Professor John McHale:

Based on the Department's forecasts, additional nominal adjustments of the kind that make up the planned €2 billion for the coming budget do not seem to be required for the period 2016 to 2018. Things will change a little as we get closer to that but that is the assumption under which those medium-term projections are being made.

The reason we still get an improvement in the structural balance is that essentially we are holding spending growth below the growth rate of nominal GDP. Also, given the progressive nature of the tax system, even holding tax rates and tax bands constant in nominal terms, we can also get increases in revenue as a share of GDP. We can get improvement in the underlying structural balance.

It is important to note that just keeping expenditure constant in nominal terms, particularly given these underlying pressures, can be extremely difficult to achieve. We saw with health last year that because of demographic pressures, the amount of savings it had to achieve were well in excess of the overall cut in its gross expenditure because our savings had to make up for the underlying demographic and other service related pressures. It will still be quite a challenging period, even though the worst will be over.