Professor Michael McMahon:

I can take the first question. I will try to answer it briefly. It is not for us to say exactly how the Government prioritises between investment and current spending. On countercyclicality, the key will be the aggregate stimulus. Within that, you can assess according to priorities. Both of us were consistent on that matter.

The point we would make on investment is that in our previous work, we identified clear infrastructure gaps in Ireland. There is a very obvious one in housing, but there are also gaps in other sectors. It is really about providing for the growing population we have had and not keeping up. Not only do we have what we need going forward, we also have a deficit that we need to catch up on from the backlog. However, the economy is at full employment. The construction sector is at full employment as much as any other sector if not more so. At at time when we are facing high costs for materials for construction, then adding a stimulus in another sector is going to reduce the capacity of the Government to deliver on the national development plan because you will encourage more household and corporate spending that will use up the construction resources.

There is a decision to be made on where the priorities lie and how the funding is allocated. In our previous work, we identified very clear infrastructure gaps which would be well addressed, not just because doing so would benefit us today but because it would benefit us going into the future. However, one point that we have discussed with this committee previously is the need for whatever plan is there on the national development side to also adhere to the notion of countercyclicality. One big problem we had after the financial crisis was that we lost a huge amount of construction capacity because there was nobody, private or public, able to step in and create it. We lost lots of workers and businesses to other countries. Our capacity in construction has never risen back to the same levels we had then, and that is holding us back now.

As a small, open economy, we will be subject to global fluctuations outside our control. If we face choppy waters, it is vital that a good investment plan can step in and maintain investment. That is why one of our recommendations is for a medium-term plan including a guarantee to keep a certain amount of public investment there. It is clear that not doing it for ten or 15 years becomes very costly at some point.