Derek McDowell (Labour)

I will address the issue of decentralisation before I finish, but I will begin with some general remarks about the economy. This must be the shortest Finance Bill the Minister has published during his time in office. Certainly, it is almost completely devoid of the grand gestures, ideas and the singular ideological shifts, swathes of tax cuts, cuts in expenditure and various other traits for which the Minister has become renowned over the last seven years. As such, there is very little with which to disagree in the Bill. In as much as the Bill offends, which it does, it is through sins of omission rather than commission. I will address those in detail in a few moments.

It is appropriate to comment from this side of the House on the resilient and sturdy state of the economy. Most of us feared 15 to 18 months ago as we looked into the near future that circumstances would be a great deal worse than they are. To be blunt and clear, if 2% growth, less than 2% inflation and virtually full employment is as bad as the recession is to get, we have not done half badly. It is appropriate to acknowledge that the economy has demonstrated a toughness and resilience which has surprised me and, I imagine, a great many economists and commentators. It does not serve the interests of the country or the Opposition to understate or fail to acknowledge that fact.

I say that by way of acknowledging that when things were going badly over the last 18 months, I found less to criticise in what the Minister did than I did when things were going well. When he had money to spend and choices, he made all the wrong ones. He cut taxes in the wrong way and spent money poorly. He operated counter to the cycle I would have chosen or thought appropriate at the time. Nevertheless, I acknowledge that in the last 12 to 18 months, the Minister has adopted the cautious approach appropriate in the circumstances.

I do not support all the cuts the Minister imposed on his colleagues. The Minister for Social and Family Affairs made for a rather sad sight when she was here. It looks like she is preparing the way for a climb down on a particular cut with which the Minister will be familiar. The social welfare cuts amounted to €50 million. With the benefit of hindsight, and even at the time, it shows how pointless they were in the circumstances.

I do not think anyone would argue that in the aftermath of the general election there was not a need to cut back the then runaway level of current expenditure. This is not to say that I was not in favour of planned public expenditure in the previous period — I was. Neither is it to say that I am not in favour of planning public expenditure in a way that will lead to improved public services over time. However, I do not believe this can be achieved by failing to increase spending one year, increasing it by 20% the following year, and cutting back according to the electoral cycle. The Minister has, by and large, got it right since the election. I say this in the knowledge that anything uttered at 7.30 p.m. in the Seanad on a Tuesday evening is unlikely to be reported by anyone.

The Minister and the social partners set out three main aims on income tax in Sustaining Progress, namely, reducing the upper rate of tax to 40%, removing those earning the minimum wage from the income tax net, and completing the individualisation process. It is now unlikely that any of these three aims will be achieved. While I will not shed tears about two of the three aims, efforts should be made to remove those on the minimum wage from the income tax net. Notwithstanding the increase in the minimum wage this year, the Minister has more or less stood still with his increase in tax credits. Secure in the knowledge that no one is going to pay a blind bit of attention to what I say, if choices are to be made in the tax code they should made in order to remove the minimum wage from the income tax net. This should be done even at a time when there is little scope.

It is nonsensical to forbid employers paying employees less than €7 per hour and then taxing these employees. It does not make sense. There is no logic or coherence to it and it should be changed. This should be done even if it must be done within the income tax code. While I recognise most Oireachtas Members would not share my view, this should be done even if the standard rate cut-off point must be changed. We need to take this measure to a conclusion and it must be done now when the opportunity exists.

The Minister has had an interesting experience in interacting with the tax code over the past seven or eight years. Senator Mansergh also referred to this. The Minister has not had to do much in the way of distribution; it has largely been a matter of deciding where to cut taxes. While I do not necessarily agree with the argument, I accept that cutting taxes in some cases has not reduced the tax take. We are now in a position where we cannot cut the overall take and where changes in the tax code are necessarily redistributive. Harder choices must now be made and the Minister has clearly taken the decision not to make changes. This is interesting and instructive in itself.

Based on previous experience, I feel the Minister and I share a similar view on tax breaks. If it can be shown that breaks are filling a need and provide a value added element, then I believe they are good. My real difficulty is that we have not carried out any serious work in showing that multi-storey car parks tax breaks and health-based initiatives actually work. While the Revenue Commissioners have made an effort to quantify the loss to the Exchequer arising from these breaks, the work seems to have been carried out on the back of an envelope. I am not convinced that the numbers stand up to scrutiny. We must be sure that there is a need and that the tax breaks fulfil it.

It is 15 months since the Minister announced that he was going to end these tax breaks. I did not believe him then and I still do not. People whispering in the Minister's ear about strategic and logistical reasons that these breaks should not be ended have clearly persuaded him. It would not surprise me to hear the Minister announce in next December's budget that they will be prolonged yet again. We should be honest about this and accept that they are justified in certain circumstances. They are a way in which high earners can often substantially reduce their taxes due. It is fine if the breaks help achieve targeted and defined social ends. However, if they do not they should be ended. I support the changes in the film tax relief, at least as a measure for the foreseeable future. I know the Minister has had some opposition to this measure from within his Department.

I am concerned about the move on private hospitals. While I am speaking off message again, I broadly support the Hanly proposals. There is merit in centralising specialities in larger hospitals while maintaining as good a service as possible in local hospitals. My wife is from Clare and I know the way in which people regard the hospital in Ennis. While tens of thousands demonstrated on the streets of Ennis, there is no doubt that in the event of a car crash, many of them would be slow to go to Ennis hospital. They would rightly choose to go Galway or Limerick hospitals.

While there is merit in the Hanly proposals, it is only in the context of the overall implementation of the health strategy. The Minister and his colleague undertook to increase the State's hospital bed capacity by 3,000. People are afraid that if the Ennis casualty ward is closed they will end up in longer queues in Limerick or Galway hospitals. If the capital investment for increased beds promised in the health strategy is not released, it is folly to follow the Hanly route. The Minister will not be able to persuade his backbenchers. Nor do I think he can reasonably expect support from independent commentators or even the miserable few of us on the Opposition benches who see some merit in the overall strategy.

Others have mentioned the issue of carbon taxes. I know the draft emissions strategy has been drawn up and I gather the full strategy will be submitted to Brussels in the coming weeks. While I have thought about this issue deeply in recent years, I have not come to a full conclusion. Taxes on energy only have merit if we bring about a behavioural change that will reduce carbon emissions. I do not see this happening unless there are significant increases in taxes on dirty energy sources and not on others. I do not see how we can do this without significantly impacting on our competitiveness and the poorest in society. If the great and the good in the Departments of Finance and the Environment, Heritage and Local Government can develop a scheme that will secure competitiveness, ensure the impact on the poor is not excessive, and will bring about the required behavioural change, then I will happily support it. I am not persuaded that the Departments will be able to do this and I suspect the Minister is not persuaded either.

I suspect the Minister either has not decided or does not want to impose carbon taxes. If this is the case, it is silly and hypocritical to suggest we are going to introduce measures on 1 January next. We deserve more honest debate in this country and we have had little of it on this issue. There is a notion that if one is concerned about the environment then one should be in favour of carbon taxes. I am in favour of protecting the environment and favour taking hard choices, including tax measures, if they positively impact on the environment. There is a responsibility on those who favour carbon taxes to demonstrate that they will impact positively on the environment. As of now, I am not persuaded this is the case. I am interested by the provisions in the Bill for research and development. In a somewhat different context, I read carefully a short time ago the Lisbon strategy documentation prepared in the context of our Presidency. There is an aspect of motherhood and apple pie in its talk of improvement of IT facilities throughout the European Union, and in R & D, and so on. Yet there is no doubt that R & D forms an important part of the strategy, and will in the future form an important part of our capacity to maintain our cutting edge in terms of competitiveness, attracting foreign investment to Ireland, and, down the line, retaining the product of that R & D in this country.

The proposals in section 33 of the Bill are quite well formulated. One certainly needs a minimum level of research and investment, and the €50,000 tax credit allowed in that area seems reasonable. One element I worry about is the link with property incentives, with buildings constructed for the purpose of carrying out R& D. It does not need genius to suggest that this is open to abuse, and will need to be carefully policed. We want to see the work carried on in Ireland, and I appreciate that some of the investment will be in buildings, but we do not want to see all the additional benefit which R& D will now attract going into the construction of buildings. If that were to happen, it would be a mistake and would be wrong. I urge the Minister to keep a careful eye on how this R& D benefit and relief will be channelled in future.

I remember in our short debate on budget night being sceptical about decentralisation. I am now quite critical of it, and not even sure that it is right in principle. Administering policy outside Dublin is fine, but as for the formulation of policy by people occupying offices in different parts of the country, whether the formulation is done by email or phone, I cannot see it working as effectively as through face to face meetings. We already have difficulties with a number of policy areas spread across different Departments. Children provide the classic example, with three or perhaps four Departments regularly involved in policy making. We appointed a Minister of State to co-ordinate matters, yet inadequacies remain in the policy-making process and in the final polices that emerge. People need to meet regularly. They need to look at each other directly, to sit down, debate, discuss and formulate policy. That cannot be done effectively if people are in different offices throughout the country, even if they sometimes come to meet the Minister in Dublin.

On behalf of the civil servants who want to stay in Dublin, someone must say that this is a fine city. There are jobs here. If one says to perhaps 1,000 or more people, along with their families, in each constituency in Dublin, that we do not want them here but in some part of country, then some will wish to go as the Minister is happy to tell us, but many will want to stay in our fine city. These people should not be disadvantaged in their career prospects because of that simple choice, which is a logical one for them. Some of them, God help us, are Dubliners, and do not necessarily want to live in the country. Someone should break the consensus of political correctness, something which the Minister is usually anxious to do, which seems to surround the issue of decentralisation and assert that Dublin is a good place in which to live and that civil servants should not be blamed for wanting to stay there. I do not blame them.

I have not put down any recommendations for tomorrow's session. Last year we asked the Seanad staff to toil into the night and eventually got onto recommendation No. 2. Nonetheless we had a useful debate. I hope we will have the opportunity for something similar tomorrow.