John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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The committee is now in public session. I remind members and witnesses to turn off their mobile phones as they interfere with the sound quality of the transmission of the proceedings.

I draw the attention of members and witnesses to the fact that witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to so do, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him or her identifiable.

The Minister for Finance, Deputy Noonan, is very welcome to the meeting and I invite him to make his opening statement.

Michael Noonan (Limerick City, Fine Gael)
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I welcome the opportunity to discuss the stability programme update. The stability programme sets out the Governments macroeconomic and fiscal forecasts for Ireland and is the first update of the Government's projections since budget 2017 was introduced in October of last year. The stability programme is presented in draft form - I am, as usual, willing to take on board constructive suggestions from Deputies. The final version will be submitted to Brussels later this month. The macroeconomic forecasts underpinning the stability programme have been endorsed by the Irish Fiscal Advisory Council.

Turning first to the economic situation, I am greatly encouraged by the latest data showing that the economy grew by 5.2% last year with strong contributions from consumption and, in particular, investment spending. The Department of Finance has increased its GDP growth forecast this year to 4.3%, reflecting the stronger economic momentum in the second half of last year. For next year, GDP growth of 3.7% is forecast. From 2019 onwards, with positive contributions from both exports and domestic demand, the economy has the capacity to grow by approximately 3% per annum.

The economic recovery is most clearly evident in the labour market, with employment growth of 2.9% recorded last year. The latter represents the addition of 56,000 jobs. As a result, there are now more than 2 million people at work for the first time since 2008. My Department is forecasting a continuation of robust employment growth over the forecast horizon and, on this basis, by the end of the decade there will be more people at work in Ireland than ever before. Accordingly, unemployment is set to fall to approximately 5.5% by 2019 down from a peak of over 15% in 2012.

Turning to 2017 and beyond, the latest Exchequer returns demonstrate that the Government continues to deliver on its commitments. While tax revenues were slightly below expectation, it still remains too early to discern any firm trends. However, it is important to point out that annual growth has been reasonably strong with tax receipts 3.2% higher compared to the same period in 2016. The performance of VAT has been very encouraging with receipts up over 17% or €673 million in annual terms.

On expenditure, it is reassuring that spending is being managed by Departments within their allocations, with overall expenditure on delivering public services below profile. Capital investment on infrastructure is slightly ahead of profile and well up on last year, reflecting increased expenditure on the housing programme.

The general Government deficit of 0.4% of GDP projected for this year is unchanged from budget 2017. In addition, it is important to point out that our primary fiscal policy objective is to achieve a balanced budget in structural terms. This is now within sight. Taking account of the current trajectory and assumptions set out in the stability programme update, I am pleased to reiterate that we will achieve this medium-term objective of a balanced budget in structural terms in 2018.

Our second priority in fiscal policy is to reduce the level of public indebtedness and we are making significant progress in this respect. Our general Government debt-to-GDP ratio peaked at over 120% in 2012. This declined to 75.4% for 2016 and 72.9% for 2017. As a result, Ireland is on track to achieve a debt-to-GDP ratio of 60% early in the next decade. Colleagues are aware that 60% is the target set under the European fiscal rules for debt-to-GDP ratios.

Despite the strong momentum, a continuation of robust growth cannot be taken for granted as there are a number of significant risks on the horizon that could potentially derail the recovery. Principal among these are the potential fallout from the UK's exit from the European Union and uncertainty associated with the policy stance in the US. The best way of dealing with these risks is through prudent management of the public finances and competitiveness oriented policies. This approach helped create the recovery and it will help ensure sustainable growth in the years to come. This is what the Government will continue to do. I thank the Chairman and colleagues for their kind attention.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Deputies Calleary, Barrett and Burton have questions for the Minister. They indicated to me in that order and, therefore, I will call them in that order. I call Deputy Calleary first.

Dara Calleary (Mayo, Fianna Fail)
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I apologise in advance for the fact that I have to leave early to go to the Dáil for parliamentary questions. I thank the Minister for his statement. He has confirmed that we will achieve the medium-term objective by 2018. I have a few questions around the capital expenditure implications but in the context of his remarks on the figures, where does he anticipate the fiscal space for budget 2018 will be in October?

Michael Noonan (Limerick City, Fine Gael)
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We are maintaining the same fiscal space as we announced in the budget. The fiscal space is €1.2 billion but there has been a strong carryover effect from the budgetary decisions of last October. These amount to approximately €500 million on the expenditure side and in the region of €175 million to €180 million on the tax side. When we put the two together, that reduces the fiscal space to somewhere around €500 million to €550 million. It is very narrow. Built into the expenditure side in the carryover is money for employing extra teachers, nurses and so on. One would need to see for what the money is allocated to see what level of activity is already built in for 2018. We will recalculate the fiscal space around mid-June. I would be hoping we will recalculate it somewhat in an upward direction but I would expect it to be reasonably modest. In normal circumstances, a growing economy with a growth rate moving from 3.5% on budget day to 4.3%, which is the latest forecast from the chief economist and his team, should generate a certain buoyancy in taxation for 2017 and 2018.

That said, it does not, in itself, make a big difference in the context of the fiscal space. We can increase the fiscal space by bringing in new tax measures or by increasing existing taxes. However, that is a discussion we would have to have in a different space. If we were to go down that road, we would have to be very conscious of our obligations under the confidence-and-supply arrangement and ensure that Fianna Fáil was taken into confidence and that we reached an agreement before we would go that way. I would be reluctant to raise any taxes but to give Deputy Calleary the full picture, the fiscal space can be increased by additional taxes. It is narrow and tight but what it really means is that when everything else is paid for, that is already committed, there is about €550 million or so at present. We will recalibrate that in June and we will have a better idea then but I would not expect a dramatic change.

Dara Calleary (Mayo, Fianna Fail)
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We had an interaction here last week with Mr. McCarthy and his team on the very strong employment figures. However, income tax figures are coming in under profile and the level of growth in income tax revenue is not as strong. Mr. McCarthy said that he is puzzled by this. We drilled down into it. What are the Minister's views? We have hugely strong employment growth but we are not seeing it in income tax revenues. Income tax for the first quarter is behind profile.

Michael Noonan (Limerick City, Fine Gael)
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When the figures first emerged, we were a bit puzzled by that. When we drilled down, however, we found that the shortfall related to USC rather than income tax. We reduced the take from USC in the budget and perhaps that had an additional impact beyond forecast, but I do not think so. PAYE was up by 6% year on year and PRSI was up 7%. There is a quirk in the USC and I have asked the Revenue to have a look at it. Deputy Calleary will remember that there was an argument that people were reluctant to go back to work in low-paid jobs because they would lose ancillary benefits. One of the ancillary benefits they were afraid of losing was the medical card. Some years ago, a change was made to the effect that if somebody had a medical card – personal or family - and went back to work, he or she could hold on to it for a period of three years. Many people going back to work, while they would be paying PRSI and income tax, would not be paying USC. That is one possible explanation. As well as that we are not absolutely sure how the HSE has been administering the system. The HSE may have been a little more generous than the policy parameters anticipated. Revenue is having a look and I will keep the Deputy informed.

Dara Calleary (Mayo, Fianna Fail)
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The Minister said yesterday at the Central Bank that the eurozone Finance Ministers want to support "productivity enhancing public investment" to use his phrase. The committee has done a great deal of work on the capital programme. The Minister confirmed that we will reach the medium-term projection by 2018. That should allow more space in budget 2019 for capital investment given that the convergency margins, etc., will not apply. What is the Minister doing at European level to follow up and what is the Government doing to allow flexibility around capital expenditure? Is the Minister considering relaxing the fiscal rules? Is it the case that he needs support for capital expenditure not for current expenditure in terms of, to again use his phrase, "productivity enhancing public investment"?

Michael Noonan (Limerick City, Fine Gael)
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The first position is the current position. That position was set out by the then Minister, Deputy Brendan Howlin, in 2015 when he announced the capital budget. When one takes commercial State bodies and everything else into account, that amounts to €42 billion over the period to 2021. Since then, further revenue streams have come up with the growing economy. There is a review of the capital programme being carried out by the Department of Public Expenditure and Reform and that will involve the Minister prioritising the expenditure of a further €2.7 billion. That additionality will be there and I assume the Minister will announce the distribution of that on budget day, but he has already invited submissions on the prioritisation of projects and I know he has consulted with the committee and taken its views into account.

In addition to that, we continue to work with PPPs, which will be off-balance sheet. Andrew McDowell, whom committee members know as a previous adviser to the Taoiseach, is now vice president of the European Investment Bank, EIB, and he is working closely with us since the bank opened its Dublin office. We are looking at the possibility of getting cheap EIB money constructed in such a fashion that the costs will go off-balance sheet for key projects. To date, the position is that if a project can be shown to generate an income flow which is sufficient to service the borrowing, arguably, the European central statistics office, EUROSTAT, would allow it to go off-balance sheet. If we were to build a metro for Dublin, for example, one would have to do a cost analysis on it and match it against the fare structure and see if the fare structure was sufficient to cover the construction costs over a 20 or 25-year period. That is one area of exploration. Let us consider what would happen if we were to complete the roads programme. One of the big projects that remains is the Cork to Limerick one. The cost currently pencilled in for this is approximately €800 million, which is way beyond what is affordable even in the reassessment of the new capital programme. It might be possible to do the road if one were willing to apply tolls to it. The same would apply to the north-west project from Cavan to Derry, which is a North-South project. In light of Brexit, it would be important to see what contribution the British Government would make. The Deputy will accept there would be a big negotiation involved but if the Republic's portion of it were subject to tolling of some sort one could see how that might work.

One could probably do something on social housing as well but the rent flow on social housing, because of the rent structure, would be insufficient to service the investment. A model was developed in France which is now applicable whereby 40% of the construction has to be for private housing. Whether that is rented to generate a revenue flow or involves the sale of the asset to generate revenue over a period, by doing it that way the French have got the concept across the line with EUROSTAT. There is a way of engineering such projects also. We are at the early stages of discussion and we hope at European level to expand the capital programme along the lines Deputy Calleary seems to suggest.

There is some movement already on a loosening of the fiscal rules for investment purposes but the flexibility that has been introduced so far has not benefited us. We continue at all opportunities at the relevant European meetings, especially Eurogroup and ECOFIN, to stress that an economy like Ireland's which is coming out of a deep recession - and out of a programme - during which there was very low investment in capital needs to beef up capital investment to grow the economy further. While there have been some changes as to the flexibility of the fiscal rules that are applicable for investment, countries such as Italy have benefited strongly from that. However, for reasons I need not get into, what such countries have done does not match Ireland's circumstances and we have not got a benefit from it yet but we are still knocking on that door and pushing hard and we will see where it goes.

We are in favour of the fiscal rules, which we think have helped quite a lot in the context of the strong economy we now have.

We are still running a deficit and as long as one runs a deficit, one obviously increases one's indebtedness. In 2018, when we balance the budget in structural terms, we will run a surplus. From then on there will be extra resources and there will be a different calculation.

Seán Barrett (Dún Laoghaire, Fine Gael)
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I will begin by congratulating the Minister. When one reads the figures, one can see what has been achieved over the past six years. One can see there has been an incredible turnaround. Very often we have got into the habit of being negative about things that have not been done as distinct from the things that have been done. I do not mean this in a plámásing way but it is an absolute miracle to be where we are today and everybody should be congratulated - the officials, the Ministers and the public who put up with the hard times. When I wake up in the morning I open my newspaper and, by and large, I expect to read bad news because people are afraid to say that there is good news. There are 2 million people at work now. Young people can go into third level education and are fit to travel the world and get jobs. We have a tremendous amount to be pleased with. Like the Minister, I have been around this House a long time. Since 1981 we have gone through various periods and it is time that we considered the positive side.

Having said all of that, the one thing that concerns me is we still have a total imbalance in terms of house prices. Young people are being driven to insanity if they can manage to get a loan to buy a house these days. Deputy Boyd Barrett and I live in an area where house prices are crazy because three-bedroom houses fetch between €450,000 and €500,000. No young couple can get a loan to match that amount or afford the loan repayments. This is a small island and we must consider houses prices in the overall picture. If I am stupid enough to get into my car and drive in here at 8.30 a.m., the journey will take me between three quarters of an hour and one hour. If we had proper public transport and infrastructure I could travel to Drogheda or Dundalk in the same period. I use the DART a fair bit and in Pearse Station at 5 p.m., platform 1, which is opposite to the platform I use, is jammed with people. They actually are pushing one other to get to the front of the queue. The trains leaving that platform go to Maynooth, Drogheda, Dundalk etc. and the people travelling are all youngish. Commuting makes sense to people. If one can travel from A to B in a certain amount of time and have a decent quality of life, is it not better than having a huge mortgage wrapped around one's neck for 25 or 30 years? These are the sorts of human things that must be considered. I suggest it is time, with low interest rates and the borrowing that could happen, for infrastructure to be provided that allows people to travel from A to B in the shortest period. I believe the public will react. Why would one take on a mortgage for a three-bedroom semi-detached house or a terraced house for €450,000 if one could get a house for €250,000 if one was prepared to travel for three quarters of an hour to an hour on public transport? Availing of the latter would make a hell of a difference in one's quality of life. This island is so small now because one can travel on the motorway from Dublin and reach Galway in two hours. We need to match that option with public transport.

While the figures that have been outlined are grand, it makes sense to me - as anyone who has spent time in the business sector will know - that when interest rates are low, it is time to invest in things that are productive, create wealth and reduce burdens both on the State and individuals. I suggest we consider various areas in towns and regions located within an hour of Dublin and draft an overall plan for infrastructure? We may have to borrow money to fund the infrastructure needed to get people out of the rat race. I am sure that lots of people who live in Dún Laoghaire find commuting to work is a rat race. It is an absolute rat race for young couples to have a huge mortgage wrapped around their necks for 25 or 35 years. The committee should draw up a plan with the Minister or whoever is in government that recommends ways to improve quality of life and provide the appropriate infrastructure. We must encourage people to move away from overcrowded areas. I am sure Deputy Boyd Barrett will confirm what I have said. It does not make sense to pay €400,000 for a two-bedroom apartment and to then spend an hour sitting in a traffic jam to reach the town centre. The committee must consider ways to shift people into areas where they can get a decent home for a decent price. We have done a fair deal in terms of infrastructure and roads but in terms of public transport and other means of getting from A to B, the committee should undertake a project that will show where people can get a decent place to live if they are prepared to spend between 30 minutes to an hour travelling. People are already commuting great distances.

Michael Noonan (Limerick City, Fine Gael)
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I thank Deputy Barrett for the compliments he paid to the officials in the Department of Finance and, indeed, everyone who has been involved in the recovery. Colleagues know the Government has prioritised recovering the house building market in order that there is a supply of houses and apartments right through the country but also in the Dublin area, which again might be sufficient. We have come through a period - starting nearly ten years ago in 2008 - in which activity was reduced initially and then stopped. There was a period in the middle of the recession where no house was built except the occasional once-off house in rural Ireland. There is a supply shortage.

Due to some abuses in the industry in the past, the dearth of activity was paralleled by a strengthening of the regulatory regime for house building and apartment building. When I meet representatives of builders and planners I ask them why have no apartments been built between the canals in Dublin but I have been told that the price of land is too high. The price of land in building is really the unit cost of the land. Were the local authority to allow another five or six storeys, the unit cost would go down. If the same patch of land sustained another five storeys with four apartments then there would be another 20 apartments and the price of land would not be too dear. There is a combination of factors.

I am not in favour of bad planning or anything like that but every city in the world allows people to live in apartments in its central area, especially young single people. While it does not have to be Manhattan, neither does it have to be as low rise and confining as it is in Dublin at present. That is only one aspect of the recovery. There is a very big Rebuilding Ireland programme that the Minister for Housing, Planning, Community and Local Government is driving forward and I do not need to enumerate all the initiatives that are being taken. Progress is being made both on social housing and private housing. Ultimately, only supply will moderate prices.

The Deputy's contribution on fast, easily accessible public transport is very important. That is the key to a lot of it. Not everyone is going to live in Dún Laoghaire or on the coast. If people are to live in the counties around Dublin, and the city is the major workplace, it is essential that there is fast, affordable public transport to allow people to commute. It has to be done in a way that it will not take them all morning and all evening, because people need to get home to their families.

The national planning framework is being worked on under the Department of Housing, Planning, Community and Local Government. To give some context for that, the census figures have been emerging in recent weeks and they were published in a county-by-county basis today. The population of the Republic is 4.76 million but the projection is that by 2040, which is not that far away, there will be another million people on our part of the island. People can imagine what another one million people would do to magnify the problems which Deputy Barrett just illustrated. The national planning framework is an essential piece of work as an attempt to take some pressure off the Dublin area and for other centres to be made more growth-friendly and more living-friendly so that there will be better population distribution. There is no doubt that for our younger colleagues in the Parliament, these are the issues with which they will wrestle over the next 20 years. It is about how to develop an economy that has an acceptable standard of living and that regardless of what wealth is created, the good of it is not taken away by the pressure of living in the modern economy. Part of it is having work but another is how someone gets from where he or she lives to where he or she works. Will everyone be on the east coast? Looking at some of the policies of the Dublin local authorities, if it continues on the low-rise model, the city will stretch as far as Athlone when another million people come in on top of what is there already. There are huge issues. Maybe this committee could have a session on the national planning framework, if it is not outside its remit. It is extraordinarily relevant to everything that we talk about on the budgetary side and the issues that Deputy Barrett raised.

Joan Burton (Dublin West, Labour)
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The Minister and the officials are very welcome. On the calculation of headroom that will be available by the end of the year, the forecast and the Minister's statement are upbeat about there being extra space at the end of the year. Will the Minister clarify what that is likely to be used for? Will it be for wage increases in terms of the current negotiations with the public sector? Will the Minister also clarify where the additional funding to replace the loss of income from Irish Water will come from? Does he expect it will come out of the headroom mentioned in his presentation? We discussed the disappointing income tax returns for the first quarter with the officials previously. We still do not have an explanation for it. Nonetheless, based on the Minister's statement today, it is likely that there will be additional space by the end of the year at budget time. I do not think anyone who has been a member of the committee would like a repeat of what happened at last year's budget where practically on the morning of the budget, the officials told us that it was all nailed down. I think there was general laughter around the room because most people who were following what we were being told did not anticipate that. We are a budgetary oversight committee. In other parliaments there is an obligation to indicate to their equivalent committees when the figures change. Will the Minister tell the committee what the likely headroom will be this year? What has been pencilled in for areas such as public sector pay and Irish Water? I saw various estimates around €250 million per annum for that. Will that come out of the headroom and will it feature thereafter as a general expenditure amount in the Government accounts?

There is a reference to Brexit in the document. It seems strange that the document has no demands. There is a graph produced in the joint Department of Finance-ESRI study. What demands, if any, is the Government or Department of Finance putting forward to allow Ireland some leeway and room to manoeuvre in the context of the difficulties that the report indicates Ireland is likely to experience as a consequence of Brexit? To date, a number of proposals have emerged. One is to allow increases in capital expenditure outside the deficit procedures of the EU, whereby capital expenditure for agreed projects of the kind the Minister just outlined would not be included in the deficit. For instance, in the case of firms that are expected to lose as a consequence of Brexit, the EU globalisation fund's approach would be adapted to allow Ireland extra leeway to support these firms. The mushroom industry in Monaghan is a well-known example of this, a lot of which came down to currency changes. It would be interesting to hear the Minister's thoughts.

The Minister heavily referenced public private partnerships, PPPs, in relation to the European Investment Bank. This may be something that we as a committee return to, but the cost of PPPs in Ireland has been exceptionally high. We have projects like court projects. If not today, then at a later date, will the officials talk to this committee about whether it is possible to get value for money PPPs, those being PPPs at a reasonable rate, or is it inherent in the PPP structure that they are so expensive to undertake that, like the project for the criminal courts, the annual rental cost is very high compared with the NTMA being able to borrow at very attractive terms, as the Minster noted? I would appreciate some guidance for committee members. We are not far from the budget.

I am sure planning for it is under way. Last year, we spent a number of months hearing the scéal of various people on the budget, but because of the tradition of budgets in this country, we got very little information. On the day, a lot more was made available. We know from the Minister's statement today that he anticipates the same happening this year. Perhaps he would indicate on what he proposes to spend any headroom that arises. I am sure the Minister has done the preliminary figures on the budget. What fiscal space is he contemplating?

Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputy for raising a number of interesting issues. On the headroom available, there is nothing in my speech that is optimistic about headroom at the end of the year. What everybody needs to remember is that the amount of money available will be the excess of the tax flow over expenditure when the deficit of 0.9% of GDP is taken into account. We are behind the curve in that regard after the first three months but we think we will make up ground as the year goes by. I would not envisage, as happened in previous years, that tax revenue will drive ahead such that there will be a lot of additional funds available for spending at the back end of the year to settle outstanding liabilities. I do not think it will go that way this year. I hope we will at least break even but I do not envisage a surplus on the tax flow side. The amount of money available is different from the amount that one can legally spend under the fiscal rules. In jumping from one to the other, one can get confused. As I said, we are a little behind in the first quarter in terms of the flow of taxation. As a consequence, there is a shortfall in terms of bringing the budget in as designed last October, but we hope that will correct as the year goes by.

On the fiscal space, on budget day we said that the space for next year would be €1.2 billion. We are planning against that, but as I said, there is already a carry-over of approximately €650 million, leaving €550 million as of today in terms of new distributions of funds. There is no headroom either on the tax flow side or in terms of fiscal space. I hope that the growing economy will generate more taxes. A portion of the shortfall is attributable to corporation tax not coming in evenly on monthly profiles. The bulk of that tax comes in in May-June and again in November. We hope it will come in again. There was an adjustment on corporation tax in 2015 which Revenue now says arose from the extra profitability of the corporate side, which drove the taxes. The difference between 2015 and 2016 was approximately 7% such that there was not a dramatic change in tax flow. Corporation tax accounts for approximately 15% of all taxes. VAT and income tax drive the tax base. We presume corporation tax will come in right as the year goes by but we do not envisage any dramatic shifts on it one way or the other. As I said, there is very little headroom on the tax flows and the fiscal space.

Joan Burton (Dublin West, Labour)
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The Minister mentioned in his speech that the GDP growth forecast has been increased to 4.3%, which is very good news, yet he is saying now that there will be no benefit arising from that. I find that hard to understand.

Michael Noonan (Limerick City, Fine Gael)
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Perhaps the Deputy would allow me to continue. On the question regarding the varying forecasts made last year about fiscal space up to the Friday night prior to the budget, what I am saying is that we are not adjusting the fiscal space arising from the new information because we have not got an awful lot to contribute yet with certainty. The first readjustment of the forecast on fiscal space will be made around mid-June in the context of the summer economic statement. I hope that a faster growing economy than anticipated will feed into an increase in fiscal space but the growing economy is only one element of the many moving parts that make up fiscal space. All I can say is that the adjustment will probably be positive but it will not be dramatic. I can say that with a reasonable amount of certainty at this point. In terms of planning to spend, it will be plus but it will be marginal. There are others issues involved.

There are other bills that have accrued since the start of this year and the announcement of the budget. The Deputy will recall that to ensure we had industrial peace in the country the payment date for the tranche of the Lansdowne Road agreement which was due next September was brought forward to 1 April this year at a cost of €120 million, which was not included in the budgetary figures. The Minister for Public Expenditure and Reform has indicated that he can carry that within the global allocations already in place.

Joan Burton (Dublin West, Labour)
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Will there by any savings?

Michael Noonan (Limerick City, Fine Gael)
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The Minister, Deputy Donohoe, is doing well. For the first time in my memory, after three months the Department of Health is on line in terms of budget. That has not happened over the previous six budgets. In terms of the Exchequer figures published last week, spend across Departments is running at 0.9% below on the current side and is slightly up on the capital side because of the additional spend on housing. As late as yesterday the Minister, Deputy Donohoe, told me that he will not need additional provision to meet that €120 million. That is good news. On the other hand, no provision was made for Irish Water and the abolition of water charges. I do not know yet where the bill in respect of the refund of water charges, as recommended by the committee, is going to land in the context of legislation. In setting out the Estimates for Irish Water we agreed a budget with it and built it into the expenditure figures going forward.

Joan Burton (Dublin West, Labour)
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Is the Minister saying it is there already?

Michael Noonan (Limerick City, Fine Gael)
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No, I am saying that the provision for Irish Water as an institution is already in place but it has to be matched. If water charges are abolished, there will be no funding stream for Irish Water. The intake in terms of water charges was estimated to be €240 million and expenditure in terms of the conservation grant amounted to approximately €100 million. These figures were factored into the multi-annual Estimates, but intake in terms of the charges pencilled in as the revenue flow from Irish Water was not realised. The intake to date for this year is approximately €40 million. As I said, there are many moving parts around money flow. This income stream was expected to result in a one-off €59 million in fiscal space for 2017. As such, there will be a reduction in fiscal space of €59 million. In other words, to keep within the fiscal space figures and the figure agreed at budget time, provision will have to be made for €59 million for Irish Water, which we had not allowed for. The figure for 2018 and 2019 is zero. It is complicated. In the context of a budget of €60 billion, this is not a huge amount and it can be accommodated.

It is the politics of Irish Water rather than the revenue from Irish Water that seemed to be the issue. It will go on the balance sheet. Water has to be paid for, as does the treatment and delivery of water. Now the decision is that it is going to be paid for out of general taxation rather than through specific charges. There will be a possibility of charges for excessive use, as I understand from where we sit at present. We will not have the full picture until we see the legislation coming through. What I have described for the committee is the position on Irish Water, but I am including it only to show that if it is not allowed for in the budget, it eats into any additional resources that may come. It does have a consequence for fiscal space also. As members know, €59 million is not dramatic in a budget of the size we are talking about.

I will do my best not to have any surprises. It is part of the agreement between our parties, the supply and confidence agreement, that there be no surprises and that we do not surprise each other. There are moving parts in the calculation of fiscal space that keep moving right up to the publication of the White Paper on the Friday night before the budget. We are still adjusting until the early afternoon on the Thursday. Sometimes they are chunky adjustments. I am not going to hide anything from members but I want them to realise I can given them the information only when I have it. Rather than giving them a false start, we are not recalculating the fiscal space now as we did last year. We will not recalculate until June, at which time I hope we will be closer to the outturn than we would be if we had a shot at it now.

On the question on Brexit, making an allowance for Brexit will depend on what will happen and the solution. If there is no deal and no free trade agreement between the UK and the EU, and if WTO rules apply and there are tariffs, there will be a 60% tariff on prime steak. One can see what that does to the top end of the beef market. A woman in Manchester can already buy two and a half chickens for the price of a sirloin steak. One can see the divergence in behaviour that would occur, especially when the devaluation of sterling is driving up consumer prices in the British supermarkets by perhaps 4% or 5%. It will depend on where it lands. I hope, and it is our negotiating position, that there will be a free trade agreement between the UK and Ireland resulting in no tariffs, such that we would not have the problems.

Some measures are being taken already. One will be aware that a combination of the Department of Agriculture, Food and the Marine, ourselves and the European Union has been able to deliver €150 million of capital to the farming community at 2.95%. That was to protect the suppliers into the food market from the first hit of Brexit. We do not know where it is going to land, however. It will not be possible to measure the consequences of Brexit until we are further down the road. Based on what the Department of Finance has done with the ESRI, as referred to, there will be a knock of about 4.5%, but that will be at the end of ten years. If a budget is moving at 3% or 3.5% for the decade, amounting to GDP growth of 35%, and it is compounded, because it would be growth on growth, one would not be far from 40%. The calculation is 4.5% off that rather than 4.5% in any given year. It would be front-loaded. Most of the hit would be in the first five years of the decade rather than the second five, but it is not as dramatic as some of the headlines would suggest. Certainly, it would act as a brake on our growth rates and hold us back.

How does one deal with that? One does so by managing the public finances better and continuing to make the economy more competitive rather than by having any specific sectoral intervention, although sectoral interventions might be necessary also. We are considering a measure in the Department, along the lines of the cheap money we made available to the farming community, that would protect SMEs in our vulnerable export sector. This, however, has state aid implications, so we have had to send the heads of what we are talking about to the competition authority in Brussels for state aid clearance. We are planning that piece. We can obtain more information on that for the committee if necessary.

Beyond that, we are pressing everybody and doing everything we can. The members know the issues. They know of the North-South issue, the freedom of movement issues, the possibility of tariffs, the common labour market between ourselves and the UK and the trade implications. Trade worth €1.2 billion crosses the Irish Sea every week in both directions, supporting 400,000 jobs, with 200,000 in each jurisdiction. This is what would be at risk if we got a really hard Brexit but we hope we can negotiate with the European negotiators to get a deal. Of course, our priorities are all the issues affecting the island, both the North and South. In addition, we are unashamedly in favour of the UK getting a free trade agreement with the European Union. If it does so, we will not have tariffs and disruption to our trade. The nearer we can get to that position, the better it is for Ireland. That is where we are but it is going to be a long story. One will notice there has been movement on both sides towards transitional arrangements. These are absolutely necessary but they also lengthen the timeframe. With a negotiation process that takes three to four years and another period of transition before any new regime comes into play, one could be looking at a decade.

Joan Burton (Dublin West, Labour)
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Could the Minister comment on the PPP costs by comparison with very cheap money available to the NTMA?

Michael Noonan (Limerick City, Fine Gael)
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The big advantage of PPP is that, while one cannot ignore costs, one can get the funding off the balance sheet. Bearing in mind what the NTMA was raising money for yesterday, we could get money now for investment purposes. We would certainly get it at 1% over a long period, certainly over ten years. We would not have to go up too far to get it for 15 or 20 years. In comparing the public capital programme to PPPs, it should be noted that it could probably be funded out of a public capital programme as cheaply as a PPP but the advantage of the PPP is associated with the second issue, that is, what one is allowed to spend. If it is spent on PPP, it is not coming out of the fiscal space. The Deputy is right about low interest rates. The price is not so much the issue as being off-balance sheet. They are all negotiated separately and some look like very good value and others do not. The Department of Public Expenditure and Reform is across this. It has the expertise. There is no doubt that it is wide awake to the concerns.

Lisa Chambers (Mayo, Fianna Fail)
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I am unhappy or disappointed that the parliamentary budget office will not be fully functioning for this year. Certainly, this will make this committee's job difficult, but I have no doubt that we will endeavour to do our job as best we can within the confines of the resources.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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The Deputy's unhappiness is unanimous.

Lisa Chambers (Mayo, Fianna Fail)
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I thank the Chairman. I thank the Minister for his presentation. I very much welcome the fact our economy is growing and that the jobs market is strengthening, but from my perspective, I am thinking about younger people. When there is a narrative that the country is recovering, that things are going very well and that the number of jobs is increasing, the Parliament, which may not be as representative of those in their 30s and 40s as it should be, must recognise that there is growing depression, anxiety and fatigue among people of that generation.

They are unable to buy a first home or get permanent jobs, must deal with pension issues and, as Deputy Barrett pointed out, spend hours in their cars or on public transport on long commutes. We have done little in recent years to address that age group's ongoing concerns. I point to the help-to-buy scheme specifically. I understand the incentive behind it, but the Minister is probably aware it has been termed the "help the developer" scheme, given that it has driven up prices for younger people and first-time buyers. I am eager to see future budgets doing something to assist people in their 20s, 30s and 40s who are trying to get a foot up in life, start families and jobs and get homes, which is becoming an impossibility for many.

I welcome that the Minister touched upon the national planning framework. I support the drive to ease the pressure in the greater Dublin area. With that in mind, there needs to be a focus on investment and development in the north west. Speaking as someone from the Mayo constituency, we consistently have been left behind in terms of infrastructural development. I do not begrudge any county development works but there is extra infrastructure development in Dublin, Cork and Galway in the form of the Luas and various public transport systems, even though the basics have not even been provided in the north west. There is no motorway or dual carriageway out of Mayo or proper links to Sligo, Galway or Dublin. Without basic infrastructure in place, it will be difficult to compete for investment and generate the jobs that will allow people to remain in the area.

Deputy Barrett hit the nail on the head where work-life balance was concerned. The public service could examine allowing people to work from home properly for a day or two per week in an attempt to ease the pressure on commuter services and the necessity of sitting in a car for two hours each way every day. The public sector should lead the way on this matter.

Regarding the GDP growth projections, are there plans to increase spending on the Defence Forces? Last year, we spent 0.55% of GDP on defence whereas the European average, including neutral countries, was 1.2%. We will be dealing with Brexit and other issues and are an island nation. I am not suggesting that major threats are posed to our State but by any standard of a functioning democracy with a jurisdiction to protect, including its waters, we have a low defence spending. I would like to see it increased, given that the economy is growing.

Michael Noonan (Limerick City, Fine Gael)
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There is no doubt at all that, in times of recession, people who are looking for their first jobs and homes and trying to establish themselves in life and society have it more difficult than those who are established and have homes, families, jobs, pension provisions, etc. That is a given and is borne out by all of the evidence. The best thing a government can do for a younger generation is to ensure that there are jobs. That was our approach - the priority was to create jobs. We have been successful in that. When I entered office in 2011, the rate of unemployment was in excess of 15% and among young people, it was much higher. As of last week, the rate is now 6.4%. The ESRI projects that it will be 5.7% by the end of this year, although we believe that we will be in the mid-5% range in 2019. As committee members know, the difference of returning to work, even for average pay of €700 or €800 per week, to a family that was jobless during the recession is dramatic. That is the best thing that we can do.

Obviously, we prioritised education after that. A great deal of money was invested in higher education, including third level. Participation rates are very high now. They increased rather than decreased during the recession. Education directly targets young people. Our young people are probably the best educated young people in Europe and are as good as anywhere else. This is important. I agree with Deputy Chambers's general analysis, in that delivering for the rising generation must be a priority in any social and economic development plan.

I take issue with her and various other commentaries to the effect that the help-to-buy scheme has increased the price of houses. That claim does not stand up to any economic analysis. In the three months of this year so far, approximately 1,000 people have received money under the scheme. The cost is approximately €10 million. That amount of extra spending in the housing market could not possibly affect prices. It is too small a quantum. Prices are increasing but not on account of the help-to-buy scheme as the input is far too small. The scheme is working. It was designed to help young couples get a deposit for a house. It contributes close to half of what was required for a house deposit last year. Combined with the Central Bank's adjustment to the prudential rules, this has stimulated the starter home market again. Starter homes are being built and young couples are buying them. However, there is no circumstance in which an injection of €10 million into the housing market could drive up prices. It is not possible.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Could the Minister repeat that point?

Michael Noonan (Limerick City, Fine Gael)
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An injection of €10 million into the housing market since Christmas could not possibly have driven up prices. The price rises are due to other factors, principally the lack of supply in the market, the availability of money now that mortgage houses are writing mortgages and the changes in the Central Bank's prudential rules allowing people to borrow more. The committee will recall that, when we were implementing the help-to-buy scheme through the Finance Bill, it was backdated to July. As the Minister for Housing, Planning, Community and Local Government announced that intention in July, we had a legal obligation to anyone who bought in expectation of getting the scheme. The budget included €10 million for the promises that were entered into for 2016 and €40 million after that. After three months, the total drawdown is €10 million. I am not saying that house prices have not increased.

Lisa Chambers (Mayo, Fianna Fail)
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I accept the Minister's point-----

Michael Noonan (Limerick City, Fine Gael)
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I am simply saying that it is not due to the help-to-buy scheme.

Lisa Chambers (Mayo, Fianna Fail)
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-----but the scheme tells developers that they can add on the extra amount because people might be able to claim it back, which has an inflationary effect. It is not down to the actual amount claimed. That is my opinion but I accept the Minister's view.

Michael Noonan (Limerick City, Fine Gael)
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There is merit in the Deputy's point but in any supply and demand situation, price is the link. If there is no supply and high demand, there is something wrong with the pricing structure. Everyone in politics meets and talks to builders. We meet them in the normal course of events. I spent five years with builders telling me that they could not afford to build because the cost of building would have been less than the price that they could get.

Tommy Broughan (Dublin Bay North, Independent)
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Why did the State not build?

Michael Noonan (Limerick City, Fine Gael)
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We did not have money.

Tommy Broughan (Dublin Bay North, Independent)
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Why did the State not have money?

Michael Noonan (Limerick City, Fine Gael)
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Due to the events of the past, which I do not want to recite.

Tommy Broughan (Dublin Bay North, Independent)
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Which we opposed.

Michael Noonan (Limerick City, Fine Gael)
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I do not believe that the Deputy opposed-----

Tommy Broughan (Dublin Bay North, Independent)
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We would have done it differently.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Through the Chair, please.

Tommy Broughan (Dublin Bay North, Independent)
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I am sorry.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Everyone opposed the collapse.

Michael Noonan (Limerick City, Fine Gael)
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I am talking about the collapse. When the economy was driven over a cliff in 2008, the country went bankrupt. Anyone who is not suffering a loss of memory knows that there was very little money. We were cutting back rather than spending. It has only been in the past two years that a large chunk of money has been provided for social housing. The Minister for Housing, Planning, Community and Local Government was given €5.5 billion for the next five years. Now the social housing work is moving through the housing agencies and local authorities.

I would be the first to admit that during the recession, we barely had enough money to keep things going. We were doing that by borrowing from Europe and the IMF. It is great to ask in hindsight why we did not spend money but we did not have it. That is what it came down to.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Does that answer all the Deputy's questions?

Michael Noonan (Limerick City, Fine Gael)
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On the question of defence, I know the Deputy has had a career in the Defence Forces.

Lisa Chambers (Mayo, Fianna Fail)
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I would not say "career", but I have had experience there.

Michael Noonan (Limerick City, Fine Gael)
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I hear the Deputy had an association with distinction.

Lisa Chambers (Mayo, Fianna Fail)
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I thank the Minister.

Michael Noonan (Limerick City, Fine Gael)
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It is a question for the Minister, Deputy Paschal Donohoe. I could not tell the Deputy what the allocation for defence is. All I know is that, when I go to Europe, on the sides of the meeting that I attend, but never at an official meeting, I hear people talking about defence spending. The rule for NATO is that at least 2% of GDP must be spent on defence.

Lisa Chambers (Mayo, Fianna Fail)
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I am not advocating that, but I am aware of the rule.

Michael Noonan (Limerick City, Fine Gael)
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The Deputy is right. Non-NATO countries have less than that. The Deputy can take it up with the Minister for Public Expenditure and Reform.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I thank the Minister for his illuminating responses so far.

I do not want to labour the past history too much except in so far as it is actually relevant to what we do from here, but one of the things that there seems to be across the board recognition of, certainly on this committee, is that we have had a dangerously low level of capital and infrastructure development investment for some time. That is manifest in the housing crisis, the water infrastructure crisis, investment in health, education and a whole number of other areas which could really do with significant investment. The lack of that investment in the housing area has produced the "supply problem", as it is referred to, because we did not invest, do not have a stock and prices are up. I would like to point out that the reason that we did not have that investment was because of the fiscal straitjacket. Those were rules which were imposed which we agreed to. Even now, we are still grappling with that. There is now a consensus emerging that we should question the fiscal straitjacket, at least with regard to capital investment. Is it not the case that we are paying - whatever about the debates on current spending - a bitter price for the fiscal straitjacket imposed by the troika and agreed to by both Fine Gael and Fianna Fáil before it? It produced dangerous imbalances in the economy, never mind the human suffering in the area of housing and the health service from the collapse in investment in those areas.

Is it not time to admit that the EU fiscal rules, at least on capital investment and expenditure, were wrong? They were short-sighted rules and did not understand that counter-cyclical investment and expenditure are needed, and one does not even have to be a Marxist to think that. It is a matter I have heard the Minister talk about more recently, but there was none of that when we needed it most and we are paying a very bitter price for it. I am interested to hear the Minister's comments on that. It is not just a past tense thing, because for those years, we paid out €8 billion in interest on an odious debt that was imposed on us, which is broadly comparable to the collapse of capital investment. That was the capital investment fund, but it was going out. It is still going out. Next year, €6 billion will go out in interest, there will be about €6 billion in the two years after that, and it goes on for quite some time. That is money that could be going into the capital investment deficit and the infrastructure deficit. We all acknowledge that is the case but Europe is imposing a straitjacket and we are agreeing to that straitjacket. Even now, despite the apparent consensus on the problem that this presents for us, I do not really sense any fight with Europe about this. Maybe the Minister could tell me differently, that we are fighting the good fight in Europe to change these crazy rules which are starving us of the housing investment, infrastructure investment and so on that we need.

Housing has been mentioned on a number of occasions. The Minister said it is a matter of supply. I agree and just gave my analysis of why we have a supply problem. Is it just a matter of supply, or is it also the type of supply? That is to say the balance of public, not for profit housing compared to an overwhelmingly privately controlled property market and development land. Would the Minister not agree that that balance is all wrong? Whereas housing output in the 1940s, 1950s, 1960s and 1970s would have been from the State directly providing a much higher proportion, 30% to 40% at times, now it is down to abysmally low levels of direct output by the State of not-for-profit housing, whereas the vast bulk of housing output now is from the private sector. That creates the imbalance and problems of unaffordable prices. Unless we increase the supply of not-for-profit, directly-provided State housing, that balance will never be corrected. I would like the Minister to comment on that.

There is a section in the stability programme about NAMA where the Minister says that its debt and bonds are to be redeemed by the end of 2017. Had the Minister not accelerated the redemption of those bonds and used the money for investment in infrastructure and housing, we might have had more for that. I think it was a mistake for the Minister to accelerate that process to the extent that he did. I ask him to talk about what will happen after the redemption. Presumably we are into the black in NAMA in financial terms, once we have redeemed the debt. Do we know exactly what assets are left, what they are worth, what they could be used for and how much profit is projected? We need more detail on all of this. How much of the profit generated by NAMA will go to private bodies? NAMA is often referred to as a public body but, of course, it is not a public body. It is 51% privately owned. We do not even know who some of the private owners are, incredibly. They are undisclosed investors. How much of the profit of NAMA will go to the 51% that is privately owned?

On the revenue side, does the Minister find it concerning or think it is an issue for us to consider from a budgetary point of view that, while profits have gone up pretty consistently for the last number of years - the witnesses could tell us what the latest available figures are but I think pre-tax profits were about €95 billion-----

Michael Noonan (Limerick City, Fine Gael)
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Is that on the corporation side?

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Pre-tax corporate profits are about €95 billion. That is from the last figures that I saw but maybe that could be corrected. We are getting about €6 billion back in revenue, which is roughly 6% on pre-tax profits. Figures from earlier years show the gross pre-tax profits from before deductions and allowances were about €70 billion.

That is an extraordinary jump in profits, while we are getting very little back.

Michael Noonan (Limerick City, Fine Gael)
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We are getting €7.5 billion, whereas three years ago we were getting approximately €3.9 billion. It has nearly doubled.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It works out at about 6%. Does the Minister not think we should look at this? We have spoken of insulating ourselves from the effects of Brexit but surely the real lesson is to diversify our economy. Our small open economy, which could also be referred to as the "leprechaun economy", is making us very vulnerable. The productivity of the Irish worker is off the Richter scale, in fantasy land, something which is connected with transfer pricing and the behaviour of multinationals, particularly in the area of IP. Does the Minister not think that our failure to react increases our vulnerability and that we are too dependent on this? We are even talking about courting more banks and financial institutions into the IFSC when we should be diversifying the economy into areas that would be less vulnerable to external shocks. If we wanted to do that, the lack of capital and infrastructure investment would be a major problem. I am thinking of areas such as arts, forestry, universities and energy self-sufficiency, which could insulate us to some extent from the ups and downs of the global market and potential changes to multinational behaviour but we are doing very little in those areas. It is an urgent task if we are to protect the economy and develop in a sustainable way in the medium to long term.

Michael Noonan (Limerick City, Fine Gael)
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There was an internal contradiction between the first part of the Deputy's presentation and the second. He condemned the straitjacket of the fiscal rules in Europe which did not allow us to spend more money, particularly in capital investment, and he went on to deplore the fact that we had to pay €6 million in interest. The reason we had to pay €6 million in interest was because we had a debt of some €200 million and if one borrows and spends more one pays more in interest. Both remarks cannot be correct at the same time.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We should not have taken on that debt.

Michael Noonan (Limerick City, Fine Gael)
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The Deputy wants us to take on more debt.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I do not. I never suggested borrowing.

Michael Noonan (Limerick City, Fine Gael)
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Where would we get the money?

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I pointed to the capital area.

Michael Noonan (Limerick City, Fine Gael)
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We can argue theory all night.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It is not theory - it is money.

Michael Noonan (Limerick City, Fine Gael)
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We do not have to rely on theory any more. We are not talking about the fiscal rules. There were five programme countries in Europe and four of them, Ireland, Cyprus, Spain Portugal, applied the fiscal rules. They are all growing rapidly and putting on a lot of extra jobs. One country, Greece, did not apply the fiscal rules and it is still mired in the difficulties it was in, having been the first to go into a programme. The model advocated by the Deputy was tried in Greece.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It was not.

Michael Noonan (Limerick City, Fine Gael)
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The model he deplores was applied, through the fiscal rules, in four other countries. The Irish people, in a referendum, voted for the fiscal rules. It was not unilaterally imposed on the people by a Government. I am glad we have the fiscal rules and I hope they continue, though I would like them to be refined in certain ways that would better suit the Irish experience. If we had fiscal rules back in the days of the Celtic tiger we might not have gone over the cliff and if we had had them in earlier times we might not have had constant swings from boom to bust in the Irish business cycle, in which it is great for two or three years and then it goes bust and 300,000 or 400,000 people lose their jobs. The fiscal rules are preventing that from happening.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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Sadly, we are heading in that direction.

Michael Noonan (Limerick City, Fine Gael)
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No, we are not. We are doing very well at the moment.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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That is what they said in 2006.

Michael Noonan (Limerick City, Fine Gael)
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There is merit in the Deputy's argument that local authorities and housing associations did not build enough social housing. In 2004 or 2005 the Minister for the Environment decided that, in allocating housing budgets, local authorities would be allowed to go into the market and buy private houses rather than construct social housing, and this certainly reduced the supply. The argument at the time, which I understood, was that by building large social housing estates one risked developing ghettos whereas, if the budget was used to buy in private housing estates, there would be a much better social mix and thus a much more sustainable housing model. However, local authorities not only stopped building houses, they took out their capacity to build houses by winding down their construction sections. While the housing agencies can now build houses many local authorities do not have sections dedicated to the construction of social housing, as they had when I was a member of a local authority, with design people and engineers who could deliver it. That is one argument but not the only one and there was a very strong social reason for going the other way. There are now very big housing budgets and we prioritised this at the start of this Government. The Minister for Housing, Planning, Community and Local Government and local authorities have €5.5 billion over the next six years for social housing and, by any standards, that is a very strong investment.

NAMA has a social obligation and is committed to building and providing 20,000 units, houses and apartments. It has already delivered between 4,000 and 5,000 and is continuing its work. NAMA was financed with primary bonds and secondary bonds. The primary bonds, worth €30 billion, are due to be fully paid in 2017 and the secondary bonds run out to 2020. The advice given to NAMA, which it has passed on to me, is that it would not be good financing to repay them any sooner and the cheapest way to pay them off would be to let them go until 2020 and settle them then. It has the wherewithal to settle the subordinate bonds and it estimates a profit of €2.5 billion at present, while its residual assets are somewhere north of €4 billion. Over the next year and a half to two years I would expect the €2.5 billion, in a thriving property market, to go up further and this will be money largely for the Exchequer. There may be a small amount, perhaps €10 million, to settle the structures put in place at the beginning of the process.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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That would be for private investors.

Michael Noonan (Limerick City, Fine Gael)
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Private investors were a requirement of Brussels and included banks and various other people. The system is not structured in such a way that they share in the profit. We will check the exact figure for the Deputy. The €2.5 billion, and anything added to it in the next couple of years, will be Exchequer money. When that matures, the Minister for Finance will need to look at whether or not to take the money into the Exchequer. Our European friends, however, will probably insist that it is taken off our debt.

Alternatively, it might be left within a NAMA structure whereby NAMA could spend on extra housing or social infrastructure. There is a way of modelling whereby we might be able to use that. NAMA is off balance sheet, as the Deputy knows. There is a gap up to 2020 in which it might be possible to do clever financial engineering so that we could dedicate some of the NAMA profits to some investment purpose which, for a while anyway, would remain off balance sheet. I have no plan in that direction. I am just pointing out that there are options that should be considered by whoever is around in a couple of years' time.

The Deputy referred to corporation tax. Going back to 2013 and 2014, the Deputy will find that it was short of €4 billion. In last year's figures and this year's estimate it is about €7.5 billion. Taking €7.5 billion in revenue on €90 billion pre-tax profits, if the Deputy's figure for that is correct, it comes in somewhere about 8.6% or 8.7% rather than the 6% he referenced. Revenue has said that the extra yield on corporation tax is not due to any changes in law but is coming from the extra profitability of the corporate sector.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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We will be having a session on that.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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The last point was on diversification of the economy.

Michael Noonan (Limerick City, Fine Gael)
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While Deputy Boyd Barrett is right, it is a very diverse economy at present and is becoming more so, especially in the SME sector and the new digital economy. I saw figures recently and, although I cannot recall the exact amount, it was something like 11,000 new companies incorporated in the first three months of the year. They are in every direction. Some of them will never trade but a lot of them will. We can see it in all parts of the country now - small operations of two, three, ten or 12 persons. There are a lot of them in the food business and in light engineering and the digital economy. The diversification is there. The general advice to companies that are too dependent on the UK market is to diversify their market. The argument would be for a diversification of markets rather than of activity, if the Deputy can get the distinction.

Tommy Broughan (Dublin Bay North, Independent)
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I welcome the Minister and his officials. I echo what Deputy Chambers was saying about the budgetary oversight office. We had a commitment in the programme for Government that it would be up and running, yet we are heading into the second of three agreed budgets for the current Administration and the office is still not there. I share the Chairman's frustration.

On the stability programme update, SPU, does table 9 not show on the tax side that the first quarter taxes are a bit soft? I saw a report the other day from the Dublin Port chief executive on the first quarter, showing that numbers of British visitors and their cars are down significantly. They are critical for our tourism industry. Is there some indication on table 9 that Brexit is beginning to bite slightly?

Going on to table A2.3 in the appendix, which is a comparison of vintages of receipts and expenditures for 2017, is there not a very significant deterioration of the underlying balance there, between the budget and this SPU? The Minister has explained about possible estimated reductions in terms of water charges. What are the other statistical reasons for the deviation?

Michael Noonan (Limerick City, Fine Gael)
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I am in favour of the establishment of a budgetary office. Our Secretary General was notified in the last week or so by the Clerk of the Dáil that the position of director of the office would be advertised after Easter. Something must be happening if we got that notification. Once the director of the new office is put in place, it will be on its way. We will not hold it up.

Tommy Broughan (Dublin Bay North, Independent)
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The funding for it is included in the budget but the Ceann Comhairle would not let me ask the Minister, Deputy Donohoe, a question about how it was being spent. That is another issue.

Michael Noonan (Limerick City, Fine Gael)
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There will be a director appointed, anyway, and on it goes. There is nothing on the executive or policy sides that would prevent it from being expedited. It is one of the essential components of new politics to give independence to people like the Deputies to cost matters.

I saw the Dublin Port figures. There are also figures from Dublin Airport, which say the opposite. There may have been a transfer of business from ferries to air transport in the bad weather for part of the year. I am not sure what the cause of it is. The traffic through Dublin Airport has gone up very significantly. The volume of trade going through Dublin Port had, of course, increased very strongly as well.

Is Brexit already beginning to bite? The economy was very strong in the first quarter. A lot of jobs were added on. Retail sales are up by 6% and trade in exports has been very good as well. There is no evidence yet. All the anecdotal evidence, such as that to which the Deputy referred at Dublin Port, we are aware of and watch them all the time. There is no hard evidence that it is beginning to bite. The big effect of Brexit so far is the decline in the value of sterling. It is dearer for British visitors to come here now, to book hotels, eat out and do all the things they did before.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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There is none of them in Dún Laoghaire.

Michael Noonan (Limerick City, Fine Gael)
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Not any in Dún Laoghaire? It is a plea for the poor again, is it? The poor people on the Gold Coast. The Deputy will be looking for subsidies for them next.

Tommy Broughan (Dublin Bay North, Independent)
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Let us move on to the fiscal rules. With the projected balance and so on, 2019 is going to be a fantastic year for whomever is lucky enough to be Minister for Finance - it could well be Deputy Noonan still, heading for a decade in office. As we achieve this structural balance and move away from the convergence criteria, does that not give us a significant amount of leg room, even before 2019? The Minister said he had some ideas. What exactly has he done to try to expand the fiscal rules? I do not agree, by the way, with a word the Minister has said about Greece. Greece has different issues. It has a huge defence budget because it was locked in a century-long struggle with a country across from it that took half its territory, for example. What has the Minister done to try to widen the fiscal envelope for us so that we can start doing the things we want to do? Health is severely rationed in many areas. I welcome Orkambi and so on but we still have these totally unacceptable waiting lists. There are so many other things. I agree with Deputies Boyd Barrett and Chambers. We are not even meeting depreciation rates in terms of capital spending. What has the Minister done to push out that fiscal rule door for us?

Michael Noonan (Limerick City, Fine Gael)
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I have raised it at every opportunity I get at Eurogroup and ECOFIN meetings. We argue very strongly along with some of our smaller country colleagues that the methodology for calculating the structure of the fiscal space was flawed. It was not accurate in the estimate of where smaller, open economies were in the business cycle.

There was a committee set up to redraft the rules in that respect. Because of our arguments, our chief economist, Mr. John McCarthy is chairing that particular group in Brussels. Maybe, with the permission of the Chair, Mr. McCarthy can give the committee some insights.

Mr. John McCarthy:

Specifically, the Deputy asked what has been done to increase the fiscal headroom. The Minister raised this matter at ECOFIN. The fiscal space is calculated on the basis of ten-year averages of growth rates and its potential. Let us talk about growth rates. Some growth rates are backward-looking and some are forward-looking. The fiscal space is supposed to be revised every three years. On foot of the Minister's intervention, we argued that it was unfair to Ireland because the backward-looking application was taking into account the very bad years, when growth was minus 5% or minus 6%. That was feeding into the average. The intervention was at a technical level. We provided a technical argument that one should forget about those years and that it should be updated more frequently. That was agreed at a technical level and then Ministers agreed it at a political level. That in itself opened up additional fiscal space and it was about two years ago. We just made our argument strongly and it was agreed upon at the Commission and at political level. There were some positives on that front.

Tommy Broughan (Dublin Bay North, Independent)
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Can the chief economist give us the figure?

Mr. John McCarthy:

I cannot give the Deputy the amount because I cannot remember it off the top of my head.

Tommy Broughan (Dublin Bay North, Independent)
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Our ultimate job is advise the Department about what we want to achieve in 2018. At the moment the stability programme update, SPU, is still fairly dismal. We are still in a stranglehold and that is the way we feel as a committee. Can we somehow use the positive figures that will have an impact in 2019 and backdate them for ourselves in order that there is a better and more expansive budget in 2018, particularly in areas like housing and health or on things we need to improve in this country?

Mr. John McCarthy:

It is fairly clear cut at this stage what the fiscal space will be. There will be a couple of moving parts, as the Minister has said. We should have those by May or June and the Government will publish the summary economic statement. As he has said, however, they are not game changers.

As for all the flexibility that exists within the rules, we simply do not qualify for it because of where we are in the cycle. Capital smoothing is an additional piece of flexibility that works for us. For instance, capital was increased for this year of 2017, because one only takes a quarter of the increase over 2016 into account for this year. In fact, that was one of the reasons we were able to increase the fiscal space in the couple of days that led up to the budget. We have availed fully of the existing flexibility, from what I can see.

Tommy Broughan (Dublin Bay North, Independent)
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I agree with having a motorway to the north west and spreading development etc. We should adjust our commitment to build metro north in 2026 and have it earlier in 2022 or whatever. Portugal and Spain seem to be able to get away with capital adjustments. Spain has built about 20 metros in the past ten or 15 years. Can we take advantage of capital in the same way?

Michael Noonan (Limerick City, Fine Gael)
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The kind of work we are doing now with the European Investment Bank, EIB, in my view is the best prospect of doing so and I described it earlier.

Tommy Broughan (Dublin Bay North, Independent)
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I heard the Minister's speech.

Michael Noonan (Limerick City, Fine Gael)
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I also described that if there was a definitive revenue flow coming from fares on a metro, it would be possible to construct something that would acceptable to EUROSTAT in terms of going off-balance sheet and we are working on that. I hope to be in Luxembourg at a meeting, chaired by the president of the EIB, specifically about Irish-related investment projects around mid-May. I hope we will get an agreement there that the EIB will evaluate a series of projects and cross-check them with EUROSTAT because there is no point in going down the road if we get stopped later. I am hopeful that progress will be made in that direction.

Tommy Broughan (Dublin Bay North, Independent)
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On page 24 of the SPU the composition of debt was mentioned. The levels of debt and the debt-to-revenue ratio are still very significant. I have asked the Minister a question on this matter two or three times. I am looking at the 60% between the fixed rate treasury and amortising bonds and the floating rate bonds. Should we take advantage of the current interest rate situation to refinance some of the €35 billion? We should not leave that as one of the negative contingencies for 2019-2020, whether it is this Government or the next one. Will the Minister talk to the NTMA about the matter again and keep it under review?

Michael Noonan (Limerick City, Fine Gael)
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I will talk to the agency again about it. I shall mention to the NTMA that the Deputy raised the matter. I did speak to the agency before and it is pretty happy with the policies that it has in place at present.

I have a note that deals with the issue that I can read for the Deputy. It is a reply to a parliamentary question.

Tommy Broughan (Dublin Bay North, Independent)
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Yes, I got it.

Michael Noonan (Limerick City, Fine Gael)
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I have already given the reply to the Deputy so there is no point in my reading it again.

Let us consider the NTMA's plans for this year. The deficit for this year will be 0.4% of the GDP or approximately €1 billion or less. The borrowing plans for the NTMA are between €9 billion and €13 billion. The bulk of what it is borrowing is for refinancing and is to deal with the peaks and valleys effect that the Deputy has mentioned. If one considers what the agency raised yesterday on the markets - it may have been for five or seven years - it was definitely for a short duration but it was modelled on refinancing so that the maturities would come in during the slack years. I will raise the matter again with the NTMA to see if there is more scope. The agency is very conscious of it.

Tommy Broughan (Dublin Bay North, Independent)
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The Minister, former Deputy Pat Rabbitte and I were seated at the back of the Dáil when we heard about the blanket bank guarantee and the three of us understood what it meant. The difference was that the former Deputy and I did not vote for it but the Minister's party and Fianna Fáil carried it. That is the part of the history, is that not correct? The Minister for Finance understood the matter.

Michael Noonan (Limerick City, Fine Gael)
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Yes but the Deputy was a loyal member of the Labour Party at that time.

Tommy Broughan (Dublin Bay North, Independent)
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I was, yes, and I would have kept them on that route.

Michael Noonan (Limerick City, Fine Gael)
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It may not have been a personal decision. The Deputy may have been driven by the Whip. Was he?

Tommy Broughan (Dublin Bay North, Independent)
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No, while there might have been certain people who drove the matter, it was actually the other way around, Minister.

Tommy Broughan (Dublin Bay North, Independent)
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I think I was actually, as well as another personality who has a very elevated status in the country at the moment, and one or two other people.

Michael Noonan (Limerick City, Fine Gael)
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I can tell the Deputy not to be libelling absent friends but it should be put on the record that Sinn Féin voted for the guarantee.

Tommy Broughan (Dublin Bay North, Independent)
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They did indeed.

Michael Noonan (Limerick City, Fine Gael)
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They had a very eminent Senator who voted for it in the Seanad.

Tommy Broughan (Dublin Bay North, Independent)
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Yes, and he wore the green shirt when we would not put it on. We wore the green shirt actually.

Michael Noonan (Limerick City, Fine Gael)
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A gentleman called Senator Doherty was the name.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Amazing recall.

Tommy Broughan (Dublin Bay North, Independent)
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That is the history, Cathaoirleach.

Mr. John McCarthy:

I have a figure for the Deputy. On foot of the change that we worked with, we got the rate at which one could increase spending up from 0.6 to 1.9%. In money terms that meant €850 million to €1 billion and I think it was for 2015.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Deputy Lahart has been most patient.

John Lahart (Dublin South West, Fianna Fail)
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I always enjoy listening to the Minister. It was good to hear him respond in such a feisty and robust form. Since I returned to the meeting in the past 30 minutes or so, there has been a heavy emphasis on nostalgic events and recalling of events.

I have three questions that will not take up too much time. I thank the Minister and his officials for their attendance. Memories and events of the past have been mentioned. Who can forget them? One of the criticisms of the Fianna Fáil Administration in the run up to the crisis, and the same criticism was made in the period immediately after the crash, was that the Government did not heed various advices that had been issued or the wisdom of august bodies. We delved to see what the advices were.

The only person offering advice on events leading up to the crash was a little known economist at the time in University College Dublin, UCD, but all the major bodies such as the Central Bank and the Economic and Social Research Institute, ESRI, were predicting soft landings etc. That is why I raise this question. I do not have the Minister's grasp of economics. I am a psychotherapist so I bow to the Minister's superior knowledge but I do have a good memory and a good emotional memory for the events. We do not seem to have similar conditions for a property bubble in that people are not borrowing to the same extent. I accept that but interest rates are at a record low and that cannot last forever so people are borrowing at a very low rate.

For the first time in approximately 20 years I went to look at a show house - I have had no reason to look at one - in my constituency, Rathfarnham. It is a three or four bedroom end of terrace in Ballyboden, Dublin 16, a good middle class area and the starter price is €560,000. That is a peak of the boom price, as I remember them. I know the situation is different now. I heard what the Minister said about the help-to-buy scheme but I am conflicted because there is significant opinion that differs with what the Minister said about the help-to-buy scheme fuelling prices. They may not be big players in the commentary space, such as DAFT.ieand myhome.ie, which have said the help-to-buy scheme has contributed to inflation in house prices but the Governor of the Central Bank has also said it. The Minister disagrees with him but he is a significant player in terms of offering economic advice. He has said he does not think there can be any doubt that if one has additional capacity to enter the system there will be impact effect, even though it applies only to new builds. He says it will drive up prices. Could the Minister comment on that?

Michael Noonan (Limerick City, Fine Gael)
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We would have great respect for the Central Bank but my own opinion is that the change in the prudential rules has had more of an effect on prices than the help-to-buy scheme. I did, however, say that the connection between supply and demand is price. If there is a shortage of supply and there is excess demand it will have an effect on price. I would concede to the Deputy that the announcement of the help-to-buy scheme probably had a psychological effect which might have influenced prices. Inputting in the first three months of the year an extra €10 million into the market does not seem to me to affect price very much. That is not the way it works. There are differences of opinion and in this respect I think my opinion is as good as any other opinion that is around at present because there are all sorts of opinions. That is not to say the Deputy's opinion is not good either.

John Lahart (Dublin South West, Fianna Fail)
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I am not offering an opinion because when it comes to economics I am just-----

Michael Noonan (Limerick City, Fine Gael)
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Sometimes I think a psychotherapist has a better insight than an economist into Ireland.

John Lahart (Dublin South West, Fianna Fail)
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The Minister is an old charmer but I have to say this is not just any opinion. This is the opinion of the Governor of the Central Bank. If there is one lesson I have learned coming out of the crash, and I think the nation has learnt it because it is the lesson we were asked to learn, it is to listen to advice that is being offered. It is not enough for the Minister to describe the Governor of the Central Bank as eminent and to say that he respects his opinion. He is the Governor of the Central Bank and he has said the help-to-buy scheme is driving up house prices. The Minister is conceding a little bit on that but I am not here to argue the point. As a layman and as a public representative who is concerned for people who have to buy homes, I want to know what steps does the Minister think he could take? Will the Minister take my word, when I say man to man, psychotherapist to Minister for Finance, that €560,000 for an end of terrace starter home, a fine home - it does not even have an "A" energy rating, it has a "B" rating, is back to the peak prices? I know Rathfarnham well. What could the Minister do perhaps on the supply side to help cool it down a little bit? I am concerned for the young constituents, as I am sure the Minister is for those in Limerick and other places, that the prices will stretch out of their reach. This is when interest rates are at rock bottom and I would have a real concern that when they borrow, and borrow large sums that are cheap to repay now and quite cost efficient, within a year or two, when the low interest rates have maxed out at rock bottom rates and start to rise, that will have a significant impact. As I represent my constituents I ask the Minister to please be conscious of the potential impact the help-to-buy scheme is having on the demand side. Could he commit to anything on the supply side that would incentivise builders rather than the profit side to get into the game?

Michael Noonan (Limerick City, Fine Gael)
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First, if the Deputy is going to beat me up with statements from the Governor of the Central Bank he should quote him in full. The Deputy probably knows that he went on to say any increase in price will work its way through the system and would not be a permanent feature.

John Lahart (Dublin South West, Fianna Fail)
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He said it is impacting on existing buyers.

Michael Noonan (Limerick City, Fine Gael)
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I think he said it would wash out. I think that was the phrase he used. That is a relevant piece of information.

John Lahart (Dublin South West, Fianna Fail)
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It is but so is the length of time it is going to take to wash out.

Michael Noonan (Limerick City, Fine Gael)
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He did not put a timeline on it either. The Deputy put his question as if there was nothing happening on the supply side. The Minister for Housing, Planning, Community and Local Government is Deputy Coveney. He got an enormous budget last year of €5.5 billion and has introduced dozens of supply side initiatives to help the supply of houses. He is the Minister responsible for housing but I am sure the Deputy is familiar with that. My job as the Minister for Finance is to provide the Minister for Public Expenditure and Reform with sufficient funds to fund all these schemes and to see if nuancing of tax arrangements can help the housing situation but my influence on it is marginal. The main driver of housing policy is the Minister for Housing, Planning, Community and Local Government. It is incorrect to say, and I am sure the Deputy does not believe it, that there are no supply side initiatives taken when he has been introducing supply side initiatives for 12 months. They are working. This year he says the supply will go from 12,000 or 13,000 last year to somewhere between 18,000 and 19,000 this year. He is predicting approximately 23,000 for next year. The ESRI says what is required is 25,000 a year and he will not be too far off that in 2018 but of course to make up for the years when nothing or very little was built one would need to overshoot for four or five years over the 25,000. He has taken a series of initiatives. The Deputy should be fair to him and give him credit.

John Lahart (Dublin South West, Fianna Fail)
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If he was here I would certainly engage with him.

Michael Noonan (Limerick City, Fine Gael)
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The Deputy must be fair to him in his absence as well.

John Lahart (Dublin South West, Fianna Fail)
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I do not want to get bogged down in this but when I mentioned supply side measures I was thinking of the figures released by the Construction Industry Federation, CIF, which contribute to the average house price in Dublin, the levy of almost €12,000 per house, which would be approximately €320,000 or €330,000, the site costs of €57,500 per house, the finance cost of €20,000, the value added tax, VAT, of €39,000. I was thinking of those costs. I do not want to get into that with the Minister now but he is going to get into it with me I can tell. It is coming up to Good Friday and sackcloth and ashes.

Michael Noonan (Limerick City, Fine Gael)
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I cannot let inaccuracies rest on the record.

John Lahart (Dublin South West, Fianna Fail)
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I knew the Minister could not-----

Michael Noonan (Limerick City, Fine Gael)
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It is like what Dermot Morgan said, they will be sleeping in the account. We cannot have that.

The point is that the then Minister, Deputy Alan Kelly, changed the building regulations, which were brought in at the bottom of the recession when things were worst and they made it worse. The price of a site is a factor in Dublin. It is especially a factor in the cost of apartments, but it is the unit cost of the site which is the issue and the Dublin local authorities should allow another five or six storeys to be built because if one puts another 20 apartments on the same site, by going up, one reduces the unit cost of the site. It is very simple and yet there is an absolute refusal to do it. Consequently, there is very little apartment building, if any at all, in the area within the canals in Dublin. Elevation is one issue and over regulation was an issue but the then Minister, Deputy Alan Kelly, changed that dramatically.

All along the quays the regulation said one had to have two parking spaces for cars. It is the one place in the country where one has every form of public transport from taxis to buses, access to Luas, and the DART is not so far away, yet two parking spaces were required for people whom one would be trying to encourage not to have cars if one was planning properly. There was a load of crazy stuff done but it has to be dismantled. It is not all a function of national government, quite a lot of it is on the planning side and quite a lot of it is local authority-driven.

John Lahart (Dublin South West, Fianna Fail)
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I will ask my final question. The Minister has opened up so many different channels. He is clever.

Michael Noonan (Limerick City, Fine Gael)
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I am dealing with a subtle questioner.

John Lahart (Dublin South West, Fianna Fail)
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The Minister was talking about the quays. I cannot track it at the moment on my phone so he should please forgive my vagueness about it. I refer to a reply from the Department of Finance about congestion costs, but I could be wrong it might be the Department of Transport, Tourism and Sport, which are estimated to cost the economy in Dublin approximately €350 million. It is allied to and in addition to the previous questions, which the Minister answered. I am interested in what the Minister said about the EIB in terms of the investment potential there. The Minister for Transport, Tourism and Sport, Deputy Shane Ross, has offered us precious little consolation when he said the future of transport in Dublin is buses given that the net additional buses received by Dublin Bus this year was 20.

When Transport Infrastructure Ireland was before the committee there was talk about measures that could be taken on the M50 to increase capacity for five years without extending the road but funding has not been provided for that, yet the cost of congestion in the city is estimated at approximately €350 million. Is there anything, in addition to the replies the Minister has given to previous speakers, that he can offer to Dubliners on the potential for further and future investment in transport infrastructure that is non-car related but that is public transport-related and could give them some consolation in terms of dealing with the chronic congestion in the city? The Minister can give me a "Yes" or "No" answer.

Michael Noonan (Limerick City, Fine Gael)
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Every time I cross O'Connell Bridge my route is inhibited by the construction work that is going on for the Luas extension. That is a major initiative on public transport in Dublin, taking in the north side of the city. That is the big initiative which is under construction at present. I am the finance Minister not the transport Minister but we had to fund that and we funded it in bad times. Deputy Lahart should go into the north side some time.

John Lahart (Dublin South West, Fianna Fail)
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I am regularly in the north side.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Is the analysis complete?

John Lahart (Dublin South West, Fianna Fail)
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For today. I look forward to the return of the same Minister at some stage in the near future and to further questions. I wish the committee, the Chair and clerk and the Minister and his staff a happy, peaceful and relaxing Easter.

Michael Noonan (Limerick City, Fine Gael)
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I thank the Deputy.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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Before the Minister goes, in relation to Brexit, we have had many discussions about it, not as much today because as the Minister pointed out, much of it is unknown. In terms of upcoming infrastructural investment outside of the east coast and the Dublin area in particular, the need for direct access by sea to the Continent rather than through Britain means an expansion in investment is required in the Minister's part of the world, namely Foynes, where he is originally from and a deep sea port potentially in the north west, which I heard spoken about yesterday, in my own area in the south east, Rosslare, for passenger traffic and Waterford Port for freight. There are knock-on consequences in terms of investment in road infrastructure in particular. The Minister will be slightly familiar with the Limerick to Waterford road which is no more than a cow track in parts. I know of no other national primary road that passes through as many towns and villages as that one. I also draw the Minister's attention to the Limerick to Cork road, which he mentioned, and the Cork to Waterford road, which requires upgrading. As we face into Brexit, but also in terms of rebalancing some of the economic growth in the country as well, is there not a significant argument for investment in regional infrastructure being more necessary now than ever?

Michael Noonan (Limerick City, Fine Gael)
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Yes and those issues are being taken into account in the national spatial plan that is being developed. The main route to the Continent is not direct ferry services at present, even though there is significant container traffic out of Waterford Port and Rosslare, it is using the UK as the land bridge, as it is called whereby people drive across. I cannot see how that would not be maintained because if one looks at the situation in Italy where every day thousands of trucks drive through Switzerland in both directions carrying goods and services from Italy to Germany and France and so on and they have an arrangement whereby one seals the truck so that it does not have to be physically examined and there are legal arrangements that apply. What I found while negotiating in Europe over the years is that if one can find a space in the European legal spectrum one can bolt a new project onto it. It seems to me that if such traffic can be managed between Italy and across Switzerland and the bigger European countries we can continue to use the land bridge. If there is a free trade area between the UK and the European Union there is one set of difficulties but if there are tariffs there is a bigger set of difficulties. If there are tariffs one would need a big expansion in Dublin Port and other ports. It would probably be prudent to have extra ferry services from the south east as well for direct access to the Continent.

I was talking to the British Chancellor of the Exchequer, Philip Hammond, about it and he told me that if it reverted to World Trade Organization regimes they would need about four years to put the investment that would be required into the port of Dover to handle the general customs activity that would be generated. They are looking at very long timeframes. It depends on where it lands; if we are into a tariff situation there will be a lot of investment consequences. If there is free trade the consequences are more limited. To go back to a previous question, the fright we have got from Brexit should, arguably, be taken on board and we should diversify our markets and make sure we have direct access to the Continent.

John Paul Phelan (Carlow-Kilkenny, Fine Gael)
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I thank the Minister and his officials for their attendance. I wish everyone a happy Easter.

Michael Noonan (Limerick City, Fine Gael)
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I thank the staff of the committee. Thank you Chairman.