Oireachtas Joint and Select Committees
Wednesday, 22 September 2021
Committee on Budgetary Oversight
Pre-Budget 2022 Scrutiny: Irish Fiscal Advisory Council
Mr. Sebastian Barnes:
That is not the plan, but I expect that aspect to be covered in our next fiscal assessment report. It will be one of the major issues. Much additional information is required, but three types stand out. One is the need to have a clear idea of what the Government is planning to spend money on. For example, will more funds be allocated to construction, which would consequently push more resources to that sector, or will more money be spent on machinery for wind farms, etc., which is imported? Very different impacts would result for the domestic economy in each of those contexts. It would, therefore, be very useful to know that information. In economics jargon, different things will have different multipliers and we need to have that kind of information.
The second thing required is to understand the Government's economic analysis of how it thinks these projects are going to work. We can imagine some of them will generate revenue for the Government and the economy. Other projects may be more concerned with just limiting economic damage. That kind of assessment will help us to understand what fiscal impact will result from the flow of money associated with these investments. Value for money, of course, is also an issue in this regard.
We also need to know what the Government intends to do beyond 2025. Government investment up to the end of 2025 is currently set at 6% of national income and we have a large structural deficit. One scenario concerns Government thinking stemming from a view that there will be a surge in investment up to 2025 and that it will then be intended to bring the level of investment down to a new normal of something like 4% rather than 6%. However, if the Government intends to carry on investing at 6%, that has different implications for the public finances in the long term.
We really need to know how it thinks about this increase in investment. Is it just a surge for five years or is this going to be the new normal for ten years or beyond? That is going to be a key piece of information.