Speech by Minister for Finance, Michael Noonan TD, at the FG Ard Fheis 2012

Introduction

I would like to thank the contributors to the very interesting discussion that we have had this morning.

The Government has brought stability
This Ard Fheis is a timely opportunity to reflect on our first year in Government. Before last year’s General Election the country was in crisis. There was no leadership or direction from the previous Government. There was constant uncertainty as to whether important legislation would be passed by Dáil Eireann. No one knew who was the responsible minister for key departments, such as health, education, jobs and enterprise. The Irish people demanded a stable Government.

Fine Gael and our partners in Government, the Labour Party, have managed to bring about a return of stable Government to this country.

Manifesto/Programme for Government commitments delivered
The two parties agreed a Programme for Government that clearly set out our commitments as to the Irish people. Already in our first year in office, we have achieved many of the objectives set out in our Programme for Government. By delivering on these commitments, we are reinforcing the stability that the Irish people demanded. These commitments have had positive effects for people throughout this country:

We have kept income taxes fixed. We have avoided further increases, which negatively impact on employment.
We have taken those earning the least out of the Universal Social Charge – 330,000 people.
We negotiated a reduction in the interest rates on the State borrowings from the EU-IMF, which will save the Irish people €10 billion over the lifetime of the Programme.
We assisted those who bought at the height of the property bubble by increasing mortgage interest relief.
We restored the minimum wage, which protects those who earn the least.

These, amongst many other measures, illustrate the progress that has been made and the direct impact on citizens. We are continuing our work to restore our reputation abroad and we are also working to restore the self confidence of the Irish people. I think there is a better view of Ireland aboard now than there is at home. That difference is perfectly understandable given the losses and sacrifices that so many citizens have endured and made.


The Next Challenge – Reducing Unemployment
The Government is fully aware that there remains much work to be done to create the growth and jobs that so many are seeking. All of us know that the single biggest challenge that this Government faces is the creation of jobs. We must create jobs in order to reduce the demoralising effect that unemployment is having on families throughout this country. My first Budget last year placed jobs and economic growth at its core.

Next Steps – Economic Growth - Motions
The motions that we have just been discussing illustrate Fine Gael’s economic approach and the Government’s role in supporting the creation of jobs.

Government measures must support the creation of jobs. That is why we reduced the VAT rate for the tourism sector to 9%, lowered the rate of PRSI and avoided increases in income tax. We can all see the importance of these measures in attracting the additional tourists that are spending in our local communities.

Government measures should be targeted at sectors of the economy that are strongly positioned for growth and job creation. We have seen the positive effect of the Jobs Initiative. The Budget introduced measures to assist sectors with high growth potential; indigenous exporting companies, agriculture and the food Industry and the tourism sector. These took the form of traditional supply side measures.

Demand side measures – NewERA
We need the economy growing again in order to create jobs. To this end, we will investigate and pursue every single job opportunity. In supporting the creation of jobs we are pursuing a range of approaches. These approaches include traditional economic supply and demand side measures, right through to much more innovative measures, such as the Gathering, as explained by Leo Varadker earlier.

NewERA has been a central element of Fine Gael’s approach to returning our economy to growth. NewERA is now set up. It is already performing detailed analyses of the semi-states and coordinating their investment plans so as to yield the maximum return to the Irish taxpayer from the assets we all own. NewERA can provide stimulus effects on both the demand and supply side of our economy.

I am determined that NewERA will invest in projects that yield a commercial return. These projects will have a supply side effect of improving the competitiveness of our economy. They will also have a demand side effect in terms of creating economic activity and jobs through supporting local demand at this time of reduced government spending. It is vital that we generate activity in the construction sector, which has been blighted by such a sizeable fall in activity right across the country.

Apart from NewERA, there are other forms of financing also available to fund capital projects and we are actively working to leverage these. The National Pension Reserve Fund has [€5] billion of funds that could be made available to fund projects. It could also be leveraged up if there are private investors who seek to provide capital in order to earn some of the commercial return.

Other funding sources include the European Investment Bank and possible pension fund investment. The European Investment Bank is already financing road projects, schools and it is providing funds to AIB and Bank of Ireland for lending to SMEs. We are investigating the possibility of pension funds participating in large scale infrastructure investment. Such projects can represent an attractive proposition for pension funds as they yield a consistent return over a long time period.

By utilizing these funding sources and identifying projects, we can put demand back into this economy. This is to all our benefits as it will create activity throughout the country.


Renegotiation of the Programme of Assistance
When Fine Gael campaigned in last year’s General Election we set out that we would improve the Programme of Assistance. We saw the Programme agreed by the previous Government as a bad deal for Ireland. The Government has continuously worked to improve this deal.

The first phase was changing the conditions of the Programme of Assistance. These changes allowed the restoration of the minimum wage and the introduction of the Jobs Initiative, which reduced the VAT rate on tourism activities to 9%. The positive effect of this measure can be seen from the recent employment figures, which showed jobs growth in the hospitality and tourism sector.

The second phase of improving the programme was last July’s reduction in the interest rate on the assistance funds. This reduction is worth almost €10 billion to the Irish taxpayer.

Last month, my colleague Brendan Howlin, led negotiations on the sale of State assets, and succeeded in reaching agreement that one third of the proceeds may be used for investment in the economy.

In more recent months, we have been involved in discussions on reducing the burden of debt associated with the recapitalization of the banks. This week saw a very positive interim outcome reached in terms of the promissory note payment of €3.1 billion technically due today. The use of a long term Government bond will free up €3.1 billion from the Programme funds to aid our return to normal market funding. It also has a real positive impact on the State’s debt sustainability.

This interim solution will allow the more important discussions on the overall banking related debt to continue. Fine Gael has always set out that improvements could be made to the banking debt that this country was saddled with through the actions of previous Governments. We are making progress and it is in both Ireland’s and the EU’s interests to see a Programme country exit from a Programme of Assistance.

Fiscal Programme
This Government is committed to putting our public finances on a sustainable basis for the future. We do not want the State to act as a drag on job creation and economic growth. We must live within our means and at the end of the day, tax receipts must, in general terms, meet our expenditure.

We will continue with our fiscal programme. It is in every Irish person’s interests that the State can continue to pay for services to the public. We are seeking to balance the books through reductions in expenditure and increases in taxation of a ratio of 2:1. We are conscious that economic growth will be a key contributor to the restoration of balance.

Fiscal Compact Treaty
There is a very important decision for the Irish people at the end of May. We will vote on the Stability Treaty. This Treaty is about ensuring long-term stability, recovery, growth and jobs. It’s a continuation of the confidence building in Ireland. We only need look at the Taoiseach’s successful visit to China earlier this week to see that other countries want to invest in Ireland and are opening doors for Ireland. If we were not so fully involved in the Eurozone, they would not be interested.

Being at the centre of the Eurozone means that we have real influence. It was using that influence which allowed the Government to make the proposals for a reduction to the interest rates on our EU assistance. We successfully built a coalition of support behind this policy that culminated in a €10 billion saving for Ireland and savings for the other countries in assistance programmes.

For job-creating investors from whom so many announcements have come in recent months, their decisions have been thanks principally to our position in Europe, to our renewed political and economic stability and above all the determination of the Irish people - despite great sacrifices - to restore Ireland’s economic health.

Challenge the False Claims
As happens during all European referenda, there will be many false claims made by opponents of the Treaty. For once, this EU Treaty will be easily readable. It is only 10 pages long and I would urge all to read it so they can challenge the false claims of its opponents.

When reading this Treaty, people will see that it is basic common sense. The Treaty has the provision of public services at its heart. It says that electorates should decide the level of public service that they want and then Government must, quite obviously, ensure that there is sufficient revenue to fund these services.

The Treaty is about managing our public finances in such a way that over time, taxpayers’ money goes, not into servicing debts, but more and more into public services and targeted growth initiatives to create jobs.

Fine Gael and Labour in Government have returned stability to our economy. Let’s build on this stability. Let’s place Ireland at the centre of Europe. We want to return to growth and to create jobs in our economy with a strong Yes vote on May 31st.

Our future is in Europe; our future is in the Euro; the new Treaty will guarantee our future and the future of our children and our grandchildren; in your own interest and in their interest, I ask you to vote Yes.


Ends