Gerald Nash (Louth, Labour) | Oireachtas source

The witnesses are welcome. I have a number of questions based on the quarterly statement and their earlier contributions. It is clear that in recent budgets, a demonstrable procyclical approach has been taken while the advice would have been to the contrary. All the evidence shows that the procyclical and untargeted approach, if I can call it that, contributed to the inflationary environment we are experiencing. When inflation is high, those are on fixed low and middle incomes are most impacted. The sense and mood music this year, although we have not seen the summer economic statement, would suggest that a form of procyclical approach will be taken again on the current side. There are obviously choices to be made. We could introduce countervailing measures around taxation and revenue raising, but those are, I imagine, unlikely. I would take a different view.

I am assuming, based on what the witnesses have said and the warnings they, the Central Bank and others have made, that the ESRI will be opposed to taking a procyclical approach at this point. If that is the case, logic would suggest the witnesses would have a concern about, for example, the Government introducing extensive VAT reliefs for certain sectors. Those come at the cost of tax expenditure and that cost can often be recurring because they are difficult to end. There would be an argument made by many that the proposed VAT relief for certain elements of the hospitality sector would be unwise. Individual hospitality sector businesses are experiencing turbulence but there has always been churn and turnover in the hospitality sector. It is a sector that has added a significant number of jobs. The data show that new businesses are being registered all the time. I am assuming, based on what Dr. O'Toole said about the validity or otherwise of a procyclical approach, that it is not something the ESRI would recommend.