Mr. Seamus Coffey:

I will deal with the first question, and my colleagues can step in.

On the issue of pro-cyclical spending, particularly in terms of investment, if we look at it over the last two decades we see that investment spending grew quite rapidly in the growth phase until 2007 or 2008. It grew from perhaps €4 billion at the start of the decade. In 2008 public capital spending was touching on €10 billion, but three or four years later it was down to €4 billion. At the time the economy was going through a downturn. This was being exacerbated by fiscal policy, which involved taking resources out of the economy simply because we could not fund the spending. The tax revenues, on which the increases in the early 2000s had been built, disappeared quite quickly and we were left in a position of having to undertake forced consolidation and forced austerity.

Capital spending was one of the areas where the largest cuts were introduced. It is likely that capital spending was cut to a level that left us in a relatively low position in the EU. When we have looked at capital spending relative to income, Government revenue and Government spending, by the time we get to 2014-15 we are towards the bottom in terms of public spending and capital in the EU. Now, within the fiscal framework we have something that should allow the public finances to be put on a sustainable footing, and even within that we are seeing that there is scope to increase capital spending. As our statement suggests, between 2016 and 2021, Exchequer capital spending is expected to almost double, with an increase of 85% over those five years, while complying with the fiscal rules.

The fiscal rules are not a huge restriction on our ability to increase capital spending, but what they should allow us to do is make sure that we do not end up in the position where that increase has to be reversed. We should get to a position where we have an appropriate level of capital spending, and caution should be exercised in determining what that is. We are not saying whether the increased level is the appropriate level. It should be spent on appropriate projects. Individual projects are assessed, and the money should be wisely spent. Our point is that it is allowed to increase over the coming years, but we do not want to be in a position where we hit a downturn in three, four or five years time and we have to cut down again. As long as we keep the public finances sustainable we should be able to manage at those higher levels, rather than ramping up when money is coming in and then having to cut it back when the revenues on which it is based evaporate, as we have seen over the last 15 years. We would like it to be less pro-cyclical and have it on a more stable and steady basis, and there is the scope to do that within the fiscal framework.

On the issue of corporation tax and the common consolidated corporate tax base, CCCTB, yes, it is a threat to Ireland. It would be a dramatic shift in terms of the allocation of taxing rights. While not under the direct mandate of the fiscal council we can assess how the allocation of taxing rights might work. At present, taxing rights are allocated on the basis of the activity that generates the profits. Whatever companies undertake in Ireland, we get to tax the profit generated by the risks, functions and assets those companies have in Ireland. If the CCCTB was to be introduced it would be a whole new environment. The taxing rights are allocated on the basis of three things: where a company has its capital assets, excluding intangibles; where a company has its staff; and crucially from Ireland's point of view, where a company undertakes its final sales with its customers.