Mr. John Palmer:

I will start with the fiscal rule questions. The Deputy's first question was whether there is a debt space under the fiscal rules vis-à-visthe debt-reduction rule. As the Deputy is aware, the debt-reduction rule requires us to reduce the debt-to-GDP ratio in excess of 60% of GDP by one-twentieth per annum, roughly 5%. It is one of three rules, however. There is the expenditure benchmark and the balanced budget rule, or the structural balance budget rule. When one is doing a fiscal policy, including what one is going to spend and also use for tax reductions, one must look at where one lands with all three. In any given year, one of the three will be the constraint. Normally, we are expecting it to be the expenditure benchmark which limits the amount one can spend, unless additional revenue is raised to pay for additional spending. However, at other times, it will be the structural balance rule.

In general, we do not view the debt-reduction rule as being a constraint for the foreseeable future, primarily because of the nominal growth rates of GDP. In other words, the heavy lifting on the debt-reduction rule will be done by the growth in the GDP denominator in the calculation. The Deputy is right, therefore, in that there is fiscal space under the debt-reduction rule. Were one to borrow for off-balance sheet, that is, not interfere with the structural balance rule or the expenditure benchmark, that is a theoretical possibility. However, if one were to borrow to use it for general Government investment or spending, then they would become the constraint. I hope that explains that one has to look at all three.