Dr. Tom McDonnell:

Essentially what the Governor is proposing is the adoption of a lower number, possibly within legislation ultimately. That would impose an additional constraint, which obviously has the potential to reduce fiscal space in future years. It is my view that the approach currently being followed, which is to follow the expenditure benchmark, is sufficiently conservative and one need not go any further than that. Therefore, looking strategically at what he is doing, the Governor is taking a particularly austerian approach to essentially act as a kind of tug-of-war push-back against rhetoric that might build up over the next five or six weeks that attempts to move it in a different direction. In a sense, it might be a degree of smoke and mirrors but that is not to say that the Governor does not believe what he is saying. I am quite sure that he does.

It is true that GDP is now a polluted metric, but I would say that the expenditure benchmark - difficult as it will be to deal with the 26% from 2016 in terms of the reference rate for future years - will potentially increase the fiscal space in future years. One option is to essentially set aside that year or to use a figure that would probably be more accurate, such as 5%, for that particular year to take forward. The latter might be a more suitable approach. Simply to decide that the rules are not tight enough and we must have even more rules - people acknowledge that the rules are already fairly tight in terms of Keynesian demand management - would be perhaps going too far. However, there is certainly a good case for adhering to the expenditure benchmark and the fiscal rules as they stand, notwithstanding my earlier comments about overheating and the potential for more space in 2018, which is a debate that perhaps the committee should have.

The Deputy's other question was about the USC and conversion to the supplementary pension. I have not done any research in that area and I do not have a particularly educated or profound view on that. I like the USC as it is because of its simple structure, minimal reliefs and so on. I would be more inclined to move parts of income tax towards a supplementary pension, although I realise low-paid workers would not necessarily benefit from that.