leadership in addressing this issue or helping to ensure that small businesses survive. I refer in particular to the Tánaiste, who has reminded us that neither she nor any other member of the Cabinet owns a shop.

The Minister of State, Deputy Mansergh, is welcome to criticise the position of the Fine Gael Front Bench, or the party as a whole, as much as he likes. However, I remind him that my party colleague, Deputy Bruton, set out a coherent strategy that would have improved the situation and would have prevented the messy cuts that were ultimately necessary. While I am keen to speak about the Fine Gael motion, rather than being distracted by the Minister of State, Deputy Mansergh, I cannot ignore the demands of the Government's unreal amendment. In the current economic climate, it is incredible that any government would attempt to commend itself on its "prudent management" of the public finances. Fianna Fáil has yet to accept any responsibility for its handling of the economy over the last 11 years. It has been anything but prudent. It should accept that its management of the economy caused this country to go into recession ahead of most of its European counterparts.

The Government amendment welcomes the continued job creation, as if we are all blissfully unaware of the fact that 269,000 people, many of whom will not receive any social welfare payments before Christmas, are on the live register. When I was in my office, I listened to the Tánaiste talking about job creation in various parts of the country. Perhaps she should visit Edenderry, Clara or Roscrea to explain to the workers of Rosderra Meats how they will get social welfare payments and tell them whether alternative employment will be available if the Government fails to support companies in the pig sector. The Tánaiste speaks about supporting Irish business and indigenous enterprise, but she does not act in a way that supports her words.

I would like to speak briefly about the foolish decision to increase VAT by 0.5%, which was compounded by the UK Government's decision to reduce the VAT rate in that jurisdiction to 15%, thereby putting further pressure on Irish business. One interesting aspect of the VAT increase is that it led to an increase of 10 cent in the cost of the toll on the M4-M6 motorway from 1 December last. This shows that Government policy is costing people money. The signs on the motorway said that the toll was increasing from €2.70 to €2.80 as a result of the budget day VAT increase. I am not sure whether similar increases have come into effect on other toll roads, as I have not been on them since 1 December. Unless my maths are wrong, the budget day VAT increase should have led to a 1.35 cent increase in the cost of the toll. However, the operators of the M4-M6 toll were able to pass on a 10 cent charge to consumers, business people and commuters who use the motorway day in, day out. Nothing has been done about it. I imagine that similar increases have been imposed on other toll roads.

The Government amendment "welcomes the recent decision of the Commission for Energy Regulation not to increase the price of gas or electricity". When there was a dramatic increase in the cost of oil some time ago, the utility companies successfully used it as an excuse to demand substantial price increases. Now that the price of oil has decreased dramatically, the Government should be looking for reductions in energy prices, in the interests of consumers and small businesses, rather than congratulating itself on not looking for further increases. The public does not believe the members of the Government when they pat themselves on the back and say they are doing a great job. When the Commission for Energy Regulation is deciding whether to increase or decrease the price of gas or electricity, it should listen to the views of small businesses and groups like the Society of St. Vincent de Paul that work with people on social welfare. As things stand, the commission does not listen to anything other than the very biased views of the utility companies.

The most ludicrous aspect of the amendment — it is almost entertaining — is the section in which the Government commends itself for setting a target. We know the Government was not inclined to set many targets over the last 11 years, but it is going too far by praising itself "on its target for reducing the burden of regulation on business by 25%". If that target is achieved, I will come to this House to commend the Government. That is when a commendation would be appropriate. The setting of a target should not be praised. If businesses operated in such a manner, we would be facing even worse circumstances than those we currently face. If one walks down the main street of any town in this country, one will be confronted with the reality that businesses are struggling to survive. Some shops have closed and others have "closing down" or "sale" signs as they try desperately to survive. While sales are welcome, the impact of shop closures is questionable. When people try to improve or expand their businesses, they are hit with severe development levies. I fear that parking charges will increase in the coming weeks. Business people are terrified that local authority rates will also increase. The only thing keeping many businesses going is the hope that the Christmas market might improve.

There is a sad lack of the leadership in this Government, from the top down. I have already mentioned the Tánaiste. The only solution that has been proposed by the Minister for Finance to date has been to ask people to shop a little bit more. Does he not realise that his budget means that most people cannot do so?

Photo of John PerryJohn Perry (Sligo-North Leitrim, Fine Gael)
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I congratulate my party colleague, Deputy Varadkar, on introducing this important motion. During last year's election campaign, Fine Gael told the people that Fianna Fáil had lost its way by becoming more complacent and less competent throughout its years in office. It is sad that our analysis has proven to be so accurate so clearly and so quickly. Fine Gael has consistently pointed out not only that the Government is responsible for this country's sustained loss of national and international competitiveness, but also that it is indifferent to the phenomenon. We have relentlessly pointed out the economic dangers and personal risks of the domestically generated housing bubble. Such problems are largely of the Government's own making and have little to do with international factors. The Government ignored our warnings about these serious problems. The consequences of the Government's incompetence are visible everywhere, for example, in the latest CSO figures, the Exchequer figures for income and expenditure and the unemployment statistics.

The most spectacular example of Government incompetence can be seen every day of the week when large numbers of cars queue to go across the Border. I am disappointed that the Tánaiste, who has a key portfolio, is not here to hear me explain that she has misread the situation. Thousands of people cross the Border each day to do their shopping. This problem relates not only to domestic shopping, but also to other sectors. People's construction needs are being met by companies north of the Border. A serious and genuine crisis is developing for retail and wholesale traders along the southern side of the Border. The bulk purchasing of domestic goods of every description is a significant problem for retailers in this jurisdiction. Similarly, the bulk purchasing of wholesale goods and services is becoming a serious problem for wholesaler traders here. Such purchasing would not exist if a level taxation playing field was in place. The Tánaiste was quoted last week as telling retailers to drop their prices. It costs 30% more to create a job in this State than it does in the North. Retailers and wholesale traders in this jurisdiction are losing business and market share to an extent that threatens their viability.

I recently received an anguished telephone call from a representative of a leading building supply company in my constituency. He thought he had negotiated the sale of a new kitchen installation with a builder for approximately €13,000. However, a few days later he learned that the builder had crossed the Border to purchase the same installation for less than €10,000. One might ask how this saving was achieved. I wish to make it clear to the Minister that there is a loophole in this area. The builder in question crossed the Border, submitted a VAT number and purchased the installation without having to pay VAT. It is as simple as that. The transaction also assumes that the builder gave a valid VAT number. In this case the VAT will come back to him several months later, but for that period the builder will have a better cash flow — a critical advantage when credit cannot be obtained. Of course it may also happen that the builder gives in an invalid VAT number in which case the VAT bill never comes back to him.

The Government must take responsibility for this situation. It is a major anomaly and is crippling businesses. The Government must take urgent action in order to prevent these companies from failing. Fianna Fáil in government in this jurisdiction has failed to control local costs and failed to control taxation and VAT levels. The VAT and duty differentials that apply between the Republic and Northern Ireland are leading to the unprecedented levels of customers from our jurisdiction engaging in cross-Border shopping.

However, the problem is not confined to currency, duty and taxation levels. Irish pre-tax prices are also dearer than those, north of the Border. Retailers and wholesalers in this jurisdiction simply cannot afford to be put at such a competitive disadvantage in these very difficult times. The failure of Government to deal immediately with this crisis will result in even more Irish business failures, in job losses and in losses in Exchequer income.

This is a very important issue and I am very disappointed the Tánaiste, who is based in Donegal, is doing nothing for small businesses. Every business in the six Border counties is on its knees. All the Tánaiste can suggest is for retailers to drop their prices when the costs of creating a job here are 30% higher. Rates and all other Government charges are considerably higher than those in Northern Ireland. If the Tánaiste wants to get competitive she should reduce the Government costs, including VAT, and then we can have some hope of doing business.

Photo of Arthur MorganArthur Morgan (Louth, Sinn Fein)
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I broadly support this motion and I call on the Government to recognise that the increases in heating and fuel costs, and daily living expenses have had a severe effect on working families on low and middle incomes, which has ultimately damaged our economy and made the path to economic recovery all the more difficult to find. While the Government will go on about low inflation or even the projected deflation for the next 12 months, in key areas such as home heating and everyday shopping, the Government has stood back while prices spiralled out of control. Energy and food costs have more than doubled over the past 12 months, while a litany of charges and levies were sneaked in through budget 2009.

As the result of the Government placing the burden of our economic difficulties on the shoulders of ordinary people, families have been prevented from using their own incomes to boost the Irish economy and are effectively being forced to shop outside of the State. The failure of the Government to intervene at an earlier stage to halt inflation has a direct negative impact on areas such as the retail sector. However, while prices are at the highest ever level and consumer confidence is at an all-time low, options remain available. I urge the Government for once to start listening to people on this side of the House and to change the direction it has taken.

We have all seen the recent figures released by the European Commission, demonstrating that pre-tax petroleum prices in Ireland are 24% higher than the EU average. The only explanation for the disparity in prices is greed on the part of certain motor fuel outlets and a laissez-faire approach by a Fianna Fáil-led Government that chose to ignore that people are being ripped off. However, the issue of high energy costs goes beyond petroleum. Over the past eight years Ireland has moved from being below the EU average for electricity costs in 2001 to becoming one of the most expensive EU countries for electricity. Ireland rates as the second highest of the EU 25 for industrial electricity prices.

While the Government will no doubt point to the recent freeze in electricity and gas prices, only last August the ESB was granted a 17.5% increase in tariffs, while Bord Gáis was given permission for a 20% hike. Both State bodies had to withdraw their most recent applications for tariff increases as world energy prices have fallen by up to 60%. While global energy prices may have tumbled, we have seen only a minuscule decrease of less than 1% in ESB-supplied electricity and nothing has been forthcoming from Bord Gáis. Despite claims to the contrary, the decreases in international energy prices are not being passed on and it remains to be seen if the ESB and Bord Gáis end up passing on the decrease or keep the difference themselves.

High electricity and home-heating costs impact most on low-income families which spend a far greater proportion of their household budgets on these basic items. As people are spending more on their petrol, home heating and electricity, they now have less money to spend on other basic items such as food and clothing, which has the inevitable consequence of damaging other sectors of the economy, such as retail. There is undoubtedly a problem with statutory bodies, such as the Commission for Energy Regulation, sanctioning increases without proper regard to the consequences for families and business.

While I support the proposal that would require regulatory organisations to hold public meetings, more measures are necessary to ensure that the regulatory bodies take account of the effects of their decisions. This is clearly not happening today. Another measure could be to oblige regulatory authorities to conduct proper impact assessments as to what are the likely effects on low and middle-income families, and on businesses if they sanction increases. For there to be any transparency, impact assessments should also be published by the regulatory bodies. This should have been happening as a matter of course anyhow. It never happened because the Government was sleepwalking through that period.

Retail price disparities are damaging shops and stores south of the Border. The National Consumer Agency has found a margin of difference up to 30% in food prices on either side of the Border, which must be inexplicable. I have had representations from businesses in my constituency which are being damaged by the numbers of shoppers who are travelling north. However, rather than coming to the aid of retailers, the Government has made matters worse by increasing VAT to 21.5%, resulting in a 6.5% difference between North and South, which has placed retailers at a competitive disadvantage, with which they may not be able to cope.

The decision is all the more bizarre in light of the shortfall in VAT revenue. VAT receipts are down by €2.1 billion and with this increase not only is the Government sending shoppers to the North, but for those who will continue to shop in the South the Fianna Fáil and Green Party Government is removing up to €200 from their annual incomes. My party has always highlighted the damage that is being done to the long-term development of both economies, North and South, through disparities in taxation. While the retailers in the North are now benefiting at the expense of retailers in South, the situation could change in the future and Northern shop owners could end up suffering the same hardship. There is a history of such seesawing of benefit on either side of the Border.

Ultimately, the Government will need to go beyond the lip service it has been paying to the development of an all-island economy and start taking on board our proposals and the proposals of a number of organisations, business groups and bodies such as InterTradeIreland. One of our proposals is for VAT harmonisation. While we accept that many more measures must be taken to ensure a proper level playing field, a 2% reduction in VAT would make a significant difference at this time.

On the issue of levies and charges through State agencies and Departments, the increases made by the Government are hitting vulnerable people the most. By increasing accident and emergency unit and hospital charges, the Government is effectively discouraging people who may be in need of urgent care, from going to hospital.

By increasing school transport charges the Government is making it more difficult for children from disadvantaged backgrounds to continue their education. However, these increases are not being done to improve or safeguard our services. They are being initiated while the health and education services are being cut back. The cutbacks in health and education will do long-lasting damage to our public services and I urge the Government to bow to public pressure on these issues.

The 1% income levy on workers who earn more than €18,305 is unwarranted and will damage low income families. The levy should apply only on incomes in excess of €38,000 and we believe that the threshold for the 3% levy should be reduced to incomes in excess of €200,000. Our proposal to remove the PRSI ceiling would have had the double effect of raising much needed tax revenue, while cushioning those on low and middle incomes from the worst effects of the increase. All of these charges and levies amount to more than €1,000 being taken out of the pockets of families on moderate incomes at a time when they need it the most. We are all aware of the shortfall in public finances and the economic downturn, but the measures implemented by the Government can only serve to perpetuate this recession and exacerbate the dire state of our public finances.

I will give the House a brief outline of what it is to try to shop in the North. Accounts have been to relayed to me about my nearest town, Newry. The PSNI had to be called twice last week to separate people from the South fighting. In one case two women were fighting over a shopping trolley which somebody had just finished with after loading the groceries into the boot of his or her car. In another instance, two men were fighting over a parking space. Somebody had just left a parking space in a well-known shopping centre in Newry and two men were literally at fisticuffs to get the space. Others, while using their shopping trolleys in the aisles, are having goods removed from them by other shoppers who cannot find the items. It is no pleasure to shop in some of the busier shopping centres close to the Border and in the North. While I can understand why people from the South would contemplate moving North given the huge price disparity, it is no pleasure. There is much more comfort to be had in this State.

Debate adjourned.