Mr. Sebastian Barnes:

Part of it is that it is a good idea to have cash on hand to meet short-term liabilities, just as it is good for a household to have a little bit of cash flow for unexpected outgoings. It is also because the Government borrowed quite a bit during the pandemic when it looked like it would have to borrow more for Covid supports. In the end, that money was not used, so the Government is sitting on unusually high cash reserves. Taken together, it is a high level of debt by historical standards. It is high compared with several other small euro area countries. There are several factors. It is a concern.

There are a number of factors that are quite favourable to Ireland's position. One is that the NTMA does a very good job, which is very helpful in terms of the financing position. As Mr. Carroll mentioned, the maturity on debt is quite high, so we do not have to repay too much each year and it will be a long time until we have to replace the whole debt stock. Even if interest rates went up, we would only be paying on any new borrowing we have, and we do not need to take out much new borrowing. The budget is in reasonably good shape, at least in headline terms. There is also the fact that the economy is likely to grow much faster than the rate of interest. That naturally tends to bring the debt ratio down. If we had not had the cost-of-living crisis and all these distortions, the debt ratio would have been on a fairly good downward path, which is consistent with the fact that the economy is growing fast, we are benefiting from the corporation tax boom and unemployment is low.

There are a number of favourable factors but there are also risks. Of course, the higher the level of debt, the more one is exposed to those risks. One risk we discussed is higher interest rates. As we stated, that could take time to feed through but would ultimately add pressure. As all present are aware, there is not a huge amount of space for extra spending, even beyond the cost-of-living measures and the immediate crisis. The other big risk is a shortfall in growth. If something were to happen to the Irish economy, such as the multinationals all going somewhere else or that kind of thing, that could make our debt position look a lot worse. The big risk is probably on the growth side. The other risk relates to the public finances.

The plan to have a 5% spending rule is a good one. It would keep debt on a good trajectory. If the Government of the day were to deviate from that on a persistent basis, if these pension, health, climate pressures and other things were to lead the Government to run a very different fiscal policy from the one it plans, those things are a risk to the public finances when there are high levels of debt.