Pearse Doherty (Donegal South West, Sinn Fein) | Oireachtas source

While the joint committee could spend an entire session on that contribution, I will not do so. I acknowledge the Vice Chairman has being generous with his time. I have two further brief questions. Earlier, Professor McHale mentioned that the council had not factored in the taking on of the promissory notes as sovereign debt over a longer period and the impossibility of so doing. The Government continues to claim it is arguing for the retroactive recapitalisation of the banks through the European Stability Mechanism, ESM. Might the Irish Fiscal Advisory Council examine a number of scenarios as to how that might affect Ireland's deficit and the projections to 2015? Were such an occasion to arise, in which the ESM recapitalised the banks and we got back that money, the witnesses could appear before this joint committee stating we now needed to readjust. Can some forward thinking be done in this regard and would the council be willing to model it?

Before coming to my final question, I wish to make a point on one-off events such as the sale of the 4G network and so on. Is there a way to isolate one-off events when considering the deficit figures? My final point concerns the stimulus debate and I am glad the council has started to open up this debate. Despite not agreeing with the Irish Fiscal Advisory Council's major headline regarding the current path, I note its function is to provide advice, analysis and data. The key point in this regard is that the council is independent and this is the point at which I have something of an issue with this report. For example, in the context of the debate on the multiplier, the council has simply accepted the Government's model. What independent analysis has the council undertaken on the Government's model? While the council notes the extant literature and makes reference to the work of Professor Philip Lane, as well as to other models from the IMF and the Commission, it has come down strongly in favour of the Government's own model and its fiscal multiplier of 0.5. Moreover, the council has provided single year and single digit figures for multipliers in its report whereas, as the witnesses are aware, all the international literature states multipliers have a multi-year effect. However, the council does not outline this point. For example, the Bénétrix-Lane model has an average multiplier of four in the first four years, whereas according to the council's report, the Bénétrix-Lane model has a multiplier of 0.7 in the first year and that it turns negative in the third year. I am not 100% sure that is accurate. Moreover, there are other models and one could consider the analysis carried out by Bradley and Morgenroth on the multiplier in the south from European Union Structural Funds. They got an average of 2.88 in the long run but yet the council is opting for a figure of 0.5. The key to being an independent fiscal advisory council is that there is independent analysis but I am concerned the council has simply chosen the Government's multiplier in this debate. What independent analysis has the council carried out in this regard?

I also wish to discuss the ESRI's HERMES macroeconomic model. As a statutory body, would it be appropriate for the council to publish when it makes reference to that model? In the context of the HERMES model, when one considers an adjustment of €1 billion in terms of the deficit, do the witnesses agree that tax increases are the best way to reduce the deficit instead of expenditure cuts? If one examines the six areas the council has chosen, public sector pay cuts are the least effective way to reduce the deficit. I asked the witnesses to comment on some of these issues.