John Paul Phelan (Fine Gael)

It has been much higher than 1.5%.

The Government parties table this motion within weeks of several high profile lay-offs, including 220 job losses at Sercom Solutions, Clondalkin, Dublin, 70 at Smurfit Paper Mills, Clonskeagh, Dublin, 54 at Parian China, Ballyshannon, County Donegal, 250 in my own constituency at the Greencore sugar factory, Carlow town, 350 at Allergan, Westport, County Mayo and 200 jobs at APW Enclosures, Tallaght, Dublin. In addition, the loss of 150 jobs was announced yesterday at Castlemahon Foods, Limerick, with which you will be familiar, a Chathaoirligh. Perhaps Senators on the Government side would care to speak to these 1,300 people about Ireland's exceptional performance, which is referred to in the motion.

Despite an increase in export sales of €1 billion among Enterprise Ireland's client firms, there was a net job loss of 1,317 in 2004. While there has clearly been a drop in unemployment since 1997, the Government cannot claim all the credit for this. It was the Fine Gael-led rainbow Government that introduced the low corporation tax rate and increased foreign direct investment, and it was this decision that led to the number of foreign companies rising from around 20,000 Forfás-assisted companies in 1994, to 70,000 today. This represents a 250% increase and is the area where the vast majority of new workers are employed.

However, the number of indigenous companies has remained almost static since Fianna Fáil and the PDs came into office in 1997. The Forfás 2003 annual report states:

Ireland's economic expansion in 2003 was led by growth in domestic consumption, infrastructure investment and house-building. This meant that the employment growth took place in the public sector, private services and the construction industry, rather than in the more export-oriented industrial sectors supported by the enterprise development agencies. This is reflected in the employment levels in agency-supported companies, which stood at 297,500 in 2003, a decrease of almost 7,500 on 2002. 2003 was the third consecutive year where there has been a net decrease in employment in agency-supported companies. This resulted in 19,000 fewer jobs in manufacturing and internationally traded services compared to the peak of 316,500 in 2000.

The same report states:

The manufacturing sector accounted for all of the net decrease in agency-supported employment in 2003. Within the internationally traded services sector job gains and losses were in balance with 8,500 of both. In contrast, there were 14,000 jobs created in manufacturing, but these were more than outweighed by losses of 21,500. The computer and electronics sector accounted for almost half of the net decrease. The textile sector and the paper and printing sector also witnessed significant net decreases, with approximately 1,000 jobs lost in each.

Perhaps this is explained by Jim Power, the leading economist, who stated that Irish competitiveness has been seriously eroded by a sharp increase in the overall cost base, which will not be reversible. He went on to say that to ensure the future prosperity of the Irish economy it is absolutely essential that investment in education to upskill the workforce and a correction of the very damaging infrastructural deficit are given immediate real priority and not just lip-service.

The point here is that the Government has reaped the rewards in the private sector, now mainly foreign-owned and encouraged by low corporation tax while it has completely failed to generate homegrown business by allowing out of control, untargeted spending that ultimately had to be paid back through higher taxes and stealth charges, increasing our cost base significantly.

The message, though the Government parties do not wish to hear it, is that they have inherited a foreign jobs boom from their predecessors thanks to a low corporation tax rate. They have completely failed to help the indigenous sector to reach its potential.

Senator Leyden referred briefly to the amendment that has been proposed in the name of the Fine Gael Senators. I will explain it briefly. Large-scale multinationals have the ability to absorb the various increases in stealth taxes that have occurred since 2002. Economies of scale alone ensure that such firms are often not seriously hurt by such increases in their cost bases. Indigenous firms, usually of a much smaller scale, have great difficulty in absorbing these costs. In calling for a similar low-tax strategy for the indigenous sector we simply ask for an end to taxation by stealth and a reappraisal of the way small-scale Irish business people are treated. For instance, self-employed people are ineligible for the family income supplement, an issue that has been raised several times.

Let us look at the way a total lack of tax strategy has led to stealth tax after stealth tax, disproportionately impacting on indigenous businesses. In 2002, VAT was increased in the budget after the election; motor tax rose by 12%; bank charges and bank card charges by 108%; bin charges by 29%; and ESB charges by 13%. In 2003, development levies were introduced, adding greatly to costs, and motor tax increased by a further 5%. In 2004, there was another 9% increase in ESB charges and in January 2005 another 3.5% ESB price rise was given the green light by Government.

In tandem with the low-tax strategy we want a pro-small business banking and insurance agenda. Banks appear to have little interest in attracting small business people at the moment, but put all their energies into attracting large companies. Economic consultants Compecon say the lack of competition in the banking sector is costing small businesses €500 million. We call on the Government to ease the unnecessary burden placed on them by raising the audit level in line with our EU partners to €3 million of turnover, to raise the threshold level at which VAT is collected to €100,000 and to ensure the reduction in charges by profitable, monopolistic State utilities so that the Government can play a practical role in reducing inflation instead of being a part of the problem.