Martin Mansergh (Fianna Fail)

I welcome the Minister and the Bill which is quite a technical and complex one. Like the previous speaker, I believe we must, to a large extent, trust the work done by experts. It is very clear this Bill is based on very detailed, expert discussions between the officials and interests in the industry and that it is designed to maintain the balance between reasonably light regulation while, at the same time, preventing abuses or scandals which could affect the reputation of the centre.

The previous speaker was quite right in saying that the International Financial Services Centre — indeed, it is no longer confined to one area — has been an enormous success. April 2007 will be the 20th anniversary of the International Financial Services Centre. I was privileged to be at the discussions in December 1986 when it was mooted and Dermot Desmond, economists from the ESRI and Michael Buckley, who subsequently became chairman of AIB, met Charles J. Haughey and one or two of his colleagues. They had three proposals at that time. The country was on the floor in that confidence was low, the number unemployed stood at 250,000 and emigration was high. Borrowings came to more than 12% of GNP and there had been a near run on the currency in October of that year. Three proposals were made, only one of which was adopted. The first was for another devaluation and was not adopted. The second was for serious cuts in social welfare payments. One of those present claimed to be an expert in social welfare but the proposal was not adopted. The third was the establishment of the financial services centre. It is a great tribute to the genius of a much criticised, not to say reviled man, namely, Charles J. Haughey, that he adopted this proposal, ran with it and fast-tracked it. The process of its establishment began within one month of his taking office and was driven initially from the Department of the Taoiseach and subsequently the Department of Finance. At the time the most optimistic scenario was that after a period of years it might employ 5,000 or 7,000 people. A niche market was envisaged. There may have been a difficulty in believing Ireland would be able to compete with major financial centres but 20 years later 19,000 are employed there.

A sum of €1 billion in revenue is attributable to the financial service centre, which constitutes the cost of many schools and hospitals. However, I recall the debates of the 1980s that demonstrated the contrast between what one might call theoretical and practical socialism. In the 1980s there were great complaints to the effect that one could not get revenue from business or capital. If memory serves, total revenue from both sources in 1986 was approximately £290 million. I checked the returns from last year and they came to more than €10 billion, which represented 22.3% of Government revenue. The comparable sum of £290 million constituted approximately 3.7% of revenue. This was not achieved by raising corporation tax or capital gains tax but by doing the precise opposite. The rate of corporation tax was reduced to a general level of 12.5%, while capital gains tax was halved. This was highly controversial for our Labour Party and trade union friends, some of whom are still not really happy with it and cannot believe it has created far more activity and revenue.

In a backhanded manner Gordon Brown's budget this week paid a compliment to the competition because he reduced corporation tax by 28%. Admittedly, he also raised the tax on small businesses. Amazingly, however, when one considers the history of the British Labour Party, his highest priority these days is the protection of the City of London. In its budget supplement the Financial Times stated that several companies had relocated headquarters to countries such as Ireland and Luxembourg recently, citing tax as a factor. While one hears much doom and gloom in this House about competitiveness, the financial services centre has been competitive beyond our wildest dreams.

On the subject of Gordon Brown's tax policy in respect of business, it is interesting to note that both on corporation tax and income tax, he gave with one hand and took back with the other. Consequently, there was virtually no net cost to the Exchequer. For example, although he cut the standard rate of income tax from 22% to 20%, he abolished a special low introductory rate of10%. In Ireland I suspect the Labour Party's promise to reduce the tax rate from 20% to 18% could be accompanied by a similar sleight of hand, whereby a concession would be given with one hand and clawed back with the other. One of the great merits of the budgets of the past two or three years is that this has not happened. Any tax reliefs given have not been taken back by other means.

I noticed some of Senator John Paul Phelan's comments regarding tax and budgetary policy. Although he accused the Government of ramping up spending, it has been highly responsible. However, if one considers the auction politics developing on the Opposition side, I do not know how——