Professor John McHale:

As I said to Deputy Peadar Tóibín, there is a general lack of understanding of what is driving this. Even though the Revenue Commissioners stated they believed the bulk of the increase was not a one-off, they are clearly struggling with this also in their own forecasting. There is a lot of uncertainty and having a permanent increase in spending based on a surge in tax revenues echoes of the mistake we made in the past. In coming out of the crisis we want to make sure we do not follow the procyclical policy that got us into trouble before. The essence of a procyclical policy is to follow a revenue surge with an increase in spending and that has occurred most recently within the year. Even in the past the increase in spending took place in the year following a revenue surge. We have been given this oversight role as part of the fiscal responsibility Act and have to assess the prudence of the fiscal stance taken. The core mistake in procyclical policy is that in good times and when there is a surge in revenue we increase spending. We have seen that happening this year. It would be a very strange fiscal council that did not react quite strongly to it.