Mr. Sebastian Barnes:

The council's concern was about the overall budgetary stance. There is now anticipated to be a deficit for several years which means that the debt ratio will not move substantially toward safer levels. The Government will essentially be putting more money into the economy than it takes out over this period. There is a risk of overheating eventually building up or cost pressures in specific sectors. That is the concern.

The origin of that concern is that the Government is increasing current spending in line with inflation. It is increasing the volume of current spending, ramping up investment and planning to cut taxes. It is trying to do everything at the same time.

In regard to the pressure on the public finances and the budget balance, a reduction of debt could be achieved by prioritising between those different items in the medium term. The council does not have a mandate and does not look at those specific items. However, if one accepts the case that the priority is to improve public services and that investment is extremely important, that raises questions about the relative importance of doing the other things. One has to wonder whether cutting taxes should be the priority and the prudent thing to do in the context of these other ambitions that the Government has.

On the Deputy's second point, there is a very important distinction between current and capital investment in economic terms. We know also that many of the needs of the economy are in terms of the capital. Public investment was very low for a long time. We are partly paying the price for that today. There is an important distinction. It is a good case to make public investment while interest rates are low. We recognise that case and that is why we are relatively comfortable in some sense with the run-up investment that is planned. However, it is a huge increase. There are legitimate questions about the capacity of the economy to catch up at that speed. Therefore, having a period of catch up clearly makes sense.

Investment at one point was maybe running at 2% of the national income. It will now go to 6%. If it only went to 4%, it would take an awfully long time for the economy to catch up. It is okay to overshoot, but that has to be managed carefully and it raises risks. This is a very high level of investment by historical standards in Ireland. It is essentially the highest ever share of national income in public investment. It is very high by international standards as well. It is a very sharp increase. That process has to be carefully managed, because it carries risks in terms of value for money but also in terms of macroeconomic management.