Mr. Sebastian Barnes:

As questions about the European Union's fiscal rules are very complex, I feel as though I have been preparing for an exam here in terms of the answers. However, let me try to give the Deputy an answer that is as helpful as possible. I believe the point about the expenditure benchmarks and ceilings is that, fundamentally, they ought to be a good idea or there is a strong case for them. In a way, they are an implication of what one needs to get to one's targets for the budget balance. In a sense, they are not adding anything to the other rules that are supposed to support getting to them. However, because one pre-commits to it, there is a case that it avoids the risk that as extra tax revenue comes in, one simply spends it without thinking about whether it is structural or cyclical. Obviously, we are painfully aware of how that can go wrong.

It is important in terms of public sector efficiency. If there is a three-year plan, one really just thinks about what one is doing for the next three years and tries to deliver it. If every year one is basically focusing on having a fight in the budgetary process to get a bit more cash, one may not think about long-term planning in the same way. Basically, that is the reason for having these kinds of rules. There is an EU dimension, because of the EU expenditure benchmark, and also domestic expenditure ceilings, which happen to coincide. We should not forget the domestic element and it would be helpful if the Government put more emphasis on the domestic part in addition to the EU part.

With regard to the EU part itself, members will be aware that the EU rules are very complex. Many of the details still have to be fully clarified as the new EU regime comes in. The EU expenditure benchmark definitely is a real one and countries are expected to meet it. In certain circumstances, one could eventually be sanctioned in some ways. The sanctions are not the same as those under the excessive deficit procedure, which is part of what is called the corrective arm. However, even the preventive arm implies some sanctions. Under this regime - I believe I am right - no country has yet been sanctioned under the preventive arm. Enforcement before the post-crisis reforms never really occurred under the preventive arm so we are in somewhat unknown territory. However, there is provision for that ultimately. However, the real point is that there should be a strong interest in managing expenditure on a multi-year basis, which the rules are supposed to underpin this.