Dr. Kieran McQuinn:

We have said, perhaps not in this committee but in other Oireachtas committees, that in the reform of the fiscal rules it would be a good idea to exempt some climate change expenditure levels because it is important that we ring-fence expenditure on climate change across the euro area. We have seen in recent times here that there is significant pressure on some of the climate change policies because of what is happening in the Ukrainian crisis, so it important that we ring-fence the expenditure levels on those issues in order to effect climate change over the longer term. One way of doing that would be to exempt certain climate change expenditure levels in the fiscal rules. I also believe it could even be extended further to commonly accepted areas such as expenditure on housing which, as we said earlier, is not just an Irish issue but an issue across the euro area in terms of the need for more social and affordable housing and more involvement by governments in providing that. There are a couple of areas where there could be exceptions built into any reform of the fiscal rules.

Regarding the fiscal rules in general, we mentioned the research by Jason Furman and Larry Summers. Other more recent research by Olivier Blanchard has provided quite a lot of interesting insights into where the fiscal rules should go. There is a need for greater clarity, for them to be more transparent and for them to be more comprehensive as far as lay people are concerned. Often they have got very much attached to very technical definitions that are not only hard to estimate but hard to explain to the lay person. There are many areas where the rules could be reformed, but certainly I believe, in principle, excluding certain areas of government expenditure, particularly relating to climate change and also relating to certain elements of housing, would be a good idea.