Dr. Claire Keane:

That has happened historically. We saw that over the great recession in that in some years, indexation might actually suggest a cut to the actual amount of social welfare or a cut to tax spends and credits. What the Government can do in that case, if a decision is made that it is not going to cut social welfare rates because there is negative inflation, which tends to be quite rare, is freeze it. Rather than cutting it the Government could say it is going to protect welfare rates or protect our tax bands and credits, if it can afford to do so, and maybe reduce the increase that comes the following year so that it averages out over time. Say in the first year the Government thinks inflation is minus 1% and decides it is not going to index or cut by 1% and the following year inflation is 3%, it would only give it a 2% rise. It would sort of freeze things in years where there is actual deflation and then give slightly lower inflation increases the next year so that over a couple of years it averages out overall. That would prevent the Government actually having to cut social welfare rates.