Finance Bill 2010

February 10th, 2010 - Pat Breen

I welcome the opportunity to share my time with Deputy Crawford and contribute to this debate.
Ultimately, there are no real surprises in the Finance Bill which simply gives the Government carte blanche to implement its budgetary measures. The reality is that public sector workers and people on social welfare bore the brunt of the budget. Its most disappointing aspect was the failure to introduce any stimulus measures which would have helped to kick start recovery in the economy, as Deputy Crawford pointed out. Yesterday the Governor of the Central Bank, Patrick Honohan, delivered a speech at Trinity College careers network centre where he warned that youth unemployment had jumped from less than 10% to over 31% in the past two years, much faster than the aggregate rate which went from 4 7% to 13.3 %”.
I have examples of that in my constituency in County Clare, with which the Minister of State will be familiar. The rise in unemployment among the under 25 age group is extremely worrying for the county’s many young people. Over the past two years the unemployment rate for this age group has grown by 137%, from 808 persons in January 2008 to 1215 in January 2009. These are warning signals in respect of youth employment. The Government must deal with the situation and put in a stimulus package for these young people. If not, they will become despondent or do what they are doing, namely, leaving these shores in their thousands.
We have a very serious situation yet the Government is not introducing any stimulus measures to assist employers to sustain employment. In addition, it appears that the Government is not going to take any action to address the serious decline in our tourism and aviation industries. I know that Shannon Airport is very important to the Minister of State, who is from County Tipperary. I am hugely disappointed that no transitional measure is included in this Bill to abolish the air travel tax which is crippling the economy and tourism all over the country but especially in the mid-west region. County Clare is very dependent on Shannon Airport and any decline in passenger traffic at the airport has a very significant knock-on effect on the tourism industry. This tax has been a disaster. When we see three airlines – Aer Lingus, Cityjet and Ryanair – plead with the Government to abolish it, something is seriously wrong. The tax is costing us a significant amount and the number of tourists is reducing. Passenger numbers are collapsing at Shannon Airport. Some 3.6 million passengers went through the doors of the airport in 2007 and in 2008 the number reduced to 3.16 million.
The 2009 figure has yet to be published, but I understand it will be approximately 2.9 million. It is expected the downward trend will continue in 2010. Only last week, Ryanair announced that several of the destinations which were well supported from Shannon, such as Alicante, Faro, Barcelona and Lanzarote will move to other Irish airports.
It is time that the Government called Michael O’Leary’s bluff and abolished the tax. We would see then whether he would bring back those services to our airports. He plans to move the services to other Irish airports, but he will do the same again and remove them when it suits him. The situation regarding the future of Aer Lingus in Shannon is also very uncertain. I have heard no commitment from the new director general that Aer Lingus is in Shannon for the long haul. It will be catastrophic for the region if these services go. The Government cannot just tax its way out of the recession. More innovative ideas are important as the recession deepens. It must introduce a policy that works and admit it got it wrong with regard to this tax.
It appears the Government’s only solution to the current crisis is to place a further tax burden on people. From 1 July 2010, local authority services will attract a VAT rate of 13.5% or 21% and hard pressed taxpayers will be faced with the prospect of paying extra money for waste collection and recycling services. The cost of public car parks and toll charges will also rise. The number of tolls on our roads continues to increase. Consumers who pay for waste collection will be hit with a double whammy as tax relief is to be phased out from next year. Many householders are already up to their eyes in debt and they will not be able to pay their bills.
I welcome some of the provisions in the Bill, in particular, the crack down on the illegal smuggling of cigarettes. Customs and Excise made record confiscations in 2009, with some 215 million cigarettes worth €90 million for the first confiscated in the first 11 months of last year. One haul of 120 million was the largest seizure the history of the European Union. It is estimated that another 826 million illegal cigarettes are imported into this country, but these go undetected by Customs and Excise. A ten-fold increase in the fine for people who are convicted of this crime, from €12,695 to €126,970, is welcome. This should be a deterrent to criminals who cost the State a significant amount in lost revenue. This increased fine is a step in the right direction. We need more resources to be put into the Customs and Excise service if it is to be able to seize the significant amount of illegal cigarettes coming into the country.
I would like to address the issue of the imposition of carbon tax on farm diesel. Coming from a farming background, I am aware how much farmers use diesel. Farm incomes collapsed by over 29% in 2009 and there were cuts in the various farm schemes. Only half of the farmers in REPS 4 have received their payments to date, including the 376 farmers in County Clare. Many farmers are now in a desperate state. This is a time of year when they have no other income and many of them are under severe financial strain. Now they face an 8.7% increase in the price of diesel, compared to an increase of 4.4% for road diesel. This will put further pressure on farmers and agricultural contractors. The Minister must review this decision. The tax should only be imposed at the same rate which is being applied to road diesel.
The extension of the research and development tax credit system contained in the Bill will do nothing for small and medium enterprises or large companies operating here in Ireland. The changes in the Bill only cover companies operating in a corporate group structure. There was a golden opportunity for the Government to show it was serious about rewarding innovation and new ideas, but it has failed the test again.
Last week, we debated the mid-west task force report in the House. There is huge potential for energy and the development of renewable energy projects in the mid-west region, something I have pointed out on many occasions here. We have the Ardnacrusha and Moneypoint power stations and the gas pipeline runs from Limerick to Galway and along the Shannon estuary. There is so much untapped potential. Denis Brosnan and his team stated in the report that a compelling case could be presented, in conjunction with appropriate incentivisation to attract mobile international investment. It is not just international investment we should target. We should also reward small and medium enterprises that invest in research and development.
The future lies in the development of an indigenous renewable energy sector. It is for that reason I believe Deputy Simon Coveney’s New ERA proposal merits a more in-depth response from the Government benches. Under the Fine Gael plan, start-up funding would be provided for research and development, because we see the importance of the development of our smart economy and of positioning ourselves and supporting innovative ideas. If we do not invest in the future, we will not see green shoots in our economy for some considerable time.
Section 4 terminates the tax relief introduced by the former Taoiseach in the 1994 Finance Act for a benefit-in-kind tax exemption on employer provided art objects, which only benefited one individual. This is welcome. However, that exemption should never have been introduced as it is this type of cronyism that has led us into the current situation. The Taoiseach hopes we will have a soft landing, but the country has already crash landed. The Finance Bill, as presented, offers little in terms of creative or innovative ideas. It is another lost opportunity by the Government to lead us of the recession. This is to be regretted.