John Paul Phelan (Fine Gael)

I welcome the Minister of State and his officials to the House. I thank him for attending earlier than scheduled to accommodate the House and the smooth passage of business. Fine Gael supports the legislation. The Minister of State said he hoped he made clear to the House the need for the changes. In a previous incarnation I worked in financial services having studied finance in college. Everybody I am friendly with from my college years works in financial services and I pride myself on being up to date with developments in this area but asset covered securities is an area in which I do not have significant expertise. As my colleague in the Lower House said, we must take the word of the Minister of State at face value but I have no reason to doubt his word in this regard.

Over the past ten years, the number of companies operating in the financial services sector in Ireland and the number of jobs created has expanded significantly. The IFSC is thriving and numerous other organisations operate throughout the State in this industry. I would welcome wholeheartedly any legislation that secures those jobs and investment going forward and attracts additional investment. Fine Gael is supportive of any development of our legislation, which has a sound, prudential basis but which also allows new products to develop. Ireland has developed a well earned reputation for being effective in regard to regulation by using a light touch that is not excessively bureaucratic. That reputation must be maintained to attract new entrants into the sector and to retain current investment. Fine Gael believes the success of the IFSC, in particular, is a source of immense national pride but that cannot be taken for granted into the future. We recognise the challenges outlined in the document, Building on Success, including the integration of EU markets and the emulation of the Irish corporate fiscal environment by other jurisdictions.

We also believe the next Government has the potential to overcome these challenges by maintaining the solid foundations on which the IFSC's success is built and developing them for a changed world. Fine Gael will strengthen the three pillars on which that success rests — tax certainty, responsive regulation and a developing skills base — and ensure the IFSC not only remains a powerful force in the economy but grows and develops.

Under Fine Gael and our colleagues in the Labour Party, tax certainty will be maintained and strengthened. For several years, Fine Gael's policy on taxation has been crystal clear. We believe this country does not need higher taxes. That means no increase in income tax rates, corporation tax rates, capital gains tax rates and capital acquisitions tax rates.

In the area of regulation, we must be vigilant to ensure the factors which have made the IFSC a success are maintained. Our agenda will focus on ensuring that the clearing house groups continue to work efficiently, that IFSRA consumer and corporate governance related regulation does not become too onerous and that the EU financial services action plan is implemented domestically in a smooth manner.

There is evidence that new regulation driven domestically or from the EU could impact negatively on the IFSC. The recent report of the National Competitiveness Council indicated that Ireland's ranking on the impact of regulation had fallen to seventh out of 16 countries benchmarked. It is essential that Departments devote greater resources to reviewing the impact of major regulatory change on competitiveness — effectively, business proofing new legislation — and that their assessment be independently tested. This is especially important in regard to the IFSC because of the very mobile nature of the business conducted in the centre and the vigorous international competition for this investment now and in the future.

On a national level, Fine Gael believes our system of economic regulation has become too complicated and is characterised by too many small, sector-specific regulatory bodies that have not proved effective in opening up regulated markets to new entrants in a way that benefits consumers. A smaller number of larger, cross-sectoral regulators would have pro-consumer advantages, in particular, by lessening the dangers of regulatory capture by incumbent monopolists and by providing opportunities to share the scarce legal and economic expertise used in economic regulation and, in the process, generating administrative efficiencies and lower costs for regulated companies.

In the area of skills and skills upgrading into the future, more than 570,000 individuals, or more than one quarter of the current workforce, have not obtained a leaving certificate or equivalent qualification. The long-term solution must be to raise the second level completion rate towards 100%, as has been achieved in a number of European countries, especially in the Scandinavian countries, and to raise further the proportion of school leavers entering third level education. However, in the interim, our social cohesion and economic competitiveness also require greater policy attention on upskilling those already in the workforce through life-long learning.

This skills challenge facing the economy must be addressed by the next Government. Fine Gael and the Labour Party will, when elected to power, commit to increasing the number of people in employment that formally progress by at least one level under the national qualifications framework by 100,000 over a five-year timeframe. For the IFSC, this means producing graduates with more advanced mathematical and financial skills as well as developing Ireland's reputation as a location for cutting edge applied research in financial product development and in risk management.

In the context of the Bill, Fine Gael does not question the need for these changes but I wish to make some other points. There is an ongoing problem in regard to the level of personal indebtedness among people in this country. Senators have raised this issue on different occasions over recent years. Debt levels have risen at an alarming rate in the past two years but the Government is only adding to the problem by ramping up its own spending plans. The Central Bank's monthly statistics for last December have revealed that in the past two years alone, Irish residents have increased their indebtedness by €118.2 billion. This represents an extra spend equivalent to 80% of gross national product. Most has gone on a huge expansion in term loans and overdrafts. Poor planning policy is pushing many young families into debt. Too often they are buying into housing schemes for which public services have not been provided. They are spending large sums of money on travel and child care. Bad policy is putting them on a financial treadmill.

This credit boom has fed into huge increases in Government revenues. The current Government has expanded its spending at a rate 50% faster than GNP growth on the back of those revenues. That results in significant vulnerability for this country. Spending programmes must be built on solid long-term foundations. A property and credit boom are an uneasy basis for the expansion we have seen in recent years.

The figures underline the urgent need for the Government to curb its inflationary policies. The inflation figures for this month are marginally down on last month's but the projections by most of those looking at inflation figures over the next six to 12 months are that they will return to an upward trend very soon. We need to focus more on value for money, particularly from this extra spend in public services. This needs to be based on an agenda of public service reform which has not happened. We also need strategic planning of public services into the future. I am not convinced the Government has grasped the nettle in this regard.

The financial services sector of the economy has grown rapidly. We have gained significant market share in this area in the past ten years. We have been very effective in developing a good niche in the financial services sector. I would not pretend to comprehend the intricacies of this Bill, despite the Minister of State's explanation, but it is a step in the right direction. We need to do everything to promote the financial services sector because it has been a major success story for the economy and country. At a time when employment in manufacturing, construction and other sectors is under threat, there is a real opportunity for further development of the financial services sector into the future. That is what this Bill is based on and, as such, I wholeheartedly support it.