Mr. Seamus Coffey:

When it comes to surpluses, one should remember that we are not necessarily saying that surpluses should be targeted; rather, they should be the outcome of appropriate fiscal policy. If Government spending - we view spending as being on the revenue and expenditure sides - had been kept in line with the sustainable growth of the economy, we would have reached the surplus position that Mr. Tutty referenced and that the Department and the Government initially forecasted but which did not turn out to be the case.

Our concerns relate to the pace at which public spending is increasing and whether it is in line with the medium-term growth of the economy. In real terms, most estimates put the potential of the economy to grow in a sustainable fashion at between 2.5% and 3.5%. We do not do it too often, but if we were to hit our average growth rate, it would be in or around that level. Current inflation forecasts are between 0.5% and 1.5%, as inflation is low and muted. These factors would give a range of public spending increases from 3% at the low end to close to 5% under the highest growth and inflation forecasts. In recent years, the Government has presented plans that we said were within that range. The stability programme update, SPU, in April of the following year tends to give public spending increases of 3%. We view that as fine and say that the Government should stick to that plan. By the time the budget is reached, though, it has slipped to 4% and approaches the limit of what can be considered sustainable in light of growth and inflation. The outturns for the past three years have averaged 5.5%, which exceeds even the top growth and inflation. The outturn for 2018 was particularly worrying, in that the growth in public spending was 6.7%. That was beyond the sustainable growth rate of the economy and any reasonable forecast of inflation. It is for this reason that the surpluses projected as appropriate have not materialised. We are using fiscal resources at too fast a pace.