Rónán Mullen (Independent)

Cuirim fáilte roimh an Aire Stáit. I echo the words of welcome to the Minister of State and wish him well in his appointment. He is a very good fit for the job and very approachable. He will work in a very important area. I was not in the Chamber when he made his speech but I have read through it. We must acknowledge that many different initiatives are being taken. They are welcome. They include the partial credit guarantee scheme, the initiatives to try to ensure-micro finance for small start-up enterprises to encourage entrepreneurship, easing access to public procurement for small and medium-sized enterprises and trying to minimise costs for business, all of which are essential.

Central Statistics Office figures show that the unemployment rate rose from 14.7% to 14.8% last month. The number of people signing on has increased to 443,400, the largest monthly increase since August. This debate is being held against a backdrop where our unemployment rate continues to edge towards 15%. While recent initiatives focusing on improving job creation, such as those I described, are welcome, they must not create an illusion that Ireland's unemployment crisis will be resolved in the near future. The continued deflation of the domestic economy is starkly reflected in the figures. When one considers that the number of housing starts last year was around 10,000, down from close to 80,000 at the height of the Celtic tiger, one can see how the knock-on effect in construction and related industries has inflated the total number on the live register.

The nature and scale of our economic collapse and the resulting unemployment increases, which have disproportionately affected the construction sector, give rise to concerns that Ireland will see, and is already seeing, a long-term structural unemployment problem. This structural unemployment occurs when a labour market is unable to provide jobs for everyone who wants one because there is a mismatch between the skills of the unemployed workers and the skills needed for the available jobs.

The demand-side stimulus proposed by the Minister in these so-called "job activation" measures may not work to easily abolish this type of unemployment. The key problem with the sort of structural unemployment we see in the figures is the number of persons who are long-term unemployed. Some 43% of those who are unemployed are now classified in that category compared with 21.7% a year earlier.

This long-term structural unemployment is encouraged to rise by persistent cyclical unemployment. If an economy suffers from long-lasting low aggregate demand in certain sectors, for example, construction, it means that many of the unemployed become disheartened while their skills, including job-searching skills, become rusty and obsolete.

When we begin to see economic recovery, we risk entering so-called "jobless recovery" where an economy experiences growth while maintaining or decreasing its level of employment. Depressions and jobless recoveries were common in many economies after the Great Depression where unemployment remained high for years after GDP had returned to growth. We can see this in the latest figures for job creation in the United States. Persistently high unemployment - 10% or more for decades - occurred in many countries throughout the 20th century with devastating social consequences. Unemployment is now at a level comparable with that recorded in 1994 when the unemployment rate was 14.7%.

I now turn to some of the key measures. I refer to the levy on private pension funds, intended to raise €470 million a year. The Minister announced that this levy will apply to the capital value of assets under management in pension funds established in the State. It appears that the market value will be determined on 1 January 2011, suggesting that the same absolute amount will be paid in each of the four years. In justifying the levy, it was stated that alternatives for increases in taxation elsewhere in the economy would be more damaging.

Practical difficulties will arise as to how this new levy will be paid and, in many instances, questions will arise as to who will bear the cost of the levy. For example, in a defined benefit scheme, will the cost of the levy be a cost for the employer or will it be passed on, in some way, to the employee through reduced benefits? This is unclear. While it is clear the new levy will apply to occupational pension schemes, for example, defined benefit and defined contribution schemes, and personal pension plans, it is unclear whether people in receipt of pensions or holding approved retirement funds will also be affected. The Minister has committed to consulting the pensions industry in regard to the introduction of this levy but it is important that clarity is brought to this area as soon as possible in order that people can assess the impact and appropriately plan for their retirement.

I refer to tourism-related measures. There is the proposal to reduce the air travel tax to zero. This is conditional on airlines opening new routes and boosting passenger numbers. There is also a cut in the lower rate of VAT. Our tourism product has been widely praised and there is much talk about the Irish brand. I heard one aspirant for the presidency talk a great deal about the Irish brand and what he might do to strengthen it abroad by bringing large numbers of people to Ireland. I thought it a novel, although not unwelcome, initiative to be taken by the presidency.

This brand is widely praised even at a time when there are so many negative international headlines about the country. Yesterday, Ireland was voted the holiday destination with the highest satisfaction rate among US travellers. The Wave awards, run by US travel magazine TravelAge West, asked travel operators and readers to vote for the winners. Ireland came out on top in the highest client satisfaction category in Europe.

This is in conjunction with new CSO figures which show a 12% increase in tourist numbers from North America. The Minister is clearly aware of the importance of the tourism sector and the large reduction in VAT to 9% for certain goods and services, mainly related to tourism, will apply primarily to restaurant and catering services, hotel and holiday accommodation and various entertainment services, such as admissions to cinemas, theatres, museums, fairgrounds, amusement parks and the use of sporting facilities. In addition, hairdressing and printed matter, such as newspapers, maps and programmes, will be charged at the new rate. This is a welcome development which I hope will stimulate the sector further.

I am glad the Minister and the Government have seen fit to reverse the cut in the minimum wage and that they have committed to restoring the minimum wage to €8.65 per hour from 1 July 2011. The last Government's supply side economic rationale for the minimum wage cut was that any measure which kept minimum wages from falling prevented real job creation. It argued that too many people want to sell their labour at the going price but cannot thus a fall in the minimum wage would stimulate job creation growth. This assumes perfect competition exists in the labour market. Advocates of wage cut policies believe these policies can solve the supply problem by making the labour market more flexible.

However, the predicted negative impact on the live register figures is based on incoherent and simplistic logic that ignores mitigating factors, such as non-minimum wage labour markets, registered employment agreements, sectoral agreements and so on. That is not even to mention the real social cost of condemning individual workers to attempt to support themselves on an hourly rate which, considering that the cost of living has not fallen that significantly, is derisory. I am glad the Government has taken the step to reverse that cut.

Leis an méid sin ráite agam, ba bhreá liom mo chuid dea ghuí a chur in iúl don Aire Stáit. Tá súil agam go n-éireoidh leis san obair íontach tábhachtach atá ar siúl aige. Tá sé tábhachtach dúinn uilig go n-éireoidh leis ina chuid dualgas.