Mr. Rob Wright:

The dynamic that is important, Chairman, is there were existing tax instruments - stamp duty and revenue flows from the property sector. When the property sector was overheating, those revenues were flowing even greater. It was not that there was a tax policy to enhance all of that but that those that existed, once the sector grew very substantially, revenues grew and the higher the revenues, the higher the surpluses that were evident, which fuelled more spending. That was the question, whether the tax authorities in the Department of Finance were aware of just how vulnerable the overall Government finances were to that stream of revenues, and they were.

The question in that sector as well was, as is now, how do you manage the potential for another overheating of the sector? I think you have done a number of things by restraining some of the incentives that were in place at the time, including interest deductibility. There is more that will be done, I am sure, on the level of mortgage coverage. There are other options in terms of broad-based 100% mortgages to deal with new home buyers that you can incent through targeted tax agreements.

That was a very important element of the dynamic that took place but it was not as if the Government was adding dramatically new incentives for the housing sector but basically not restraining some of the elements that were there. In fact, some of the elements that were there were creating more expectations for spending, not unlike in any other country. In Canada, we had a period of time where we were targeting to reach a certain point on deficit and surplus and there was pressure to spend to meet needs across the country. If there was a surprise to the upside on revenues or whatever, where there was an increased pile of money in one year, there was enormous frustration about why we did not know about that earlier. I think you face the same pressures here from all parties to meet real needs of the economy. That fuelled the fiscal spending.

I did not answer the Chairman as completely as I should have. What has changed very dramatically now is that years ago, countries like Ireland and Canada devolved very tough economic decisions to our central bankers. If the economy was growing too fast, you needed some cold-hearted economist in a senior position to say, "We're going to have to pull back now, folks. Hopefully, we will be open in why we are doing it, but that is what we're going to do. We're going to pull back now." They do that and people may not like it. They will gripe to the central banker but politicians will not be making the final choice on when and how to pull back. Central bankers are much better at pulling back.

Now you do not have a central banker who will deal with the unique monetary policy needs of this country. You are part of a broader economic European Union. It puts a lot more pressure on you, as politicians, to help the people of Ireland to restrain expectations about what you can do and to explain why there is a danger to over-incenting the economy. That is not obvious to people out there yet.