Finance Bill 2013- Second Stage- 20/02/2013

At the outset, I acknowledge the Minister, Deputy Noonan’s well crafted and progressive Finance Bill. I also acknowledge the clear exposition by the Minister of State, Deputy Brian Hayes of the fiscal challenges facing this country and the necessary solutions, both within this House and outside it. We should be proud of the Bill and I am sure that when Deputy Finian McGrath gets to speak, he will be big enough to acknowledge the progressive elements of the legislation, while offering constructive and costed critiques.

The Bill attempts to achieve two broad objectives. First, it seeks to continue making progress on the public finances, which is so vital from every perspective, and ultimately to put our people to work. Second, it seeks to support existing employment while stimulating the creation of new employment.

We have a current budget deficit level of 8% of GDP and are heading for 7.5% next year. We are on course to meet the target of 3% by 2015. That is an extraordinary achievement from a position of effective bankruptcy when we entered Government. At that time, the public finances had gone completely awry with enormous implications for employment, inward investment and borrowing for economic stimulus. The negative implications were enormous then but, conversely, the implications of where we are getting to now will be enormously positive. We are on course to achieve the fiscal deficit target of 3% of GDP by 2015.

It is worth noting also that banks are back borrowing on the markets, while banking is beginning to normalise. We are on course for growth this year, which is a great achievement. While the promissory note deal might be somewhat abstract for the public to fully comprehend, it has enormous implications for the country in that it will prevent the borrowing of €2 billion per year for the next ten years. That has a double effect in that the borrowing would have led to a further reduction in demand in the economy, meaning a reduction in domestic activity as interest would be paid, thus leading to a diminishment of services. The sum of €3.6 billion will not have to be paid for each of the next eight years, with consequent implications for front-line services and economic activity generally. Economists are now saying that by the time we get around to paying the debt in 2038 it will effectively have diminished by over 40%.

It is a major deal for the country with great implications. We are back borrowing in the markets and the yield on Irish bonds has fallen to 3.6% today from 15% in 2011. Confidence is generally recovering, which is indicated by the new rating from Standard & Poor’s. It was also indicated in practical terms by the creation of 12,500 jobs for the private sector last year and by continuing quarterly increases in exports, including a rise of 3.6% in the final quarter last year. That is all positive economically.

The Finance Bill does a number of progressive things, which Deputy Finian McGrath and others will be big enough to acknowledge. They know it is the right thing to do. There are major elements, including section 21 which deals with tourism. This allows for an extension of the employment and investment incentive scheme until the end of 2020. That will allow hotels, guest-houses and self-catering accommodation to qualify for a wide range of incentives for investing in the business, including repairs and maintenance. Cash flow would not currently permit this, while banks might not be that fussy about funding such work immediately without this kind of support.
The 9% special VAT rate is being extended in this area of the food industry, etc. It has been a huge stimulus to jobs and will continue to so be in respect of the tourism sector. The tourism industry is vital and provides 196,000 jobs for the country or 11% of total employment. Moreover, it is of great importance in my locality, namely, the lakelands district of Ireland or the Lake District of Ireland, if one likes. The entire Cavan-Monaghan area traditionally has been an important angling tourism centre and there are lots of small guesthouses and hotels which will benefit from the provision in section 21, which I welcome.

Similarly, the provisions of section 19 are critical for my constituency. It deals with the retention of stock relief for young trained farmers, which is important. It is also an incentive for farmers to be properly educated and there is financial support available for them to do this, as well as for registered farm partnerships. I note there is 100% stock relief for young trained farmers and it is being retained until 2015. Moreover, there is 50% stock relief for partnerships, which now have been extended to include beef and sheep partnerships. This is very important for consolidation, improvement in production levels, etc.

Section 46 deals with the restructuring of the capital gains tax. Tax relief will now be made available to farmers where the proceeds of a sale of farmland are reinvested for restructuring purposes and this is very important. This relief also will apply to farmland swaps, subject to certification by Teagasc. This will have a huge implication, in that it will allow for consolidation of holdings, more productive and accessible holdings, economies of scale, etc. Having grown up in a rural community, I am acutely aware of the disadvantages farmers suffer from disparate holdings being miles apart in respect of travel issues and so on. Economies of scale arise in a big way in this regard and consequently, this is highly progressive and will sustain farm families and farm jobs. I personally know many young farmers who are dynamic and enthusiastic about the future of farming in Ireland. They are willing to embrace new technologies and challenges, to revolutionise the manner in which farming is done in this country and they will do their bit to extend production over the coming years. The inclusion of these incentives in the Finance Bill is a clear message of support to these farmers and to the future of agriculture in this country. The Government can be very proud of this measure, which I salute. As Deputy Regina Doherty noted earlier, it has been done by a listening Minister. This issue had been brought to me by representatives of my local IFA executive a number of times and I am happy there has been good news in this regard. Moreover, while it is not germane to this Bill, this provision is paralleled by the huge achievements in the Common Agricultural Policy negotiations or in the multi-annual financial framework negotiations at European Union level in the past ten days. The combination of these budget initiatives and the recent deal on the Common Agricultural Policy is important news for the farming community and I am sure it will acknowledge it as such.

The fuel rebate is an excellent development. It involves partial relief for people who buy auto diesel for business purposes such as hauliers. It has now been extended to coach operators with great implications for the tourism industry and to local buses, etc. It is a good initiative that will involve partial relief up to a maximum amount of 7.5 cent per litre. This is something for which the haulage sector, coach operators, etc., had been lobbying and which was granted by a listening Minister. I believe it will stimulate the economy. It all is predicated on the principle that jobs are at a premium and that employment retention and creation are critical. Ireland’s export sector is extremely important and measures such as reforming the three-year corporation tax relief for start-up companies, increasing the cash receipts basis threshold for VAT, amending the close company surcharge rules to improve the cash flow for SMEs and extending foreign earning deductions for work-related travel to certain additional countries are all positive.

I appreciate the Acting Chairman’s indulgence and state in conclusion that the Government has had enormous achievements to date across a range of areas including the establishment of confidence, job creation domestically and from inward investment and in respect of foreign lenders’ confidence in Ireland with the promissory notes deal being the icing on the cake. The Government has had achievements across all those areas and this Bill is a good and important component of that. However, the Government must continue and a jobs stimulus package is forthcoming. The challenge now is to turn the progress to date into job creation. This will restore the dignity of those who get the jobs. Moreover, each time a job is created, there is a double whammy because the annual cost to the Exchequer arising from the associated health and social welfare-related expenditure falls by €20,000. This Bill constitutes a good day’s work, is a step in the right direction and the House should acknowledge it as such. I believe there is an audience outside this House which does not want destructive or negative politics but which seeks positivity and results for people. Moreover, if there is to be criticism, such people want it to be completely constructive, costed and accompanied by alternative plans. The audience outside for what Members have to say is too sophisticated for the days of magic calculators.

Senator Joe O'Reilly representing Cavan & Monaghan 2010. | An ExSite website