Mr. Sebastian Barnes:

The council's job is to look at the overall budgetary stance. We do not take a view on either the design of specific temporary measures or of tax measures. We were setting out that if the Government were trying to keep the tax system the same in economic terms as it was before - regardless of whether people think that is a good idea - the higher inflation now would draw more income into the higher band, leading to an overall tax increase. In order to maintain it as it was before would require more of an adjustment to those tax bands in cash terms. By increasing the amount allocated to that, the Government is making it more likely that there will be less of an increase. In previous years, the Government has not always fully indexed the tax system, which has been a source of real tax increase. As the Deputy says, it falls mostly on higher earners; that is how it works. Sometimes it has introduced other measures to offset it. There is often much confusion about the indexation issue and the impact of inflation on taxes.

If one wanted to keep the system as it is then today, in economic terms, one would basically have to index the bands by more. That would show up as larger measures, in the sense that the Government is using it, and bigger cash changes. In economic terms, the impact would be the same. So it is not really changing taxes in an economic sense at all.