Dr. Kieran McQuinn:

In our estimates of investment, we do not specify. We have not considered it in that level of detail over a multi-annual period. Any advice we have given in the budgetary process has prioritised the housing area for the reasons I have articulated, not just because of the causes within the housing market but because of the knock-on effects of higher rental rates and the pressures that high house prices put on competitiveness. In terms of priorities, I echo Professor Barrett's comments that if we suggest investment in any area, it is absolutely critical for detailed analysis to be done on the returns from any investment programme that needs to be undertaken. Sometimes there is a danger that it can be almost built into the popular vernacular that we need more investment. Obviously, there are areas in the economy where we need that but it needs to be done in a very rigorous, well thought out fashion and a very detailed cost benefit analysis needs to be done on the types of project that will result from whatever expenditure goes in there.

In terms of the broad budgetary packages, or rules, which guide this, the Commission’s take generally on the expenditure benchmark is that expenditure can be increased in line with the potential growth rate of the economy. That is one of its basic principles or guidelines for fiscal rules. In terms of any overarching principle that should guide expenditure in this area, it is important that whatever the Government engages in improves the productive capacity of the economy and by definition leads to increases in its potential output growth, for example, in areas such as transport investment.

The other area that is a bugbear of mine is the call for greater investment in health and while we all wish for greater investment in that area, we need to consider what kind of data and information we have of detailed costings in the health service. I take that as an example of how when we spend large sums of money on public investment, we need to make sure we get a substantial yield from that and that it is spent in a very wise and prudent fashion.