Building sector the scapegoat of economy, says Noonan

CONSTRUCTION and development has become the “scapegoat” of the economy but it is a “key part” of any developed modern society, Minister for Finance Michael Noonan has told the Fine Gael ardfheis.

He said construction became such a dominant part of the economy “it consumed the resources for investment in manufacturing industry and small business and went to over 20 per cent of GDP”. In a country the size of Ireland building and development should represent 8-9 per cent of GDP but “it has dropped down now to almost 5 per cent”, he said.

Mr Noonan, who described himself as a mechanic trying to make an old car run more efficiently “because we can’t afford to buy a new one”, said they had “nuanced” the Finance Bill for construction. Measures include no capital gains tax for people who invest in property in Ireland in 2013 and hold it for seven years.

“We have to move the overhang, get it out of the way” and then restore the construction industry to “a much smaller role but a real role because it’s very important that that would happen in Irish society”, Mr Noonan said.

Employment in the industry would never again return to the levels it reached but there could be a “significant core” still working in this area. “It has become the scapegoat of the economy but I want to stress you can’t have a proper economy without that area being a vital area as well,” he said during a debate on the economy.

He also said there had been a huge flow of foreign direct investment into Ireland “and key to that obviously is the 12.5 per cent” corporation tax rate. “We’re going to stick with the 12.5 per cent. It’s not negotiable.”

But he said it was a “very competitive business attracting foreign direct investment” and the Government was “constantly redesigning the package” to make it attractive to investment.

Minister of State for Small Business John Perry warned “if the banks aren’t delivering on the €7 billion that’s ringfenced for small business I will be asking the Government to reallocate this money to other bodies that will give it to viable small companies”.

He was responding to delegate Diane Sexton from the Swords branch in Dublin North who highlighted the difficulties for small businesses which employ up to 700,000. She said the Government needed to put “persistent” pressure on banks for affordable capital. Further “innovative and stimulating measures” should be considered to help SMEs thrive.

Catherine Yore, a Fine Gael candidate for Meath West in the general election, said the visits of “Queen Elizabeth, President Obama and vice premier Xi Jing Ping of China truly signify our past, present and future” in relation to Ireland’s economy.

Kieran Coleman from Meath East, the founder and director of a water treatment firm employing 13 people and six contractors, urged the party to “make a concerted effort to reduce red tape” for small businesses. There were huge costs in time to companies dealing with the problem, saying that “small- and medium-sized businesses provide over 60 per cent of private sector jobs in this country and in the past 15 years have created over 300,000 jobs”.

Minister for Tourism Leo Varadkar highlighted the tourism industry as one of the sectors the Government had prioritised. Reducing the VAT rate to 9 per cent, reducing employer PRSI and a new visa scheme for people from developing countries to visit Ireland, and through “continued investment in attractions, marketing and route development, albeit with reduced resources”all helped the industry, he said.