Dr. Sheila Killian:

I agree that Irish Aid has a terrifically strong reputation, based on policy coherence, and it is very important. On the question about how the Department of Finance got it so wrong and how it has responded to criticisms, it must be said that this was a pioneering piece of work at the time, and we can look back at it and see methodological flaws. Like any other piece of analysis, academic or otherwise, we can see that it was done in one way but that it might have been much better if it was done differently. The methodology in spillover analysis generally, for countries and corporations, has moved on since this spillover analysis was done.

Perhaps rather than asking how the Department got it so wrong it would be better to point out the obvious things that could have been done to improve the methodology used. For example, as Mr. McCaughey said, it should not rely solely on publically available information when other information is available. It should not just rely on direct flows because many such flows go indirectly through other countries. It should pay as much attention to gaps as it does to flows. If one looked at the spillover of Ireland's policy on the rest of Europe, it could be said that we compete aggressively for foreign direct investment, which probably has a dampening effect on investment in France and Germany. That is a policy decision on the part of the Government and it is made consciously. It leads to slight negative spillover to European neighbours but that is a decision we have made. If we do a spillover analysis that does not capture that element, we risk having spillovers that are not decided upon but which are inadvertent and which are causing incoherence with Irish Aid. This is why work on spillover analysis coming from City, University of London, now looks at the political economy element, as well as the flows. As an accounting and finance professor I am allowed to criticise things that only focus on the accounting and finance and I believe it is important that something like this includes political economy and a social element.

Capacity building was mentioned. It is worth noting that the Revenue has done quite a bit of good work in that area.