Martin Mansergh (Fianna Fail)

It has been a good debate and I compliment Senators on all sides of the House. We were privileged to have a particularly lucid speech from the Minister but there were also valuable contributions from, among others, Senators McDowell and Ross and I compliment Senator Terry on her contribution which addressed a serious social problem.

I will address some points which arose during the debate. While there are many competitiveness indexes, I cited the Bertelsmann index, a German index for economic development and economic policy. It divides countries into three zones: the danger free zone, which Ireland tops, the warning zone, which contains a number of countries, and an alarm zone, which includes France and Germany. We are still close to the top, at least on some indexes.

On the adjustment of tax bands, we are only referring to the one third of income earners on higher incomes. That the tax bands have not been adjusted does not affect the tax situation of the two thirds of taxpayers on lower incomes. To address other points, an increase in VAT is not a stealth tax but an overt tax and taxation on work and PRSI is practically the lowest in the EU. Most of the construction incentives are to be abolished by July 2006 which, on the evidence of the Revenue Commissioners to the Joint Committee on Finance and the Public Service today, will deal with the millionaires who are not paying tax at present.

The policies of 2001 and 2002, whatever motives may be attributed to them, had a counter-cyclical effect which was acknowledged last year by the IMF and the OECD and which means they were beneficial in counteracting tendencies towards depression. Such a slowdown in spending as occurred in 2003 bears no comparison to what had to be done in the late 1980s.

With regard to the UK, I do not agree with Senator McDowell's point that an increase in income tax would not have any effect on our competitiveness. We are in competition with the UK and labour is very mobile. Even in the UK of Gordon Brown, the top rate of tax is 40% and there is an introductory rate of tax lower than 20%, which cannot be ignored.

I agree up to a point with Senator Ross when he stresses the importance of US multinational-led investment. Unfortunately, he can never bring himself to acknowledge the role of social partnership in the recovery since 1987. An IMF document states that, while not the only factor, social partnership contributed significantly to the increase in the employment rate since the early 1990s, which averaged 2.1% per annum during the second half of the 1990s. The IMF also favours a further benchmarking exercise as an alternative to past practice, which involved special pay claims and relativity.

It was not clear from Senator Browne's remarks or the amendment to the motion whether we are being criticised for underspending or overspending.