Professor Alan Barrett:

I dealt with the Hermes issue earlier. The development of the new model partly related to the need to plug that particular gap. The financial side, therefore, has now been factored into the model.

I am not sure there is a right or a wrong answer to this. The institute has typically in its analysis indexed all welfare payments to wage increases in its thinking about the budget. That was the standard approach we took. It may be partly driven by the fact that the institute for a long time was involved in the measurement of poverty and reporting on poverty statistics. It is a simple point that if wages are increasing in the economy and welfare payments remain constant, increased poverty is being engineered into the system given poverty is defined as a proportion of average wages. Researchers in the institute always had trouble getting their heads around a scenario where there was non-indexation while wages were increasing, but they would have to stand over a position that poverty could be increasing when it was a clear objective of Government to reduce it. It always struck me as somewhat inconsistent to say there should be zero indexation but any indexation is a proactive decision to provide. There are different positions on it. I have had this discussion with colleagues in the Department of Finance who always make the more legalistic point that when the Minister stands up on the day of the budget, it is a decision to increase and it is not automatic. There is not necessarily a right and wrong answer but the key point is the committee needs to have analytical capacity, either in the heads of members or provided to them by someone in a support role in order to put them in a position to tease out the different positions that will be presented.

These are complicated issues. The worst of all worlds is where people are not explicit about the assumptions underpinning the figures they are talking about. To talk delicately about the issue that blew up during the election campaign in respect of fiscal space and precisely how much money is available, nobody was necessarily saying anything that was incorrect but people were not being completely explicit about the assumptions underpinning the figures they provided. There is a sense that members need to be well informed enough to know what are the questions they should ask.