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

I welcome this opportunity to speak on economic growth and job creation. When the Government took office in 2011, it had a clear strategy to restore stability to a country that was on its knees and get people back to work. Those who have lost their jobs have been hit hardest by the crisis. Over the course of the crisis, some 330,000 jobs were lost and unemployment reached a peak of 15.1% in 2012. Getting these people back to work and creating jobs and opportunities for the younger generation is this Government's priority. That is why a range of important policy measures have been undertaken since the Government took office. They have provided a solid foundation for a sustainable economic recovery to restore the jobs that were lost. Significant progress is being made. Employment growing at its fastest rate since 2007. Some 61,000 jobs were created in the last year alone. Unemployment has fallen for 20 months in a row and now stands at 12%. We must build on this level of job creation. That is why the Government's medium-term economic strategy sets full employment by 2020 as its stated objective. This will require the creation of a further 220,000 jobs over the next seven years, a task to which we are firmly committed.

It is fair to say that there is a growing sense of optimism in the country. Following another year of growth in 2013, the economic recovery is set to further strengthen this year. The publication of strong employment figures last week was followed by strong retail sales figures indicating that confidence is returning. Due to our relatively small domestic market, Ireland's growth model must be export-oriented. Exporting sectors are continuing to perform well and are supported by continued reductions in our cost base and improvements in the outlook of our main trading partners. Encouragingly, we are seeing increasing signs of recovery on the domestic side of the economy. We welcome this development because our strategy, delivered through various budgets and other Government measures, is to spread the economic growth evident in the exporting sector to the domestic sector. Achieving this reoriented focus is vital as domestic demand is relatively more jobs-intensive.

The fact that our strategy is working is evidenced by the labour market recovery that is solidly under way. The release last week of the quarterly national household survey provided further evidence of this. Some 61,000 jobs were created in the economy over the year to the fourth quarter of 2013. This represented employment growth of 3.3%. This is evidence that sectoral policy initiatives pursued by the Government have begun to bear fruit. It is not often recognised that a sectoral examination of the economy is undertaken in each budget to identify the scope for job creation. This permits the implementation of targeted measures. A €500 million pro-jobs package was introduced in budget 2014, with targeted measures for the different sectors of the economy and a particular focus on small and medium-sized enterprises. I will mention some examples. Under the jobs initiative, the VAT rate was reduced for the hospitality sector. The Government continued this measure in budget 2014. The role of this measure in supporting job creation is clear, given that over 22,000 jobs have been created in the accommodation and food sector since it was launched. The Government has introduced measures to stimulate increased activity in the construction sector and boost employment. In budget 2014, the home renovation scheme was introduced, which provides home owners with tax relief on expenditure of up to €30,000, excluding VAT, incurred on repair, renovation or improvement works on a principal private residence.

Our policies are working. We have seen three consecutive quarters of annual growth in construction employment. The start your own business initiative, which was introduced to support entrepreneurs, provides that an unemployed individual who starts a new business will be exempt from income tax on the first €40,000 profits of that business for the first two years. This initiative will give people a much-needed incentive to start their own businesses and reduce their dependence on welfare payments. A new capital gains tax incentive has been introduced to incentivise entrepreneurs to invest and reinvest in assets that are used in productive trading activities. The removal of the air travel tax, the aim of which is to support the labour-intensive tourism industry, will support Irish airlines in their bid to attract an increasing number of passengers to Ireland in 2014. In direct response to this measure, Ryanair has committed to bringing an additional 1 million passengers to Ireland this year.

Following research carried out within my Department, I have further enhanced the research and development tax credit scheme by increasing the amount of qualifying expenditure to €300,000. This recognises the importance of maintaining firms that have invested in research and development here previously. Supporting research and development increases the long-term potential of the economy and boosts supply-side capacity, thereby securing higher future employment levels. To support small and medium-sized enterprises, which account for over half of total Irish employment, I introduced a ten-point plan aimed at supporting small and medium-sized enterprises in budget 2013. Building on these supports, the annual VAT cash receipts basis threshold for small and medium-sized enterprises will increase from €1.25 million to €2 million from May 2014. In addition, a new subsidised financial training programme for small businesses has been introduced and lending targets to small and medium-sized enterprises have been set to promote lending volumes in support of real economic activity. Such a sector-by-sector examination of the economy, in addition to the implementation of targeted initiatives to support businesses in these sectors, has considerable potential to generate jobs.

We are aiming to diversify the economy and achieve sectoral strength across it so that we will never be so dependent on one sector again.

Exiting the EU-IMF programme was a key milestone in Ireland's recovery. However, it is by no means the end in itself and my colleagues and I in government are determined to build upon the solid foundations that are now in place. The medium-term economic strategy published in conjunction with the programme exit is the Government's strategy to support growth and job creation. The strategy sets out the objectives to deliver a deficit below 3% by 2015, to eliminate the deficit by 2018 and to achieve full employment by 2020. These are ambitious targets but the strategy shows that they are deliverable.

The strategy is based on three pillars: ensuring debt sustainability; financing growth; and supporting employment and living standards. I would like to briefly talk about the importance of the work under way on each of these pillars. The deficit is on a downward trajectory and the debt peaked in 2013. At just over 120% of GDP, our gross debt levels are higher than the EU average so our strategy is, therefore, to reduce this to a more sustainable level. The first important step here is to run a primary surplus so that we are not borrowing to fund the day-to-day expenditure of the State. We will achieve this for the first time this year. Second, we are working to maximise the value of what we own and offset the value against our gross debt levels. The policy is that when market conditions and price are right, the Government's intention is to continue to dispose of our banking assets.

Pillar 2 is financing growth. It goes without saying that every functioning economy needs an adequate and efficient flow of credit and financing to grow. In Ireland, SMEs are the backbone of the economy across the country and the banking system must support these companies to grow and create jobs. Targets are being set for the banks for lending to both SMEs and mortgage customers. The Government's medium-term economic strategy builds upon the approach we have taken to grow the economy and create jobs. Through future budgets and action plans for jobs, we will seize sectoral opportunities for growth.

Let me conclude by saying that things are now going right for Ireland. Progress to date has been no accident. Things are going right because we are implementing supportive policies. We recognise this and we will not be complacent. Although we have successfully exited the EU-IMF bailout, this does not mean that we will ever allow a return to past practices where expenditure grew to unsustainable levels alongside a tax base that was progressively eroded. The job is by no way complete and the medium-term economic strategy sets out the plan to reach full employment by 2020, with the Action Plan for Jobs 2014 being another important step towards this. The success of our approach will be measured against our ability to grow the economy and support business to create jobs.