Professor John FitzGerald:

I thank the committee for the invitation. Since the crisis hit after 2007, GDP has fallen by about 14% up to 2011, which was the bottom of the crisis, but Government revenue fell by 20%. In spite of the fall, Government expenditure was up 3%. The reason for that was welfare payments. There was a dramatic increase in the expenditure on welfare payments. It rose by about €5 billion. If the share of welfare payments had been held unchanged at the 2007 level, there would have been €9.5 billion less expenditure. If we consider that €30 billion is roughly the cuts and tax increases we have had, one third of that has gone to fund a dramatic increase in expenditure on welfare over the crisis period. By contrast, only 5% has gone to fund the interest on the bank debt.

Looking across the European Union, in the crisis countries there has been a significant increase over the same period in the percentage of GDP going on transfers, but Ireland stands out as having a much bigger increase. By contrast with, say, Greece or Spain, there was a much bigger increase in unemployment. Therefore, that tallies with the Irish data.

With regard to what happened to the income distribution, one of the problems in terms of tax revenue was that there was a wipeout of people on very high incomes, for example, in excess of €275,000. Their number was down 28%. Their average income was down 15% and their total income in that category was down 40%. The effect of this was that whereas previously a great deal of our tax revenue came from people on a very high income, their income fell. Therefore, the difference had to be made up by people on incomes below €100,000.

I will not revisit what Dr. Donal de Buitléir has said on the Gini coefficient. Everybody has said that before the tax and welfare payments, the market income is fairly uneven. We have a very uneven distribution of income, but after tax and welfare payments, we have a much more even distribution of income, and after the crisis it is marginally more evenly distributed than before the crisis. The crisis has been good in that sense for distribution of income.

To sum up, there has been a big fall in everyone's income because of the crisis. Successive Governments have allocated a huge increase in funding for welfare - approximately €9.5 billion in terms of the share of GDP - and that has taken up about one third of the cuts. For those on high incomes, numbers have fallen dramatically and their tax rate has increased, but the amount of income tax coming from that group is substantially down as a result. That has left more of the burden to be carried by people on incomes below €100,000.

A consequence of the changes has been that without tax and welfare payments, there would have been a big increase in equality but because of the increase in welfare expenditure and taxes, there has been a small fall in inequality. I have not heard today's figures but I would not expect there is much action in that respect. That has not been enough to prevent a rise in those at risk of poverty, which Professor Dorothy Watson and my colleagues have talked about. Unemployment has had a major impact, which public policy and welfare has only partially offset. When a great number of people lose their jobs and move down to the bottom of the income distribution, even with a big increase in resources for welfare it has not been enough to move them up, as my colleagues have stated.

While individual policy changes announced in successive budgets, as Professor Tim Callan will talk about, taken together have not been particularly progressive, the overall impact of Government policy on expenditure and taxation of successive Governments has had a progressive impact, reducing inequality and, to some extent, insulating those who lost very heavily in the crisis from the worst effects.