Mr. Sebastian Barnes:

It is welcome that the Department of Finance now uses this kind of existing level of service concept, which is similar to what the council talked about in terms of standstill. In any typical budget, many of the spending increases are needed just to maintain wages and pay. That is a welcome change.

One of the difficulties with the SPU is the existing level of service beyond the current year. There are no real details about how finance gets to it. Usually, it is a more realistic number than some of the numbers we have seen for spending in recent years. There are no very clear underpinnings so it is harder to work out exactly how we would adjust that.

In terms of the Deputy's bigger question on the higher inflation that is now expected next year, which is important, if we were to make up for the unexpected inflation this year, which will actually be a much bigger number that, our assessment is that if we were to just stand still, the total amount of spending that was allocated for next year in the summer economic statement would not be enough to index all these bits fully in line with inflation if we take into account wages, welfare rates, pensions and other parts. Our assessment is that the costs of standing still are higher than the total amount for spending next year. That means within the overall spending limit the Government has set, choices will have to be made between different aspects of it. There may be some aspects where it is desirable not to fully index them. There are obviously some areas within that which would be priorities. As I noted earlier, there is obviously not going to be much space for any additional spending on new programmes unless, of course, taxes were to increase, which, not relative to the rule but in economic terms, would make a difference.

In terms of the Deputy's specific question on pay, we have not made that calculation so I do not know what the impact of that pay deal would be. Obviously, given that space is limited within that spending limit, it may be that the more pay is increased, the less space there is, for example, increasing pensions and welfare payments.