Charlie McCreevy (Kildare North, Fianna Fail)

I am grateful to the Senators who put down this motion as it affords me an opportunity to discuss and evaluate the current and future prospects for our economy. The record will show that in my period of office a thriving economic climate has been created in Ireland. We have recorded one of the best economic performances in the world. Economic growth has averaged nearly 10% per annum, unemployment has reduced from over 10% to historically low levels, over 300,000 new jobs have been created, and long-term unemployment has been cut by 80%. These achievements are recognised and applauded by responsible commentators everywhere in the developed world. For instance, in August 2003, no less a body than the IMF commended the Irish authorities for our "exemplary track record of sound economic policies".

The new member states which have just joined the EU also recognise this and their common desire is to be like Ireland. They are anxious to learn how we did it. Clearly, the Government has established a climate which has allowed our economy to flourish. Despite the international economic downturn of the past number of years, our economic record far outshines that of our main EU partners and our budgetary position remains sound. I am confident that if we ensure we regain competitiveness, we can improve our economic growth to reach 4% to 5% in GDP terms going forward.

The motion, therefore, rightly and accurately summarises the economy's achievements, namely strong growth, full employment and low inflation. Who in the House as little as 20 years ago could have imagined any Minister for Finance being able to give such a synopsis of the economy? It would have seemed a pipe-dream then, yet it is now a reality and the credit goes to the effort, enterprise, diligence and creativity of our people. It is due also to the relentless pursuit of the right economic and fiscal policies to help the dream become reality.

It is on certain aspects of that reality that I want to dwell in my contribution. We have in the past seven years changed the face of this country and made it a better place in which to live and work. We have restored pride and encouraged the return of tens of thousands of our young people.

The object of Government policy in every Administration has been the creation of jobs. In that, we have been remarkably successful. What has been all the more remarkable is that despite the recent economic shock, the level of employment has held up well. The unemployment rate now stands at just 4.4%, the lowest since December 2002, and in the last year an additional 31,000 not just part-time but also full-time jobs have been created. As satisfying as these figures are as an endorsement of the low-tax policies which the Government has pursued in the interests of job creation and maintenance, they must be galling for an Opposition which, if the amendment to today's motion is any measure, is increasingly bereft of any constructive ideas.

The Government claimed that we had a flexible job market and we have seen the proof of that. However, it has been no accident. The Government's tax policy has been a large contributing factor. Some 35% of income earners are now outside the tax net, that is 669,000 earners compared to 380,000 in 1997. The result is that, as recently acknowledged by the OECD, we have the lowest tax wedge on the average single worker in the EU. The Government has increased the entry point to the tax system from €98 per week in 1997 to €246 per week now. Since the Government came into office, it has reduced the average tax rate by 10% for a single worker on the average industrial wage. This means the average PAYE worker pays far less tax than before and gets to keep much more of any extra income in his or her pay packet.

The Government's tax policy has encouraged and sustained the jobs market in both good and bad times. Together we must secure our competitive edge by moderation in future pay increases. The Government's record on tax reform is one of solid achievement of unparalleled success when compared with any period in Irish history during which the parties opposite were in Government. Ireland is truly now a country of opportunity.

The Administration's second notable achievement has been the reduction in inflation to less than 2% per annum. In little over a year, the CPI has declined dramatically from 5.1% to its current level of 1.3%. The inflation we suffered owed much to the fortunes of the euro, the very high level of demand for labour in our economy and the price effect of the process of catching up with our wealthier EU neighbours. The last of which is the so-called Balassa-Samuelson effect, which the new member states are all looking forward to.

If one were to listen to the Opposition, one would think the Government was the real cause of inflation. This must be examined in so far as indirect taxes are concerned. Taxes on alcohol have been left largely unchanged since 1994. VAT rates were cut during this period on one occasion and excises on petrol and diesel were reduced in one budget. Tobacco excises were raised substantially, but primarily in pursuit of health policy objectives as well as for Revenue reasons. I have been constantly implored by the health lobby to ignore CPI effects when it comes to policy decisions on tobacco taxes and to persuade the CSO to drop tobacco from the CPI altogether.

It seems that any tax changes one does not like are now characterised as "stealth taxes".