Dr. Tom McDonnell:

I have a view on the 9% VAT rate. The Deputy will be unsurprised to hear that like most economists, I think it was a mistake but it is much more of a mistake now because of the strength of the sector. The economy is running very hot. We are at full employment. The beneficiaries of that measure tend to be middle-class households who go to expensive restaurants or hotels. Those households currently have a savings ratio of almost 20%, which is double the historical average. Net wealth is at record levels. There is a cost-of-living crisis for some people, which is why we need indexation, benchmarking and other targeted measures, but for other households it is not really there at all. The commission recommended that there should not be temporary reductions in VAT in response to the economic cycle. It was very clear on that. I do not believe you will find an independent economist who thinks its extension was a good idea. I regard this as a victory for political economy over economic and sustainability concerns. We have a monetary authority, the European Central Bank, ECB, which is tightening monetary policy, on one side. You can agree or disagree with its strategy; we will leave that aside. Then you have a fiscal authority, the Government, on the other side, which is refusing to fully insulate and protect the weakest members of society. Perhaps that is the wrong choice of words because it is not intentional, I am sure. At the same time, without any economic analysis around it and with even its own Departments' work in the past stating it is not a good idea, it continues that for another six months. It is confounding, frankly. Mr. Gibbons may have a view.