Address by Brian Cowen T.D., Minister for Finance to the Federation of International Banks in Ireland

24.04.07

Ladies and Gentlemen:

Our economy is stronger than at any time in our country’s history. Our citizens are presented with greater opportunities and better life chances than ever before. The fear of unemployment has been replaced with the reality of good jobs paying good wages and offering good prospects. We are investing more resources than ever before in our health, justice and education services. Our transport system is being overhauled, rebuilt and transformed. At the same time, we are repaying our national debt, putting money aside each year to pay for future pensions and reducing the tax burden on working people. We live in truly exceptional times.

I believe that these desirable results are not the natural order of things. I do not accept the premise that these outcomes would inevitably happen if we had the patience to hang around and wait long enough. We should remind ourselves that many thousands of our people could not afford to hang around in a country without prospects, without employment where the life blood of our society was being squeezed by punitive taxes. I do believe that our country’s performance and its emergence as one of the most successful economies in the world is the result of sheer hard work on the part of the people of this country responding to the right policies, the policies implemented by this government.

Now the time has come for us to take the next steps forward for the economy and that involves implementing policies in government which secure our prosperity and use it as a base on which we will build a better Ireland.

In essence, our economic philosophy can be reduced to four, straight-forward rules:

Invest in education, skills and infrastructure to raise productivity, to enhance competitiveness and protect prosperity

Reduce taxes to reward work, promote enterprise and spread the burden fairly across society

Increase spending on services to improve the lives of citizens

Follow a prudent budgetary policy characterised by balanced budgets and falling debt burdens so that our spending and tax policies will be sustainable in the long run

Those policies have been the basis of our success in the past ten years. If re-elected to office in a few weeks’ time, they will be the basis of our success for the next five years. A strong economy is the foundation of all our proposals and our policies are designed to secure that foundation.

If given the confidence and trust of the people once more, we will continue to reform our tax system alongside and in support of the National Development Plan. We will do so because we believe in low taxation from experience and from conviction.

It rewards people for their effort.

It helps working families by putting more income directly into their pockets.

It promotes social and economic inclusion.

It supports enterprise and risk-taking and

Our proposed tax reforms will increase opportunity for all our citizens.

Our proposed tax reforms, and the ones we have previously implemented in government, are a central part of the economic strategy we have pursued and we will pursue. We will also ensure that these tax reforms and tax reductions are for keeps, not just for the election campaign. By delivering these tax reforms and reductions within a sustainable, balanced budget environment, we will keep our economy strong and shield it from adverse external influences.

The policies we have pursued in office and our proposals for the next five years are all designed to underpin and enhance our national competitiveness. This is not for some abstract reason but to secure and grow employment, high-quality employment offering good pay and good prospects.

The competitiveness debate tends to centre on issues of cost. We are facing an increasingly globalised marketplace, not least in services, with countries offering lower wages and lower costs competing in many instances for the same investment as Ireland. However, I do not believe we have to compete on the basis of costs alone. Nor do I believe that our job strategy should be about competing on the basis of costs alone. Ireland is now a high-wage economy and it is in our best interests that it remains a high-wage economy. That is not to say that we should let our costs grow significantly from here or that we should award ourselves pay increases that the country clearly cannot afford. No, it means that we can only compete and we must compete on the quality of our skills and the quality of our capital. That is a sustainable competitiveness strategy and one which will secure our prosperity.

In terms of capital, we are implementing the National Development Plan which will give Ireland the infrastructure it needs if it is to attract and retain the best mobile investment in the world. That is why we are building a modern transport system fit for the 21st century. That is why we are building better schools, better hospitals, a better social infrastructure because we recognise that countries compete too on quality of life issues. And of course, through our guarantee that the corporation tax rate will remain at 12.5%, Ireland can remain a preferred location for the world’s most value-creating, profitable businesses. Ireland’s corporation tax regime is safe only in the hands of the Government.

Let there be absolutely no doubt that we will resolutely oppose any attempt to introduce tax harmonisation within the European Union, either directly or through technical measures.

Our policies on indigenous industry are central to our plans to boost the country’s capital base. We believe that small business is vitally important in terms of its contribution, its potential and the difference it makes in communities the length and breadth of the country. That is why we will continue to support and enhance the Business Expansion and Seed Capital Schemes.

On skills, we have ambitious programmes in education with our emphasis on the creation of 4th level Ireland. Look at the resources we are committing to R&D and innovation. Our taxation system, central to attracting investment, is also pivotal in the global competition for skills. By rewarding work and by keeping our taxes on labour low, we will retain existing skills and attract new people with new skills. That is why we will reduce and reform our income taxation system further. The tax system will continue to reward enterprise and hard work under Fianna Fail, not punish them.

Our focus is on sustainable development and what will allow us to keep Ireland working today, tomorrow and in the long term. Yes, skills and capital are the drivers but we must ensure that the country’s legal and regulatory framework is not impairing enterprise and development. On return to office, we will instigate a review of the entire economic regulatory environment. This review will be designed to ensure that the existing regulatory regime is operating efficiently in support of public policy, is balancing the needs of users with the requirements of producers and is not imposing excessive costs on the economy.

I believe that it is also important to point out, particularly to a group such as yourselves, that we intend to deliver a reduction in the General Government Debt burden and growth in the National Pensions Reserve Fund which together will see Ireland’s public debt being reduced to 3% of GDP in net terms by the end of 2012. The present figure for the net debt is 14.5% of GDP.

It will be an historic achievement that a quarter of a century after this country was one of the most indebted in the world, we will virtually eliminate the debt in net terms. That is testament to the policies we have pursued in office and will continue to pursue if returned to power. It is also the right thing to do.

The move towards no net debt represents an important part of this Government’s philosophy. We have turned deficits into surpluses. We have created a national pensions fund. We have chosen to do the right thing. That’s what’s at stake here in this election campaign. It is at the heart of it.

Combine the right policies for our country’s long-term development with moderate spending growth, budget surpluses and a further significant reduction in Ireland’s net debt and you have a powerful recipe for the prudent, responsible management of our country’s affairs. It is clear from our projected budgetary outturns that our polices are sustainable for the future.

Our policies and approach will underpin our competitiveness, strengthen our economy and position Ireland for the future.

They will secure the gains already made and use them as a base on which we can build for the future.

They balance ambition with responsibility and are sustainable for the long term.

Thank You.