Dáil debates

Wednesday, 9 November 2011

Priority Questions

Public Transport Projects

1:00 pm

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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Question 4: To ask the Minister for Transport; Tourism and Sport the current status of the metro north project; and if he will make a statement on the matter. [33486/11]

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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Funding for all transport capital projects for the next five years will be determined in the context of the capital review which will be published tomorrow. I will announce my Department's plans for such funding, including decisions relating to the large public transport projects in the Dublin area such as metro north, immediately thereafter.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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When I tabled this question I was not aware that the Government would take the decision it took on Tuesday on the amount it would spend and the projects on which it would be spent in the coming years. There is a clear indication in the announcement last week that €750 million is being cut from the capital budget for next year. It is not necessarily my job to remind the Minister of the commitments his party and the Labour Party made about their willingness and desire to put in place appropriate and necessary measures to ensure unemployment levels would be addressed through the creation of employment. One of the most obvious ways to do that is through State spending and the capacity to employ people through an effective capital programme. Given the significant cuts the Department will have to make in its capital programme, how does the Minister intend to assist in the recovery of the State through the creation of jobs?

The Minister attempted to create employment in the tourism sector earlier this year through the jobs initiative, but that has not materialised. It was a gamble at that stage. A recent paper published by the Economic and Social Research Institute, ESRI, clearly indicates that while a stimulus project or plan should generate extra employment and ultimately pay for itself, this has not and will not. Where do we go from here in terms of job creation and finding a solution to the current crisis?

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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I do not accept that the measures introduced to boost tourism have not increased the number of jobs. The Restaurants Association of Ireland has indicated an increase in job numbers and we will see from the quarterly results whether job losses have stabilised or increased in the tourism and leisure sector. The ESRI report acknowledges that reducing VAT has increased the number of tourists visiting the State, but the revenue lost, in terms of the reduced VAT intake, is not compensated for in the additional revenue that has come in from those tourists. The ESRI does not comment on employment. That remains to be seen. However, with a 10% increase in tourist numbers this year, I would at least expect the number of people employed in the sector to stabilise or increase. I certainly hope it will increase next year.

As regards the capital budget, the announcements will be made tomorrow. Everyone on the Government benches understands that cutting spending and increasing taxes are not good for the economy. We are not stupid. We realise that increasing taxes and cutting spending will further depress the economy and make it more difficult to achieve growth and employment growth. The reason we are doing it is not because we think this is the way we will solve the country's problems but that we cannot afford to finance the State. We have a primary deficit of €12 billion, which is the gap between what we raise in tax and revenue and what we spend. That has nothing to do with interest repayments on debt, the banks or bondholders. It is simply our primary deficit and it must be addressed. We must work out the best way to address it. In that context, one must choose between current spending cuts, capital cuts and tax increases. The Government has taken the view that it wishes to honour its commitments not to increase taxes on work and not to cut social welfare rates as far as is practicable. It believes this is the most effective way to maintain demand in the economy as much as possible. Capital investment is a very expensive way to create jobs. The probable best way in which the Government can sustain employment is to try to keep wages up and taxes down and that is its priority.

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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I believe the Minister's analysis of the impact of the VAT reduction within the tourism sector is flawed. It entails measuring growth in tourism against a very poor year, that is, the previous year, which was greatly affected by the ash cloud from the volcanic eruption. Clearly, the Minister's VAT reduction measure has not had the benefit it was set out or expected to achieve. My suggestion concerns the €400 million the Government has taken from the private pension funds. While I will not discuss the impact this measure had on such pensions, it had a capacity to raise funds. Had the Government a more appropriate methodology for investing that sum in the economy, it could have had a greater potential to increase employment levels. I suggest it was a pool of funding that could have been used to provide for the Minister's capital programme, thereby sustaining investment in the economy in those shovel-ready projects many of the Minister's colleagues identified in advance of the election and which were going to be the panacea to create employment when the Government parties came to power. Sadly, that has not happened. Will the Minister review the €400 million grab on pensions and consider the use of that pot of money towards assisting in the capital funding available for those important projects?

Photo of Michael KittMichael Kitt (Galway East, Fianna Fail)
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That seems to be a different question as we are discussing metro north. However-----

Photo of Timmy DooleyTimmy Dooley (Clare, Fianna Fail)
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To clarify for the benefit of the Minister, he has set out the economic parameters in which he finds himself with the capacity to fund certain programmes that have been identified. I suggest there are alternatives.

Photo of Leo VaradkarLeo Varadkar (Dublin West, Fine Gael)
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The 0.6% levy on private pension funds is a temporary measure and will only be in place for three to four years. It brings in approximately €450 million per year, which would not pay for metro north. To be clear, the cost of the project is significantly higher than that, even when spread over a prolonged period. The money that is being raised from the 0.6% levy on private pension funds has gone into a number of measures and not simply the VAT reduction. It also has gone into a reduction in employers' PRSI, which has not yet been assessed. Most people accept that reducing employers' PRSI, thereby reducing the cost of employing someone, will protect jobs and potentially will allow for employment to be increased. While the Government must make this judgment call, it is not yet necessary. It was introduced last June and has only been in place for less than five months. The VAT reduction will be reviewed at the end of 2012 with a view to the 2013 budget. The short answer to the Deputy's question is that the levy is temporary but is not sufficient to create significant jobs on the capital side. In addition, the VAT reduction will be reviewed for the 2013 budget.