Dr. Martina Lawless:

We are reasonably agnostic about the mix at that micro level as long as the total performance is pretty balanced and that leaves a lot of room for reallocation. Deputy Burton talked about skills shortages in the housing sector but there may be training going on in other sectors that are not growing as rapidly. There can be reallocation within the existing allocations of spending that could address some of these issues.

She also mentioned tax expenditures. In a very general sense - I will not get into tax expenditures on corporate taxes - it is very much the Fiscal Advisory Council's view that all tax expenditures and rebates should be reviewed on an ongoing basis to make sure that the rationale for introducing them in the first place continues to exist. Many tax expenditures and rebates may be introduced to fix a particular problem or market failure. They should be reviewed regularly to make sure they have done their job effectively and to ascertain whether they are still needed or whether there are now better ways to spend the money. It should be recognised that there is sometimes not much difference between a tax expenditure and an actual cash payment. Sometimes people take less notice of exemptions from taxes than of direct payments but from an overall fiscal position they should be treated reasonably similarly.

Finally, regarding the Government's spending, we have discussed in a number of reports that compliance with the fiscal rules has often been pushed to the maximum at the end of the year when the Government finds there is some extra money in the Exchequer that was not taken account of in the initial planning and it gets spent within the last two months of the year. In this context, the fiscal rules are very much set at trying to link the overall budgetary process to a long-run sustainable path of the economy. In that light, once-off revenues, whether increases or decreases, are taken into account. Really what we are looking at is a smooth and sustainable level. We do not think sudden ups and downs in the Exchequer balance over the course of the year should be taken into account. We would also say that if there were a sudden fall, spending should not be slashed in December if receipts come in under profile. We say exactly the same thing if they come in over profile: keep to the projected path at the start of the year when the spending was based on estimates of the long-run potential of the economy.