Martin Mansergh (Fianna Fail)

This budget maintains and consolidates Ireland's economic strength. If we want social partnership to work and our infrastructure to develop, we must maintain confidence in the economy. The measures are not on the scale of the 1980s but confidence will help the economy to expand more quickly. One economist referred to this as "expansionary fiscal contraction". There is not even any contraction. Post-budget spending is marginally above the rate of inflation. Other countries are at or over the limits of the stability pact but this budget and the Exchequer returns published last night send a very strong message. Any deterioration in the public finances is being arrested.

We have not been deflected from maintaining lower personal tax rates and the consolidation of corporation tax at 12.5%. We have carried that through. People should be reminded that Deputy Quinn, as Minister for Finance, set that target. The harmonisation of corporation tax at European level will not provide the solution to Germany's economic problems. The United States is fully federal but there is tax competition between the different states. The proposal will not get anywhere.

There has been a limited increase in the employee tax credit, or the PAYE allowance, from €660 to €800, making 90% of the minimum wage tax free. There is increased help for first-time buyers. A mortgage of up to €200,000 for a married couple will be covered, compensation that is way beyond the cost of an extra loan that would be needed to make up for the loss of the first-time buyer's grant. The gains are concentrated at the lower end of the income scale.

Generous tax relief has been given over the last five years, with both rates being cut and bands being widened. It is not possible to repeat that this year but the public will understand the importance of maintaining a strong economy. The number of jobs will rise by 18,000 in 2002, with a projected increase of 11,000 in 2003. In all previous recessions jobs were lost or there was a slow down. The economy is not in recession. The unemployment rate in Germany is 10%.

The public service has increased by 20,000 since 1998, or 33,000 if health workers are included. Employment in semi-State bodies has decreased somewhat. I understand the reason for the cap but it is a crude instrument and a more sophisticated management measure must be found to achieve the same result.

There is pain in the budget, such as the non-indexation of tax allowances and the modest increases in indirect tax. It was right to raise the lower rate rather than the upper. There are also tax increases on cigarettes, alcopops, spirits and diesel.

Property has been far too attractive an investment and certainly the reliefs should be time limited if they are to have an impact. The time limit has been set for some time in the future but in the meantime that will give an extra incentive for projects to go ahead now.