John McGuinness (Carlow-Kilkenny, Fianna Fail)

Local authorities should heed the constant call by public representatives, who are sensitive and understanding about this issue, to freeze their rates and examine their planning mechanisms to ensure reasonable planning applications relating to change of use and so on, which are not contentious, are approved expeditiously to enable economic activity. The fees and charges applied to planning permissions should be frozen, thereby not adding to costs.

I agree with the issues raised about wages and free parking. This is related to us passing decision making down the line to local authorities. They should contribute with local chambers of commerce to establishing a vibrant commercial centre of activity which attracts people to shop and do business. That is what is required of local authorities and they must step up to the plate in the same way as there is a role for the Government, agencies and the consumer. That needs to be acknowledged.

The new charges affecting business, such as for water in, water out, refuse collection and so on, are applied locally and they need to be examined and understood because a number of local authorities have money and they have the capacity to engage with the local economy to do the best they can for the businesses they represent and, ultimately, the consumers living there. Not everyone is going to the North shopping and I recognise the difficulty faced by the necklace of towns along the Border. I addressed a conference there last week and witnessed at first hand what is happening.

Regardless of how painful it might be for the Opposition and those of us involved in politics and business, we are being impacted upon by what is happening internationally. No one could have anticipated what happened in America and how quickly it would take off. The price of oil, which is at $50 a barrel now, peaked at almost $150 a barrel a few months ago. No one could have anticipated the movement in the markets of stocks, shares and bonds, which would frighten the living daylights out of any businessman or government because governments cannot find the money to fund business. Alastair Darling owns three banks in the UK and he still cannot free up the cash necessary to fund business.

Opposition Members have posed the question about what the Government is doing in this regard. Senior bank representatives are being brought in. I met National Treasury Management Agency officials regarding my Department and I met the banks' representatives whom I will meet them again in the coming months. Even when the banks are recapitalised, how sure are we businesses will be given the funding they require? There needs to be an absolute guarantee with regard to how that might happen given that taxpayers' money might have to be used to ensure business can be conducted.

I would hold the banks to account over how they are calling in their clients. This is not just hearsay; it is a fact. The facts are taken from chambers of commerce and business people throughout the country who are being called in willy-nilly to have their accounts gone through. Business people have walked back out of the bank with half their original overdraft, with new charges being applied and with less time to pay back their loans. That is simply not recognising the reality of business as we face it in this country. It is not all about Government action. A partnership approach needs to be taken by everyone involved in this situation. We should take the position that we are all in this together — Government, business, those who represent business, local authorities and others.

On the other side of this coin, regardless of what the Tánaiste and Minister for Enterprise, Trade and Employment would do, and she has done much, there is the question of competition. I have heard Ben Dunne say we should examine how supermarkets equal the prices and that the prices should be beaten. Why is there such an acceptance of price from supermarkets, whether for own brand goods or otherwise, so that across the board one gets an accepted price across a number of lines? That is not acceptable and it is not competition. Questions need to be asked as to how this is achieved by the supermarkets and other businesses, because they are making it happen. Real competition must be introduced in some way, shape or form into the marketplace to provide consumers with what they want, the choice they want, the value for money they want and the range of prices and products for which they will go shopping. More needs to be done in this regard.

As we move along in this debate, the question of the consumer arises. What should we do for the consumer and how do we keep the consumer advised? It is true consumers are confronted in their homes every single day with making a choice between buying or not buying and between one product or another, or with regard to keeping the household budget afloat. It is a problem. We need to ensure consumers play a role in this process and are informed as to what they are buying, where they are buying and so on.

There is also the issue of the difference in sterling and the reason that difference is not being passed on. The sooner we get information from Forfás or some of the other Government agencies with which we are currently engaged, the sooner we can take action against these supermarkets and those businesses that are not passing on value for money to the consumer, and the better the value that will be given down the line as we approach this in a constructive way.

We are not coming at this problem from the same platform. Our taxation system is quite different in that we are a low tax economy. We cannot have it every way. We cannot cut back taxes to 15% and have the same range of services. There is a balance to be struck and a choice to be made. It is the Government which makes that choice and which will have to stand over it. This is the backdrop to any debate we would have on this issue.

We must consider also an issue mentioned several times during the debate, namely, how we approach VAT. In so far as the effect of the recent budget decisions in the area of VAT is concerned and their effect on cross-Border trade, which is specific in the motion, the reduction in the UK standard VAT rate clearly will have an impact on the price differential on some goods between this jurisdiction and Northern Ireland. However, the UK has increased excise on alcohol, cigarettes, petrol and diesel to offset its 2.5% reduction in VAT on those items. Consequently, there will be no reduction in the price of those products in Northern Ireland as a result of the reduction in the UK VAT rate to 15%.

Approximately half of the value of goods and services purchased in the State are not subject to the standard rate of VAT and, therefore, are unaffected by the change in the standard rate. For example, all Government services, local authorities, hospitals and schools are exempt from VAT. The majority of foodstuffs, oral medicines, books, children's clothes and shoes are also at the zero VAT rate. Housing, electricity, gas, domestic fuels, restaurant services and labour intensive services, such as hairdressing and shoe repair, have the reduced VAT rate of 13.5% applied to them.

The UK Government decided as part of a fiscal stimulus package to reduce its standard VAT rate from 17.5% to 15% on a temporary basis with effect from 1 December 2008 to 31 December 2009. There are no plans to make a similar reduction in the standard VAT rate in Ireland to the UK level. As I said, it must be recognised that our starting point is very different from that of the UK. We already have a low taxation rate, especially in the area of direct taxation — both income tax and corporation tax — which has a direct impact on all employment in the State. This lower starting position for direct taxation makes it more difficult to reduce taxes even further.

Already, as has been stated by the Taoiseach and the Minister for Finance, we are borrowing 10% of all our day-to-day spending on public services. This is unsustainable and we face difficult choices in bringing forward corrective measures. In the recent budget, the Government introduced a general package of revenue raising measures to fund key public services and in this regard one measure was to increase the VAT rate by 0.5%. Each percentage point reduction in our standard VAT rate would cost €450 million in a full year and for Ireland to reduce the standard VAT rate by 2.5 percentage points would cost some €1.25 billion in a full year. For Ireland to reduce the standard VAT rate to the UK level of 15%, which would mean a reduction in the standard VAT rate of 6.5 percentage points, would cost almost €3 billion in a full year. This is equivalent to approximately 2.5 times the amount of the revenues to be raised in a full year through the new income levy. There are stark choices to be made.

Senator Buttimer referred to what he called my solo run on the public sector. It was not a solo run. It was my view expressed in as constructive a way as I could express it. I put it out there and believe it was worthwhile to do so. It was my view on how things could be changed. It was a view I believe is absolutely necessary if we are to look at both sides of this balance sheet, which dictates we must spend less. If we are spending less, the public sector must create greater efficiencies and must deliver in the same real time as business does. I see nothing wrong with that.

The Senator made the accusation that Government did nothing and that another quango was appointed. If one considers all of the OECD report, one will see there were negatives and positives within it. I acted and explained what I felt that report was about. If one considers what is being done currently by Government, one will see there is a focus on the need for a more efficient public sector and, as the Taoiseach said, the need to do more with less, which must be achieved.

The appointment of those key people to ensure this happens is not to create another quango. As I understand it, that body will provide bi-monthly reports. Businesspeople who asked for this in the context of this debate are now engaged with the Department of Finance to ensure there is oversight in regard to the necessary changes and reforms. It is good they are involved. There is a timeframe involved and engagement is taking place with the various Departments.

I have no illusions about this process. It is a huge undertaking. It is a major attempt to modernise the public sector but it is a demand that is being made not just by me on a solo run but also by those who are working within the public sector. The greatest response I received to what I said was from a number of people working within the public sector itself, in one case asking that they would be saved from themselves. It is the system and culture that needs to be changed.

The crude tool used to define what should be done, such as cutting 10,000 staff or whatever might be suggested, is one that needs to be considered. However, regardless of how many are taken out of the public sector to save on costs and create greater efficiencies, we are still faced with the problem of having the same culture and system in place. Anyone in business will know we need to change the system and the culture where it is not working. There are people who will say exactly that. As this debate rolled on over recent months I heard little from Fine Gael, and my compliments to Deputy Bruton in the other House who articulated a stern point of view on this. If we are to bring about change, we must do it collectively and understand what needs to be done. A considerable amount of work needs to be done on this and I wish well those who have been appointed.

As part of its statutory mandate, the National Consumer Agency, NCA, is charged with promoting public awareness and information. It has dedicated significant resources to raise consumer awareness on the various prices and choices available in the marketplace, especially in groceries. Through regular grocery price comparison surveys, the agency has sought to enable consumers to inform themselves as to where they might get the best value for money.

The agency published the results of its first survey in February 2008. The key findings of the survey were that there was virtually no price difference between the multiples on branded goods, a point I made earlier, but greater value was available from some retailers in meat, fruit and vegetables and other products. Following this survey, the NCA urged consumers to be more strategic in how they shop and suggested they should consider splitting their shopping among various retailers to achieve the best value for money. I have noticed that shoppers in my home city of Kilkenny identify where they can get the best choice and value. This needs to be encouraged.

This brings me back to my opening remarks when I spoke about the agencies, the Government, the local authorities and the consumer. We are all in this together and we all have work to do. This will not be achieved overnight. I understand the difficulties which exist with regard to cross-Border shopping and I understand what needs to be done. Those in this House need to be reassured that the Tánaiste, my Department and the Government generally not only are aware of it but are engaged directly in trying to ensure a resolution is found to all the issues raised. However, it is a complex matter which will take time.