Professor Michael McMahon:

We agree with that but the point being made is that there will be another budget in the future at which point, if the Government had compensated the full 15% or 16% and then there was deflation, it might be difficult to get that back. It would look like a permanent real income shift up. This allows scope. No one credibly believes that deflation will be of a scale to undo the full 8% so that is locked in permanently and there is scope to bring that up in the future. We do not build that into the forecast because it is not policy. That is a discussion for next year's budget but at that point we will have a better sense of whether 7% was the correct number or whether inflation in the next year, because of developments Mr. Barnes mentioned, came in at 1% or -2%. We also have to acknowledge that there could be a positive inflation shock or the number might be 8% or 9% next year if other untoward events happen. I think that is the point Mr. Barnes was making.