Professor Stephen Kinsella:

I understand. By the way, I was in Letterkenny last week and I met a group of Ukrainian schoolchildren there. It was a really interesting discussion because they were asking about Ireland's future. They had not been to Letterkenny previously - I doubt they knew it existed two years ago but they are now here and very much part of the school infrastructure. It was very interesting. The Deputy is right that Letterkenny has had to deal with a large influx of Ukrainians. It was brilliant talking to the children's teachers because they gave me a very good sense of what they had done and the lengths they had gone to in order to really integrate the children. It was brilliant. I found listening to the accents fascinating because they were a little bit Ukrainian but there was a little bit of Donegal in there too, which is brilliant.

On the substantial point, the choice is about allocation. The Minister for Finance or the Minister for Public Expenditure, National Development Plan Delivery and Reform of the day is going to have to make a decision about allocation. Medium-term expenditure rules are useful because you can have the system growing at 5% and only allocate, say, 20% to housing, but that means you will need to make reductions in other areas. Otherwise, the chance of overwhelming the State's finances if something goes wrong is very high. The key lesson for me from the 2002-06 period is that relying on one category of expenditure to expand, and then weakening the tax base because you think that is going to keep going, is a massive mistake. In fairness to the Department of Finance, what it is saying is that it recognises the windfall nature of the corporation taxes and it is coming up with at least one model to absorb some of that windfall issue.

One could argue that we need to put the money somewhere now in order to get a return on that, and I have no problem with that and presumably it will happen. The nature of the surplus is such that we could do a bit of everything and get away with it, and it would be fine, and “a bit of everything” in the context of €12 billion extra a year is a lot. The question is whether we are going to earn a large enough return for the taxpayer in order to justify it. That is really it.

On the first page of the report I talk about what current spending means in terms of a return, including capital spending and so forth. I am involved in a local building project in Limerick so I am very aware of what it is actually like to do capital spending on a daily basis. The reality is that capital spending becomes current spending the moment it is allocated because you have to pay for bricks, for builders and so on. At a certain level of granularity, there is no such thing as capital spending and it is actually all current spending in a certain sense. The difference is that that kind of current spending ends because the building is built, which is great if it is a community centre or a road, or something like that. The question we have is, when that stops, and if the taxable base is weakened and the expenditure base is too high, in any circumstances where the economy falters, people suffer. That is the key motivating factor for me, namely, we do not want to have the base of spending increased too quickly relative to the base of taxable income. This is an effort to take some of that windfall out before it gets built into the base of permanent spending.

The question I would have, and it was something that came up a fair bit in other questions, is that this is not going to be that big a sovereign wealth fund. At its highest amount, if we put in the maximum amount possible, we would end up with €90 billion, which, compounded over, say, 15 years, gives us €102 billion or €103 billion. It is not that big, relatively speaking. To go back to the start of my answer, as an allocation decision, do you get more out of a return in a public value sense from investing in roads or climate change now, or do you get more later by investing it in the sovereign wealth fund? The Norwegians would certainly say that by banking the principal and living off the interest, they have done better.