Dr. Tom Healy:

No, it is off. To conclude, an important consideration in this regard is how much of an impact any cut in public sector pay would have on the Government deficit, because the latter is the primary public concern with regard to the continuing fiscal adjustments. In fact, given the way in which some of these changes are taking place, they are likely to have a relatively limited impact on the deficit, when allowance is made for the impact on revenue and other adjustments through tax, as well as the indirect impact on unemployment and more generally on domestic demand. In fact, some evidence I have reviewed from the ESRI would suggest, based on its long-term economic modelling impacts using its HERMES model, that reductions in public sector employment may actually increase public debt in the long run. A perverse result, but that is based, obviously, on many qualifications and limitations of economic modelling. Such is the complexity of what we are doing here that any given cut certainly does not translate into an equal saving, and in some cases the result could actually be perverse.