Professor John McHale:

To a significant extent, the Deputy has a point. There is an argument that comes from economics that if an investment yields a positive financial return, it should be undertaken. There is quite an amount of discussion going on at European level on possible changes to the rules to create a greater distinction between current and capital spending. That is an important conversation to have. The point I was making earlier is that one cannot make too much of a distinction in the sense that they both lead to higher borrowing and, ultimately, higher debt. There could be investments that yield such a high financial return that they pay for themselves but debt often has to be rolled over in a very short period. The fact that it initially funded some good capital investment may not be particularly helpful when that debt has to be rolled over. As such, one must look at the overall level of debt as well. In our judgment, the path of debt reduction we are on, which is very much associated with bringing the deficit close to balance, is a sensible and prudent policy for the Irish economy in light of the fact that we are starting at a very high debt level and that there will be a lot of fiscal pressure from future demographics. To bring that debt down, given the volatility of the international environment we face, is important. As such, there is a distinction to be made and it is an important conversation that will take place over the next year or so. I expect that some changes in the rules will come from Europe. However, one should not lose sight of the other objective, which is to get the debt to safer levels so that we are not so vulnerable in a very uncertain world.