Mr. Sebastian Barnes:

On the wider question regarding where the spending rule fits in, the council's mandate is carefully thought out. It refers to economic and budgetary management. One would hope those objectives would be going in the same direction but there are times when they go in opposite directions. Here in Ireland, they might be going in slightly different directions, in the sense that the underlying budgetary position is going back to surplus for the first time in a long time, even when one takes out corporation tax. One issue is that growth has been strong in recent years and revenues have been boosted by other aspects of the multinationals. A significant amount of the income tax growth has come from the phenomenal growth in pay of those working in the tech sector. That links back to the corporation tax issue. The budgetary position is looking better, however, and we are getting to a position where, in terms of the debt risks, debt will be at a sufficiently low level that we do not need to worry about it too much so long as it stays at that level.

What is becoming more of a concern is the second part, namely, the economic management part. Ireland has high inflation, record low unemployment and big capacity constraints relating to housing and investment. That is becoming a growing concern. It is the main reason for thinking about the spending rule and not putting too much money into the economy too fast. Otherwise, it risks being self-defeating, with bid-up prices and more bid-up rents. That is not what we want to happen. That is why the spending rule is a good framework. At the moment, however, the economic constraint may be a bit more than a fiscal sustainability one in terms of its relevance. In addition, there are many pressing social challenges, as well as public expectations of improvements in public services. As the Deputy pointed out, Ireland is not a particularly high spender in a European context, even when one measures it properly. That leads to the point that the spending rule should be asking questions about what we want to do and what the country will look like. Of course, the spending rule is adjusted for revenue changes. It is a social choice in respect of whether one wants to have an economy with higher taxes, higher spending and better public services or one with lower taxes where one accepts the consequences that come with that. That is a choice. Running the public finances in an unsustainable way or overheating the economy should not be a choice. There is a debate to be had on that. Last year, the Commission on Taxation and Welfare gave rise to an interesting debate in that regard which needs to be considered.

On the specific issue of investment, it is clear that Ireland has big needs relating to climate. We wish there was more analysis and a clearer plan to meet the climate targets, on both the capital and current sides. A significant amount of that investment is probably already built into the national development plan, NDP, but that is not fully clear. It is striking that the NDP is supposed to be taking investment to record high levels for a sustained period. That is often forgotten in the debate. There was a period when investment was undoubtedly too low but it has been going to record levels. That is what we need but it needs to be factored in. What has happened is that, year after year, the Government has not managed to spend its investment budget. That raises questions, although they are not for us to answer. It is an important feature of the public finances. The extra investment that might be needed in that context will be one of the factors that plays on the economy. Even though it is for climate investment, it could add to the capacity constraints in the economy if there is a significant amount of construction and various demands. We need to consider how that climate investment will fit in with the rest. That is why it is important to make choices and recognise that if we are in a period where we have to make these big investments on the climate side, that requires making choices in other areas regarding how we finance that. There is a big debate in respect of a golden rule or green rule or whatever, but that is often based on a somewhat textbook view of the world and ignores the fact that there is a public finance aspect to this. Of course, some of these projects will not have market returns. Building flood defences is a good idea because it helps prevent houses being flooded but it will not generate more taxes. Unfortunately, it is just something that needs to be done because the ecosystem has been damaged. Extra investment in these areas, however useful and worthwhile it is, also will call on the same capacity constraints in the economy. There is a need to be cautious and have a plan for how these choices will be made and how it will fit together. It is to be hoped there are a number of things here that lead to us strengthening our long-term planning, which has clearly been a problem in many areas.