Dr. Edgar Morgenroth:

The matter has come up in a number of questions. It is clearly an important aspect of policy right now. Clearly, we did not have money during the crisis to retain the level of capital expenditure that we had previously in the noughties. It was one of the highest in the OECD on a per capita basis.

There is an interesting fact that is not well understood. Over the past 40 years capital expenditure in Ireland, as a share of GDP, is one of the highest in the OECD. I would argue that if one looks around Ireland it does not feel like it was one of the highest.

Perhaps we have wasted some of our expenditure and perhaps we paid too much for some of our projects. In that context, the review of the capital plan and the regular review of capital expenditure are highly welcome.

We need to ensure we target our investment appropriately. Earlier, Professor Barrett referred to the national planning framework, a draft of which will be published this summer. That will be a very important part of the assessment because it is not only about how we spend but about where we spend the money and on what type of infrastructure we spend it. The national planning framework should help us to make decisions.

The national spatial strategy had a problem in that it came at a time when the national development plan, NDP, had already been drawn up. It was far more difficult at the time to reflect some of the spatial strategy objectives in capital spending because the NDP had already started and some of the projects had already started.

I was asked about the overall level of spending. I would always be cautious about setting a target on whether it should be 5% or 6% of whatever. The money needs to go into productive projects. That is the most important thing. In that context, low interest rates are not necessarily much of a help because a productive project will have a double figure return, perhaps a 10%, 15% or 20% return. Even with 2% interest rates, that would not be such a problem. Whether it is 2% or 0% might not make that much of difference if we have a sufficient number of good projects.

We are not always good at assessing those projects. I have been involved in research around the national development plan going back to the 1998 study. We can see that there has been some wastage. Having said that, one should not necessarily compare Ireland to countries that perhaps do not even have population growth. Our needs will always be different if we have population growth. For example, that is a difference between Germany and Ireland. We are likely to have greater construction, investment and infrastructure needs than a country that is not growing, at least not in population terms, or growing relatively slowly in economic terms. One would expect that we should be well above the average if that is true, but we need to find the projects that offer a good return.

Reference was made to Brexit and getting goods to the market. That is an important point. It is not only a question of our relationship with the UK but how we trade with the rest of Europe as well. The land bridge is an important aspect of our trading relationship with the rest of Europe. In so far as there might be barriers post-Brexit, that will obviously have implications for us. In fact, in that case the implications are only for us because no other country would need to trade through Britain to get to another EU member state. That is something we need to keep a close eye on. Obviously, it is something that needs to be emphasised in the context of negotiations.

Another point arises that I should have mentioned earlier. We tend to think about the export side when it comes to Brexit, but it is also important in terms of imports. If the trade costs for exports to the UK go up, then the chances are that imports will become more expensive as well. That is going to matter to people when they go to buy groceries in the shops. Of course we have high penetration of UK multiples in the retail sector. It also matters for intermediate products that firms buy to process further. That is going to have an impact on competitiveness and, therefore, on the wider economy. Again, that is something we need to think hard about. It is something that will only affect Ireland.

Those are two aspects in respect of which we will have specific interests in the negotiations. We do not know yet what the shape of Brexit will be. Whenever we find out, some aspects may require direct interventions, whether in the form of extra funding or some other derogation to help Ireland to adapt to those new changes.

I will make one more point. Deputy Brophy is quite right: income taxation is extremely high in Ireland. However, there are two aspects to that income taxation. One is the USC and the other is income tax itself. The USC has a far broader base than income tax. For that reason, it is far less volatile in terms of its revenue. It should also be stressed that the largest part of tax revenue comes from income taxation at over 30%. Any reductions will have substantial effects on total revenue. Where we go in terms of the tax system to ease the burden of income taxation has a major impact. By virtue of having a wider base, change to the USC will have a far greater impact on tax revenues than some reform in the main income tax system.