Mr. Michael Tutty:

I will take that question. Yes, we are trying to narrow the differences between us and the Department so that we can get a fix on what the real demographic pressures are, but our estimates are still somewhat ahead of the Department's. They are not way above them - there may be €100 million in the difference - but, as I said, I think we have worked out in the area of health what the pressures are and are pretty well in agreement on that. I think our difference would concern more the question of what to do about inflation in making forecasts than the demographics.

The gap between us is bigger in that area. We feel that one cannot look into the medium term and say this is the amount of room we have for fiscal space, while ignoring the fact that inflation will take up quite a considerable part of that space. One does not have to talk about the indexation of social benefits or that sort of thing, but one must take account of the fact that there are inevitable pressures from inflation that will add to the costs of social welfare and other things over the medium term. If one assumes that will not happen, it is not a good basis for planning.

In the recent medium-term expenditure review published by the Department, there was an interesting sentence which seemed to say that it is moving in that direction to some extent. It refers to work being under way to develop a framework for modelling Government expenditure that goes beyond demographic drivers and that separately modelled the evaluation of volume and demand and price impacts. In terms of looking at the price impacts on public expenditure, the Department states that is what it is now doing. That is exactly what we want the Department to do so that can be taken into account in setting the medium-term forecasts.