Mr. Sebastian Barnes:

The national reserve fund is something we have been seeking for a long time. Since we first made the call, the context has changed a bit because the Government has taken other measures to try to limit the reliance on excess corporation tax receipts, including the 5% spending rule, which means that it will increase spending by 5% and not whatever corporation tax has increased by. There have been a number of other instruments. In truth, the amount of money coming in is dramatically larger than was the case a couple of years ago. The nature of the problem has changed because the size has changed. Now, there is a big question about what we want to do with this amount of money that is coming in. The first thought might be to spend it now, which is something we hear, but it is a lot of money that is not going to be there forever, so we should think about what is the best thing to do with it. One of our concerns is that we have a large amount of money coming in now, and we know that in about 20 years' time, there will be a massive cost associated with paying pensions for the baby boomers. If we put those two things together, we might think that it is a good idea to save that money, as some other countries have done. Norway has done something similar with the oil money. It can raise a return and sometimes it can be used for social purposes if that has a return as well, and then it will be available at a later date. People might think that is a better use of that money than just spending it without really thinking about it too much. There are other things that we could do with it too.

It is important to take that money out of the economy. If we spend it domestically now, it will add to inflationary pressures. One rule of the Norwegian fund is that it is not allowed to invest any money in Norway, which might seem paradoxical, but it is because they do not want to put that money back into their economy. That can be very difficult for politicians because they want to see some benefit from it, but it really needs to be invested abroad and then we can bring it back when we need it to pay for pensions.