Mr. Seamus Coffey:

I thank the members for those comments. I refer to Deputy Byrne's comments about the choices made in cutting the list from seven to four. No indication was given as to why those three items were dropped. Legal services was the matter on which the judges of the European Commission had made the least progress in 2014, yet that was the one they dropped. Legal services in Ireland cost up to €2 billion per annum. Costs in the Irish legal system are quite extensive when one considers the cost of solicitors, barristers and court cases. The costs appear to be relatively high. I agree that there could be greater benefits for the broader economy if that system were reformed. On the issue of mortgage arrears, sufficient progress has not been achieved, but some progress has been made and at least we see the problem and people want to solve it. In contrast, with the legal costs issue, there are large vested interests - those who benefit from these high costs - and it is unclear why this item was dropped.

On the question of what we should do with the benefits of economic growth and whether the extra money resulting should be used to pay off debt, as the Chair has mentioned, we are unlikely to pay down debt. It must be remembered that we are still running a deficit. We are experiencing economic growth. If we continue to spend more and cut taxes, it will not reduce our debt; it will increase it. We are just deciding to borrow more. The deficit this year will still be more than €5 billion, and even by next year, according to the current projections, it will not be much below that. The issue is not necessarily about reducing the debt. I do not think we will repay it. We will use growth to reduce the debt ratio. The issue is how to stop borrowing money. Our deficit opened up in 2008 and the current projections are that it will not be closed until 2019. That is a 12-year span in which we have borrowed money to run the country on a year-to-year basis. Our objective should be to reduce the debt. In the midst of the crisis, there were a lot of references to counter-cyclical policy. When the crash came the one thing the Government should have done was to spend more money and reduce taxes. Now we are going through a growth phase in which the economy is expanding. If we are to stick by the logic of counter-cyclical policy, this is when the Government should step back. We do not need to undermine the tax base or increase Government expenditure excessively. Changes should be made so that if wages are rising and inflation is present we should adjust income tax. If there is inflation, one should adjust welfare payments and public sector pay, but not excessively. I would argue that we should use the benefits of the growth to reduce the deficit that exists rather than reducing the debt. That will happen naturally. I think we should stop borrowing money.

The lone parent allowance is a complex issue, and when one makes changes there will always be losers. The allowance is a payment based on status. We have lots of payment based on status – disability, illness, and payments for those who are widowed, among others - but the lone parent allowance is a bit different in the sense that it is one of the few statuses that to a certain extent is under the control of the individual. One does not make one's self widowed, sick or disabled. There are issues in terms of the selection of people into the payment. Clearly, there will be losers in the change in terms of moving people across to work-related payments, but the overall system needs to be reformed, not just tinkering around the edges in terms of eligibility. I am in favour of payments for everybody and I feel that we should scrap the broad range of payments that exist and merge them into one payment. Then one would not have a debate about winners and losers.

On debt, which was raised by the Chairman, I do not think we will repay it. We will bring down the debt ratio through growth. The economy is growing at the moment and we should use the benefits of that to reduce the deficit rather than trying to push the EU rules to the extreme, as seems to be the case at the moment, to find how much we can cut tax and increase expenditure to the maximum. At the moment it does not look as though we will meet the EU budgetary rules, but we should try to meet them, bring our deficit down and put ourselves on a stable footing. We have undermined the tax base before and it looks as though we might do it again. The universal social charge is a very unpopular tax, but it is one of our best taxes because one cannot get out of it. If we take people out of the universal social charge and reduce it at the top, we would be pushing people back into income tax, and there is a broad range of ways of getting out of income tax, whether it is for wealthy people using particular schemes or through pension contributions. For those at the bottom of the income distribution, the effective rates are quite low. For this reason, I would favour holding on to the universal social charge and perhaps changing the name of it, as it seems to be such a high-profile issue, but I do not think we should undermine the tax base, given that we expanded it during the crisis. We should use the benefits of it as we go forward, and if it does bring in extra revenue we could provide extra services across the community.

On Senator Burke’s point on health care, I do not know why our pharmaceutical costs are so high. Reference was made to baskets across EU countries that we can use to price ourselves against, but one must remember we are also in the baskets for other countries that are far larger than us, so if the Irish price is one ninth of the price that is set in Germany, it suits the pharmaceutical companies that the price is higher in Ireland, and that can be the same for the UK, France and other countries. There might be some issues in terms of the smallness of the Irish market. If companies can get away with it they will push the price up as high as they can, because that will make one ninth of a difference in Germany, so they will not make much money in Ireland, but getting the price up by 11% or 12% in Germany is clearly a big issue. The question is how far we push it. Do we go to the companies and say we should not be charged such a high price on patent-protected products when the sector has 40,000 or 45,000 direct jobs and perhaps as many indirect jobs again, bringing a couple of billion euro into the country every year? We see the visibility of high prices for those products, but in the background there are huge inflows from the sector itself. It may be the case that there are some trade-offs going on there. It has never been proven but it has been suggested from time to time.