Alan Kelly (Labour)

I welcome the Minister, Deputy Willie O'Dea, from a neighbouring county of mine. It is regrettable that the Tánaiste and Minister for Finance cannot be with us. He might give us the pleasure of a visit at a future date, as I am sure there is a requirement on the horizon to discuss the economy. I take this opportunity to comment on the economic situation in which Ireland now finds itself but in doing so I do not want to be accused of talking down the economy. This is an old line usually trotted out by Fianna Fáil and the Government when Members of the Opposition seek to have a reasoned debate on the economic situation, which is what I seek. It is amazing how Fianna Fáil always takes credit for the economy when it is on the way up, but fails to take any criticism when it is on the way down, or when there are changes in its momentum. We are suddenly being asked to believe external factors, such as the downturn in the US economy, are at fault, as demonstrated by the Taoiseach in his recent comments. We are told none of the Government's policies is at fault. One cannot have it both ways. Let us face the fact that our economy is at a critical juncture.

Let us debunk the myths and begin by dealing with the facts as they stand in March 2008. The housing market is dead as a driver of the economy. Many of us are of the opinion that the fall off in the housing market has led to a downward spiral in the economy and has infected many other sectors. Some analysis is required regarding how this has been allowed happen under the watch of the current Minister. The level of growth in the domestic housing market over the past eight to ten years led us to a false dawn. We may well see that many of the elements that it has fostered will have a long-term negative impact on the very economy it was supposed to be helping to advance.

While the housing market was booming, we were in reality eating our own flesh from an economic point of view. The housing market boom did not contribute to exports and it inured many of us to any form of international competition. We did not feel we had to compete in many sectors as the migration to the construction industry and the consequent production of massive sprawling housing estates had us in a cocoon. Now that we are in the fresh air, we are struggling to stand on our own feet again. The very immune system of the Irish economy has been attacked by this Government, its policies and, most of all, its failure to act to diversify domestic housing construction as a driver in the economy.

It is said that for every 10,000 houses that will not be built, we will be reducing our growth rate by 1%. It is estimated that approximately 45,000 house will be built this year. More importantly, the decline will deprive thousands of people of work. Thousands of tradesmen, in all constituencies, are now being made unemployed. To date, the figure amounts to approximately 20,000 people.

We need re-skilling programmes to bring many unemployed individuals back into the workforce and the Government is way behind in this regard. These people should not be the ones to suffer due to the mismanagement of the housing sector. Neither should construction workers suffer through their wages, as the Construction Industry Federation wants, nor should the unfortunate young people who have 100% and 105% mortgages and who are now possibly facing negative equity be made to suffer. Surely, if people must suffer, it is those who made tens of millions of euro from construction. However, we should not be at this point in the first place.

We must learn from this experience collectively. It is unfortunate that the Minister for Finance did not learn a lesson quicker. We need to get back to basics. The Government is continuously pushing down the expected growth rate for the economy. It is now estimated at 2.3%, according to the Minister for Enterprise, Trade and Employment on Sunday. The revenue yield is down substantially and tax receipts have dropped dramatically. Statistics for February showed disappointing tax returns, yet there are budgetary increases in capital and current spending of 12% and 8%, respectively.

A worrying trend is that it is not just a drop in stamp duty that is contributing to this decline; corporation tax is down by €100 million, VAT receipts are down by €200 million and capital gains tax receipts are down by 34%. Inflation is raging, at almost 50% more than the EU average. Consumer confidence is very low. There are now almost 200,000 people, or 5.2% of the workforce, on the live register and this is the highest figure we have seen in over eight years.

Redundancies in January have increased by almost 30% by comparison with the same period last year. There have been significant losses for investors and pensions in the Irish stock market. Between 1995 and 2000, export volume grew by 20%. We now face an increase of 5%. The competitiveness indicator shows we have slipped 17 places in the past five years. The strength of the euro vis-À-vis other currencies is having a dramatic impact on the potential of our companies to export and it is also having a great impact on our tourism industry, as will be clear from this year's performance. House repossessions have increased by 350%. As a nation, we have one of the highest levels of personal indebtedness in Europe. We have high fuel prices. The price of a barrel of oil has increased by $51 dollars in a year. I will let the Minister off with that.

The Minister, I regret to say, has presided over the worst deterioration in Irish public finances ever. He has turned an Exchequer surplus of €2.3 billion into a deficit of €4.9 billion in a short period. If current trends continue, with revenue decreasing and spending continuing on its current course, we will be facing a deficit of €8 billion.

We need to be innovative in order to turn this economy around but, unfortunately, given the Minister's track record, I do not have any faith that he will be able to deliver. We need the Minister to stand up and be counted because, despite his seemingly huge presence within Government, it is not happening for him at present. His non-activity on the economy is practically killing it.

We need to get back to basics, by which I mean we need to focus on what we are good at, where we can compete and the techniques we can use to foster growth in specific high-economic-yield sectors. As the commentator David McWilliams might have said, we need to begin creating value again.

We need to put in place policies that will support high-value business services, be they in the areas of insurance, risk management, computing, IT or financial services. This sector of the economy has performed remarkably well over recent years and we have seen an almost tenfold increase in the volume of exports in this area. However, given the educational profile of our young people and the increasing demand for these services, this area can grow much further. We must provide incentives to push this sector.

We need to promote research and development in the area of renewable energy. Recent moves in this area are welcome but more needs to be done. The €200 million that has been allocated is not enough. The point is that we should have been doing this years ago. This is a key point that needed to be addressed in respect of competitiveness. We all know we need to consider alternative green technologies to lower our dependence on imported fuels. We are almost 90% dependent on them at the moment. The Minister should focus more on wind energy, and particularly wave energy, in order to make us more competitive.

We need to change dramatically the way in which we promote the technology sector. This is the most important point I want the Minister to address. If we are not more innovative in our policies in this area, we will not be able to turn this economy around as we desire. A divine trinity of components comes into play when promoting the technology sector. These include education, infrastructure and investment policy and techniques. We have catered for education in that the Waterford and Dublin institutes of technology and other colleagues are producing great graduates with IT backgrounds. Unfortunately, we do not have the appropriate infrastructure. The roll-out of broadband is the single largest national infrastructural issue facing us and the Government's record in this regard is a disgrace. I will not dwell on this matter because I could use up all my time on it alone.

The third component comprises investment techniques. We need to increase considerably the quality and volume of incubation services for SME-type IT companies that will allow us to foster new ideas across a range of technology disciplines. Unfortunately, the day of the big catch from the IDA in the technology sector is gone. In my constituency of Tipperary North, the Shannon Development-IDA parks need to be filled with technology start-up companies. It is sad that Shannon Development has recently revealed to me that it cannot obtain a site to develop the "e-towns" project for SME technology companies. Land prices are too high when the owners see Shannon Development calling. This has been happening for years and must be stopped as it stymies growth. I know many SME companies in the sector that would love to move into such facilities.

We now need to foster our own wealth indigenously. I was very disappointed the Minister failed to make advances in the technology area in light of the budget. We need to find ways in which we can support technology-orientated SMEs bringing in medium-risk investment from the domestic market in a friendly way. We need grant schemes and tax incentives that will work. We have seen so many of them in the past from Fianna Fáil that have not worked and only promoted the interests of its patrons. Workable incentives are needed now more than ever for the technology sector because SMEs find it much more difficult to gain access to investment capital from banks, which are putting the squeeze on them.

In the IT sector, we should encourage development of embedded computer systems and devices. Why are we only investing €1 million in an EU joint technology initiative in this area? We should also encourage investment in mobile integration services, digital advertising, intellectual property rights and their management, second-generation and third-generation web technology development and gaming technologies. This is not rocket science. Most IT gurus could compile such a list better than I could, I have merely selected some of the areas with which I am familiar from my background.

We need to examine our techniques for generating investment from abroad. We need Keynes-type economic strategies in order to get our economy moving again in the direction we desire. We cannot just sit on our hands, as is happening at present.

I welcome the increase in VAT thresholds in the Finance Bill, but we need to consider total VAT reform for small businesses. We need to fast-track the national development programme and broadband roll-out and integrated ticketing in particular. When considering public sector reform, we must consider in particular developments at management level and ensure that we measure performance and achieve accountability. The HSE is an obvious target but we must also consider tourism and job creation agencies. Fresh regional investment policies that achieve positive discrimination are required.

On the specifics of the Finance Bill, I do not agree with the sly privatisation of the construction of hospice care facilities by the Minister through capital tax allowances. Will the Minister finally put us out of our misery in respect of decentralisation? We have exceeded the deadline and we have only witnessed a 10% increase. On the issue of pensions, we need to consider the merits of offering tax relief at the current rate. Up to half the population do not have a pension fund. Why are we still imposing VAT on defibrillators at a rate of 21%? Why are we not doubling the capitation grant to primary schools? Why are the tidy towns organisations not being accorded charitable status?

I welcome a number of points in the Finance Bill but I do not have time to address them, and there are other points I do not welcome. I will move amendments to the Bill on Committee Stage.

The gains made by the PAYE worker in the budget are already rendered meaningless by inflation. If someone earns approximately €35,000 and does overtime or gets a bonus, he or she must pay tax on it at a rate of 41%. The Minister will soon have a salary of €270,000. With that salary comes responsibility, and in this regard he is not measuring up. His self-delusional and non-interventionist attitude is not working. He is acting like the kid who thinks he knows something all the rest of us do not.