Professor Michael McMahon:

Regarding relative optimism about the recovery, our forecasts have factored in a stronger recovery than those of the Department of Finance. In that sense, we are agreeing with the Deputy that there is a great deal of scope for recovery. Once we have built that aspect into the scenario, though, the concern remains that the lack of medium-term planning and the lack of clarity on how policy will fund some of these pre-committed measures can themselves be damaging. Policy uncertainty is being created. Businesses and households expect that there could be tax rises, but without having clarity about where and how those rises will come. In preparing for those potential tax rises, therefore, businesses and households may take actions which in themselves will stunt the recovery.

We absolutely support the Deputy's statement that growth is a fantastic way to bring debt down and ensure that fiscal policy is in a sustainable place. As I said, we are more optimistic in many regards concerning the medium-term prospects for recovery from the disruption caused by Covid-19, and we are not looking back at what happened in the past year. We are looking forward, and in that regard the key point is that we are concerned that it is exactly the lack of credible medium-term planning that will act as a bit of an anchor on the recovery. We have been warning about this aspect for several years and it is exactly this policy uncertainty that we would like to see eradicated.

Nobody knows precisely what will happen in the future. If the experience of Covid-19 has taught us anything, however, it is that entering a period of unexpected crisis in a healthy and credible fiscal position enables the Government to provide supports such as those it has wonderfully been able to provide in the last year. We must, therefore, separate the Covid-19 concerns - and, yes, it is and has been an uncertain time - from the very important aspect of policy certainty and credible fiscal frameworks. We worry more about those aspects being the cause of stunted economic growth.