Professor Stephen Kinsella:

Those are good questions. I will go through them backwards because I think it is sensible to do so. I gave five choices. I agree with the Deputy that three would be appropriate. It does not make sense to reduce the national debt. Why pay down debt that is on average at 2% and that is being well managed by the NTMA, which has a great reputation for doing that? It is the highest rated debt that it has been for 16 years. I do not think reducing debt makes sense at the moment. The stock of overall debt is fine. The economy is growing much faster than the rate of growth of the debt so no economist who understands debt dynamics would suggest reducing debt. I do not think item 5 is a runner.

Current spending will have to rise, particularly for lower-income households. The recent report from the Central Statistics Office, CSO, showed poorer households and those with large mortgages have been experiencing much higher levels of inflation. A little bit of money will need to be spent on them. I do not believe tax cuts are optimal at this point. They are politically popular but one of the key lessons we learned is to not weaken the tax base when things are going well. Reducing income taxes on a marginal basis for lower-income households might make sense but for most people there is little evidence that the higher rates of tax act as a disincentive to further work. My colleague, Dr. Darragh Flannery, in the University of Limerick is a brilliant labour economist. He and I have gone through the data carefully and there are no data to suggest that. One hears a lot that if taxes are increased, people will work less. We do not have those data. It could be because people have high living expenses and have to work more. It could be on the other side. We will see large increases in capital spending anyway. We will certainly see some increases in current spending.

To cover the second part of the question, I agree with the Deputy that it is equivalent to paying down a bit of the debt to use the sovereign wealth fund because you can always sell out of it if needed. However, investing the principal into the Irish economy on a commercial basis would likely overwhelm parts of the economy. To explain what I mean, ISIF has €14 billion of assets under management and is already investing in the economy. If this fund is also investing, it is likely to crowd out the private sector, if care is not taken.