Dr. Eddie Casey:

On the forecasting side, an interesting way of dealing with this is to look at why we got it wrong this year and why the deficit will be much better. There are always two sides to the deficit - tax and spending. On the tax side, we know that income tax and corporation tax will do a lot better. Corporation tax has been such a volatile and unpredictable tax head that one would say there is a much better way we can forecast that with great certainty. On the income tax side, what the Department seems to be doing, which we would encourage, is looking at ways of forecasting this tax head by individual sectors. It involves looking at what are the high-, middle- and low-income sectors and forecasting in respect of those areas. We generally forecast what overall wages are doing but this would not have helped us with a shock like Covid because many of the low-paid sectors, where taxes were not very high, were hit worse than any other sector and so the overall hit to income tax was not as large as we would have expected. What we really need to do is look a bit more carefully through that tax head.

On the spending side, a very useful thing for the committee that we would love to see next year is a clear split so that when this is looked at on a monthly basis, we know what the core spending is doing, everything outside Covid and the buffers for it. We could not see that this year and we still cannot get a clear picture of what is happening with core spending whereas we know what probably happened this year is that a lot of buffers built in for various Departments for Covid-related spending just have not been needed, which is a good thing. This is one of the reasons we are seeing a better deficit but it is very hard to track.