Mr. Colm McCarthy:

The Deputy raised three points. In the context of fiscal space, there is some according to the Minister's statement earlier. It is important to remember that there is a real resource constraint in the economy. If the Government did not have a large amount of debt and if we had a strong balance sheet and we could readily and safely borrow a heap of money, it must be realised that we do not have a heap of real resources to reallocate with that money. To put it another way, if a few thousand guys are going to head off up the mountains of Ireland with trenching machines in order to install broadband, they will not be available to build houses. The idea of financial balance for the Government is the mirror of the balance in real resources for the economy. Even if we there was not a financial constraint, we could not summon non-existent resources out of thin air. It is important to bear that in mind. The ESRI hinted at that in some of its recent reports. If we want to spend more money on, for example, the provision of care services, we must increase taxes and tell people to stop buying ice cream because some of the folks who make the ice cream will have to go and work for the social services. There is a real resource constraint that is mirrored by the financial balance requirement to which the Government must adhere. That would not be the case if we had piles of underemployed resources and a capacity to borrow. If, however, IFAC is right and we are running out of underemployed resources, we must make choices. The choices may well relate to the fact that we want to spend more on various items of the type the Deputy mentioned, but this means that we must increase taxes and hit consumers in their pockets in order that they will stop buying ice cream or whatever else it is they currently do. We must always bear that in mind.

The Deputy asked about more reliable sources of tax revenue. There are many possibilities and I mentioned some of them. We still have a fairly low level of residential property tax. At last we have a residential property tax. Residential rates were abolished in 1978 and we have finally got them back but they are at a fairly low level. Most people in the United States pay a few thousand dollars a year in local state and municipal property taxes. People in most parts of Europe also pay them. They also pay for water. There are certainly those possibilities.

The Deputy mentioned doing away with tax loopholes. There are tax loopholes but we would want to be careful about some of them. If, as Dr. Kinsella stated, we compare our overall spending on social transfers with the remainder of western European countries, we discover that it is higher than some and lower than others. However, some of those countries have state run pay-related pension schemes. In Germany, people pay a slice of their income into it but they pay pay-related pensions. In Ireland, that is done privately so the money is not in the Government's accounts. It could be put into the Government's accounts, but we do not do that. There is a comparability issue in this regard. We offer certain tax breaks for people who make private pension provision. If we did not, the State would be doing it. We must always bear that in mind.

The Deputy asked about wealth taxes. We could have a wealth tax. Every country in the world that has introduced a wealth tax, France being the most notable example, has ended up not collecting much money from it.

Ireland has a partial gross wealth tax which is called property tax. There is huge resistance to it, including, bizarrely, on the political left which it is a source of great merriment to many people. There could be a higher property tax, or wealth taxes of various kinds.