Mr. Sebastian Barnes:

The Deputy made two very important points. Obviously, investments in areas such as education, training and agriculture would be very good for the country but they could also be good for the public finances in some sense if they have high returns, that is, by training people so they have higher incomes, which feed back into the tax system, and are less reliant on the welfare system. Depending on how they are done, all these can, in principle, be helpful to the public finances. They are also relevant to the public finances for other reasons. The Government should naturally be thinking about that and the democratic process needs to take a view on it.

There may be a case that under certain conditions, some of this could be financed from some of these excess receipts. However, there are a number of caveats to that. The case would need to be made very carefully if the Government were planning to do that. One of those caveats is that many of these things actually involve recurrent spending. In education spending, for example, there is a new generation every time.

One is locking in recurrent spending and there may also be current expenditure that is related to the capital part. Funding recurrent spending from a volatile source of revenue that we might lose is risky. That risk must be carefully considered.

Another point is the overall amount of money put into the economy. One of the reasons for not putting so much of the corporation tax money into the economy is that it is essentially coming from the outside and is being pumped into the economy. In an environment where there are risks of inflation and overheating, that is a constraint on how much you can put in. If it is funded through taxation there is an offset somewhere, in that someone has less money to spend. If, however, you are just funnelling in external money, that is a recipe for overheating, which may not be sustainable if the tax revenues are not sustainable. In short, definitely the investment is a source of future prosperity or at least it should be if it is done properly. How that interacts with the rainy day fund must be very carefully considered with these kinds of receipts because there are risks involved.

On the second part, in terms of wage inflation I wish be clear about the figure that I gave. It was a figure of approximately €2 billion for operating for the unexpected inflation. It is the difference between what was projected in the budget and in the stability programme update, SPU. Inflation has actually been a bit stronger than that so the actual number would be a bit higher. The number actually includes the State pension, public sector pay, welfare rates and payments on goods and services. About half of that would be public sector pay. Of the remaining, one quarter of the title would be pensions. The welfare and the other parts are actually relatively small compared to that. This is one of the cases for targeting the number of welfare recipients relative to the size of the economy. Relative to the population, it is a relatively well-defined group. That is purely the figures part.

On the economics, the Deputy is right. This is one of the reasons why we say that when the Government strikes the balance, the reasons for the extra cost of living supports are partly for very vulnerable people or people on low income in general, but it is also to support the economy. Most people's wages have not gone up in response to the inflation we have seen. Mostly this is because we do not have a lot of choice as to whether we purchase fuel or food. When people are having to make choices between that and other things, the other things are the ones that are domestically produced. For example, people might go out less and they would spend less on all sorts of other domestic activities. This is why it will slow consumption in the domestic economy. There is some case to have some increase in wages because of that reason. Increasing in line with the full value of those pressures for everyone is not a desirable policy because one would be helping everyone, and yet the economy as a whole is being negatively impacted by these higher import prices. Not everyone can be fully compensated. That is obviously a very extreme case. The question is: within that, who is the Government going to compensate and by how much? There is no simple answer to that. This judgment must be reached by the political process and by society more widely.