Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I thank the Senator for his comments and I do not disagree with anything he said. One of the problems with the arguments in favour of demand side stimulus of the economy is the multiplier is probably less than one whereas all the Keynesian theories that seem to be imbued in the mentality of Irish people of a certain age are based on a strong multiplier effect but the economy is so open now that the multiplier effect is not achievable anymore.

As a general approach, we were in a frightful crisis after the catastrophe that occurred. Doing nothing is not an option for the Minister for Finance or the Government in these circumstances. I freely admit that if I try ten things and seven work, I am well ahead and I regard that as success. Not everything that we try works but that should not stop one from trying. Some of them have worked spectacularly, such as the reduction in the VAT rate for the hospitality industry from 13.5% to 9%. That has worked spectacularly as a job creator. We have also had an immediate return from abolishing the travel tax. In return for reducing the tax yield by approximately €36 million per year, many more tourists will visit the country next year. In so far as there is such a thing as a self-financing tax break, that would come close.

The calculation regarding the home renovation scheme is if the VAT rate of 13.5%, which generally applies to building products, is applied to the upper threshold of the scheme, €30,000, that would almost equate to the tax credit being provided to householder, which comes in at €4,500. This is, therefore, not a random set of figures. We think we will get quite a bit of the tax break back through the increased activity relating to materials and the VAT that will be paid. When people leave the live register, there will also be a significant saving in social welfare payments. Then if they come into the tax net, there will be additional USC and income tax payments. Over a period, if additional activity is generated, this will be successful and may not be that expensive. However, the volume of inquiries so far suggests more people may improve their homes and claim tax credits than we expected. We will see how it works out and we will monitor it. The scheme is limited to two years in accordance with the provisions of the legislation. If I or a subsequent Minister for Finance wants to extend the scheme, it will be necessary to return to both Houses to secure a mandate for that. It will not be automatically extended. I am prepared to such schemes to focus a sector for particular purposes but if they remain in place forever, they do not work. They must, therefore, be time limited. I am in favour of making sure this closes after two years.

The Senator is correct about the grants that were introduced in the 1980s to replace doors and windows during the aluminium revolution, which destroyed many a decent house. If one person got aluminium windows, the entire road had to get them. It got completely out of hand and it cost a fortune with limited benefits aesthetically, socially or economically.