Professor John McHale:

We do not choose the mandate; we are given it. Other people in this room have more influence on changes to the mandate than we do.

The Senator mentioned policy tools regarding house prices. Debt-to-income and loan-to-value ratios have to be kept in the table. Given the current price inflation is not driven by credit growth - the banks are being quite restrictive in the credit they are giving out - they are not the main drivers at the moment but that could change, particularly if bubble dynamics take hold. It was good to see a nice outline of the Central Bank's macro prudential policy tools in the most recent macro financial assessment. They seem to be very aware that these tools have to be there and can play an important role if bubble dynamics take hold.

Regarding what the Senator said about micro-economic reforms, that goes outside our mandate but certainly an awful lot more needs to be done. Hopefully, the new Irish Government Economic and Evaluation Service will also help in cost benefit analysis and pushing the agenda of structural reform.

We are not health experts but, as part of our mandate, we must assess the Government's budgetary forecasts. As we outlined in this and previous reports, there has been series of missed targets and overspending. In our previous report, we referred to the phenomenon of a soft budget constraint, which has been used in other contexts but applies here, where the anticipation that budget constraints will relax leads one to act differently in the belief that one will essentially be bailed out in the end. In the international literature on the soft budget constraint one of the things that is referred to is having career consequences for the people involved. This is relevant to comments made by the Chairman of the Committee of Public Accounts. On the other hand, we have to recognise that the people running the health services are also responsible for the health services themselves and, therefore, it is not just about balancing the books. We have to recognise the very difficult situations they may face.

In a way it comes back to a point emphasised by Mr. Barnes earlier about the importance of advance planning. This is not just about giving a budget to the health sector that may not be achievable. One has to think about the consequences and where the savings can be made by raising various inefficiencies. If one is going to cut spending, it must be done in the right way, otherwise it will have a huge effect on health services. That requires significant advance planning and, therefore, there must be broaden ownership of the quantum of spending in the health area. That underlines the broader point made by the Senator about the importance of micro-economic reforms and how they are organised.