Mr. Michael Tutty:

Our main difficulty with the medium-term projections is that they are technical projections rather than policy ones. Current expenditure is being projected to grow by a fixed amount of 2.5% rather than the Government looking at what it expects to do over the next number of years. That 2.5% is very far below what has been happening in recent years and below what the economy can reasonably bear over that time. We have seen over time that projections like that are never followed through but are in fact exceeded substantially in succeeding budgets. We are looking for realistic projections which take account not only of demographic realities and inflation but of policy changes any Government will be likely to introduce. That does not happen, however. In my time in the Department of Finance it never happened either. I am preaching things I was not able to do but the Government has been developing much better three to five-year forecasts in recent years. However, the only time they tend to be realistic is when an actual plan is published, as we saw during the days of the IMF and ECB. Outside that, all that seems to happen is that the Department of Finance says it does not have Government projections and therefore makes an assumption which is always very low.

It would certainly be desirable for the next three to five years to be able to set out exactly what it is planned to do. One does not have to set out every expenditure measure one wants, but one should look at the level of expenditure that is likely to take place and how it will affect the economy and public finances rather than make technical assumptions which show a nice surface developing all the time which is just not going to happen. To make projections in the more medium term is certainly desirable. From a demographic point of view, it is very desirable indeed to make projections even to see what it will cost to maintain existing services. That is not being done on a very sound basis at the moment. One of the biggest difficulties with the Department of Finance's projections is that they assume there will be no pay increases other than the ones which have already been agreed. The Department is reluctant to include anything in a forecast that suggests there might be more pay. In summary, its projections are not realistic at all.