Dr. Kieran McQuinn:

On the point about capital expenditure, the broad point is that we agree and we have put forward the case for significant investment in areas such as housing. It is clear now that the carbon and environment area will require a significant increase in expenditure as well. In investment terms we see big increases, or certainly sizeable increases, in capital expenditure coming over the next few years. The issue from a macro point of view is that the economy is set to grow quite strongly. Our expectation is that it will grow very strongly this year, next year and probably for a year or so afterwards. The danger in that context is that we see a significant increase in capital expenditure, or expenditure generally, at a time when the economy is performing very strongly. That can lead to overheating pressures. I take Deputy Boyd Barrett's point that at times there is a blurred distinction between capital and current. We are certainly not calling for any reduction in current expenditure. What we are talking about is being disciplined about the rate of increases in current expenditure we see going forward. As to which areas we would look at - and this may chime a little with what the Deputy says - I do not think there is much scope for any significant reductions in, for example, taxation such as personal income tax. Greater taxation may even be called for as a way of taking the heat out of the economy. That is the point about current expenditure. If we see significant increases in current expenditure on top of significant increases in capital expenditure, the danger, in the context of a very strongly growing economy, is that there will be an overheating problem. As I said, sometimes our economic cycle is not quite the same as the European one. That has implications for monetary policy and the kinds of actions of the European authorities to control inflation. It may well be that our inflation will be out of whack with what is going on in Europe.

That is a kind of by-product of our membership of the euro area. That is the broader point.

On the carbon tax, I do not know if Dr. Doorley would like to jump in. Again, going back to the earlier point, we do not have our environmental colleagues with us. If they were here, I am sure they would echo the point we made in respect of Deputy Michael Healy-Rae’s questions. The evidence seems to suggest that carbon taxes are an important way of changing behaviour. I take the Deputy’s point about the distributional issues. Clearly, if people do not have an alternative, then that is that is a major issue. The research seems to point fairly conclusively to the fact that if you want to change behaviour in this area, carbon taxes are the way in which to do that.