Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I ask everyone to turn off their phones and devices or to put them on silent. Before we begin I will explain some of the limitations of parliamentary privilege and the practice of the Houses as regards references witnesses may make to other persons in their evidence. Witnesses are protected by absolute privilege in respect of the presentation they make to the committee. This means that they have absolute defence against any defamatory action for anything they say at the meeting. However, they are expected not to abuse the privilege, and it is my duty as Chair to ensure that privilege is not abused. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity they will be directed to discontinue their remarks. It is imperative they comply with such direction. I also advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex to participate in public meetings. In that regard I ask any members partaking via Teams that, prior to making a contribution, to the meeting they confirm they are on the grounds of Leinster House. Members are reminded of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. Therefore, if their statements are potentially defamatory in relation to an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative they comply with any such directions.

I welcome the Tánaiste and Minister for Finance, Deputy Harris, and the Minister for Public Expenditure, Infrastructure, Public Service Reform and Digitalisation, Deputy Chambers. I welcome the following officials from the Department of Finance: Mr. John McCarthy, assistant secretary, Mr. Ian Power, principal officer, and Mr. Harry Williamson, assistant principal officer. I also welcome the following officials from the Department of Public Expenditure, Infrastructure, Public Services Reform and Digitalisation: Ms Jessica Lawless, principal officer, and Mr. Luke Daly. The committee welcomes the opportunity to engage with them, and I thank them for being here.

Simon Harris (Wicklow, Fine Gael)
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I thank the committee for the opportunity for the Minister, Deputy Chambers, and I to discuss the Annual Progress Report 2026. The annual progress report is an important milestone in Ireland’s annual economic and fiscal cycle and is a key element of our engagement with the revised European fiscal framework. It sets out my Department’s latest assessment of the economic situation and outlook and reports on progress under Ireland’s medium-term structural and fiscal plan.

Before turning to the outlook, I would like to say a few words about the wider economic landscape. As members of this committee are aware, the global economy is facing its second major energy price shock in less than five years. The disruption to energy markets precipitated by the conflict in the Middle East has significantly altered the short-term outlook for inflation. Indeed, we have already seen the impact of recent developments on energy prices, and I am conscious of the pressures this has placed on households and businesses across the country. That is why we have put in place a package of over €750 million in targeted measures to reduce energy costs, protect vulnerable households and support sectors that are critical to ensuring growth in domestic activity.

Importantly, and this sometimes gets lost in the discussion, these measures are helping to mitigate the increase in inflation. The Department of Finance's best estimate is that our targeted interventions are reducing the annual rate of inflation by around half a percentage point below what it otherwise would have been without them. These measures are deliberately time-bound and targeted because our approach has to be both responsive and responsible. While it not possible to predict precisely how events will unfold, what the Government will continue to do is act in a measured and responsible way, protecting the most vulnerable and supporting economic stability.

Turning now to developments in the domestic economy, despite significant external challenges, the Irish economy has remained resilient. Indeed, modified domestic demand, MDD, which is a good proxy of underlying domestic economic activity, recorded strong growth again last year. However, this data is backward looking and we cannot take the progress we have made for granted. The risks remain firmly tilted to the downside and the outlook continues to be shaped by developments beyond our control. Given these risks, the endorsed projections contained in the annual progress report, APR, should be interpreted as a reference forecast or a benchmark against which incoming data can be assessed. That is why I thought it was important that this report also include two alternative scenarios examining how the outlook could evolve under less favourable energy price developments. The central message is that the economy is expected to grow in all three scenarios but at a more moderate pace than we have seen in recent years and, unfortunately, with a higher rate of inflation.

Under the reference forecast, inflation is projected to average 3.3% this year, with MDD projected to grow by just over 2%. Under an adverse scenario, involving a more prolonged period of elevated energy prices, inflation could average around 3.75% this year. In a severe scenario, inflation could average around 4.5% this year, with year-end inflation significantly higher. This would of course have knock-on effects on economic growth. While the situation remains fluid, my Department's latest assessment is that we are currently operating closer to the adverse scenario, though that assessment may evolve further depending on developments in the Middle East.

Before I conclude, let me say a few words about the fiscal outlook. For the year as a whole, we are projecting a general government surplus of €9.2 billion. This provides the country with options and security in an uncertain time. It allows for investment in the Future Ireland Fund and the Infrastructure, Climate and Nature Fund. The surplus is welcome. It reflects the fundamental resilience of our economy and our proven record of sound financial management. However, when we look at the figures in more detail there are some warning signs we should be conscious of. My Department recently published the Exchequer returns for April. They show that the Exchequer recorded a deficit of €4.7 billion. Some of this is due to the transfers to the two funds, but even if these had not taken place, we would still be running a deficit. This underscores the importance of taking a cautious approach to our public finances. In this context, our approach has been to keep our powder dry. By running budget surpluses, we have had the capacity to respond swiftly and flexibly to help, and we have done that already.

The budget 2027 process is now well under way. As we consider the decisions we will make in the budget, and in an environment of extreme uncertainty, it is vital that we continue with a balanced and careful approach to overall fiscal policy. That is the best way – indeed, the only way – to ensure we have the resources on hand to respond as needed to future challenges.

I am looking forward to the Government hosting the national economic dialogue in Dublin Castle next month, and to the committee's involvement in bringing together stakeholders from across society to discuss the priorities for the budget and how we can work together. The Minister, Deputy Chambers, and I will then set out the budget 2027 package of parameters in the summer economic statement in July.

While the international environment is highly uncertain, it is important to be clear about where Ireland stands today. We are entering this period of global uncertainty from a position of strength. Our labour market is operating at full employment, domestic demand has continued to expand and the public finances remain in a relatively healthy position. While risks to the outlook are significantly tilted to the downside, the Government will continue to respond in a way that is decisive and responsible, and also that supports the long-term resilience of our economy.

Alongside our cost-of-living interventions, we are making significant investments in renewable energy, grid infrastructure and rolling out supports to improve the energy efficiency of our homes and workplaces. That is also an effective and important way to protect households and businesses from future energy price shocks and to reduce their exposure to them in the first place.

I look forward to a constructive exchange of views today and in the weeks and months ahead. I will give the floor to the Minister, Deputy Chambers.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I thank the Tánaiste and invite the Minister, Deputy Chambers, to make his opening statement, after which I will open the discussion for members to ask questions. I remind members that there are a couple of witnesses joining us online, so I ask them to direct their questions to the appropriate witnesses.

Jack Chambers (Dublin West, Fianna Fail)
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I am pleased to be here with the Tánaiste and Minister of Finance to discuss the annual progress report which was published in late April. The annual progress report is a key reporting document as part of our annual budget cycle and the EU fiscal framework.

The 2026 APR contains economic and budgetary forecasts, as the Tánaiste mentioned, for the period to 2030. To ensure that we are in a position to continue to deliver capital investment and public services, it is important we implement our fiscal policy as set out in the medium-term fiscal and structural plan. Implementing this plan in the manner envisaged by the Government when it was agreed is critical to protecting our country's future prosperity in terms of competitiveness and supporting living standards in a sustainable way. Importantly, our medium-term fiscal and structural plan highlights the trade-offs and choices the Government must make when working within a binding set of constraints.

As outlined by the Tánaiste, the conflict in the Middle East will have an impact on the global economy and, by extension, the Irish economy. However, our economy is in a strong position and the baseline forecasts are positive. While the economy may grow at a slower pace than previously forecast, it is expected to continue to grow this year.

The Government is acutely aware of the pressures facing both households and businesses from higher energy and fuel prices as a result of the conflict in the Middle East. Since the outbreak of this conflict, we have responded with targeted supports of over €750 million. Careful management of the public finances is required to ensure we are in a position to continue to respond to shocks as they might arise. There is still considerable uncertainty about the duration and ultimate impact of this current conflict. Our supports have been provided quickly and we continue to monitor events and their impact across the economy. This is also consistent with the approaches taken by many EU member states.

The Government has decided to increase the expenditure ceiling for this year by €0.7 billion to €118.5 billion. This reflects the decision to provide a package of measures in response to increasing energy prices in April to support the transport, farming and fisheries sectors. In addition, we also decided to allocate funding to the Department of Education and Youth for increased supports and staffing in the sector. This includes additional places for students with special educational needs and funding for the school transport scheme. The medium-term expenditure framework highlighted the trade-offs between different sectors for a given level of investment. This is an example of Government seeking to prioritise the education sector in a sustainable way.

The expenditure ceiling for 2027 is set to increase from €118.5 billion in 2026 to €125.5 billion next year. This is an increase of 5.9%. To deliver on the 2027 ceiling agreed under the medium-term fiscal and structural plan while accommodating the prioritisation of education, the Government agreed that a levy will be applied to Departments from 2027. This will require them to implement reforms and efficiencies in the order of €446 million. Departments received significant increases in their expenditure allocations in 2026 and expenditure will continue to increase to the significant levels set out in our medium-term plan. In 2027, spending will reach €125.5 billion and this will provide for increased capital investment in critical infrastructure and enable strong investment across public services.

Departments are required to identify efficiencies and reforms in advance of budget 2027, setting out how they will deliver the savings required. This will form a key part of the Estimates agreement for budget 2027. This scheduling gives Departments time to plan for measures which can generate deliverable reforms and enhanced productivity.

I recently brought to Government Circular 21/2026, Expenditure Control and Escalation Process. It sets out the various phases of an expenditure escalation process for use across government and the corrective steps that may be implemented where expenditure risks and overruns are identified. This process outlined in this circular will help ensure effective budget oversight through strong governance and a focus on value for money, ensuring that expenditure ceilings are credible and deliver effectively on programme for Government commitments. Where expenditure pressures persist, the circular sets out a framework for how my Department may engage with other Departments. These steps are focused on strengthening transparency, accountability and ensuring that overruns are addressed in a timely manner.

It is important to look at past and future development over the medium term horizon. The period 2019-2025 reflected significant investment across social protection, health, capital spending and front-line public service staffing. This investment has expanded public services and the number of people eligible to receive supports, increased front-line staffing to provide these services, reduced the cost of services and delivered significant progress across capital projects and infrastructure. Building on this investment, budget 2026 set out significant additional funding for this year. Spending figures to the end of April, published earlier this year, demonstrate sustained high levels of investment with overall spending at €36 billion, an increase of 8.9% on spending on the same period last year.

Looking ahead, we are aware of the risks but the overall outlook is positive. Our focus is on making consistent and lasting improvements, continuing our work to accelerate progress in our critical infrastructure and continuing to strengthen public services that people depend on every day.

Above all, it is about investing sustainability and making choices that support a stronger, more resilient country for people. I look forward to a constructive engagement with the committee today.

Joe Neville (Kildare North, Fine Gael)
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I thank the Ministers and their teams for coming. The area I will focus on initially is one that arose when I was lucky enough to spend an hour with the International Monetary Fund , IMF, last Thursday afternoon as we went through its report. It had done its analysis. I know the team presented to the Minister's office over the weekend. One thing that jumped out at me from the analysis was that while the Irish economic situation is going well, the IMF was very conscious of the increase in spending, the over-reliance on corporation tax and the lack of expansion of our tax base. With that in mind, and considering the increase in spending on public services, how can we ensure that the public finances are managed sustainably into the future? We have these corporation tax windfalls, but how can we ensure our public finances are going to be sustainable into the future on that basis with public spending increasing?

Simon Harris (Wicklow, Fine Gael)
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The Minister and I can both chip in. I welcomed the IMF's annual visit. I heard commentary last night in the media, but it was the annual visit of the IMF-----

Joe Neville (Kildare North, Fine Gael)
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It has nothing to do with the old-----

Simon Harris (Wicklow, Fine Gael)
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Interestingly, that was not how the visit was reported on a programme I happened to watch last night. This is a very welcome annual visit that the IMF pays to our country. The Minister, Deputy Chambers, and I, and our officials, had an opportunity to engage with them. It is a welcome part of the debate, and I do not say that to be in any way critical of any of us, but in the environment we are in there is often a desire to spend more and to spend better, and there is legitimate political debate around all of that. The IMF being here is a reminder of some of the challenges and vulnerabilities that exist in the Irish economy.

We have successfully taken a number of measures as a country to bring in additional revenue streams. We have brought in a property tax, for example. The IMF might have a view as to what more we could do but we do not plan to do so. We have brought in a property tax. We have a carbon taxation system. It is the subject of robust debate here but is a tax that has been brought in and legislated for. It is a tax that is not only supported by the Government. There are different views across the House, including among those in government and in opposition. I cite those as two examples that are not unimportant.

Going back to the IMF, I would say to everybody that we are doing three things to try to make sure we protect our country into the future. It should not be only one of those. We have a plan to run budgetary surpluses. We have a plan to continue to invest in the funds. They are not rainy day funds. They have an active purpose in providing funding for infrastructure or future demographic needs that we have already identified as crucial. We will also significantly increase capital funding. All three of those need to be viewed in the round as measures we are taking to protect our country from future shocks and to build up fiscal buffers. They are all investments in the future of the country.

The IMF is an important voice. We had good engagement with its representatives. There are good discussions around AI in the report. There has been a lot of discussion of AI. We need to have a broader discussion of AI - and the Minister, Deputy Chambers, and many others are leading and doing good work - in the context of the productivity of the public service. That is an interesting and exciting area that we should be discussing more. We must also discuss how we can support people through the IDA and Enterprise Ireland upskilling agenda. That need is clear.

Jack Chambers (Dublin West, Fianna Fail)
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I will come in on that quickly before I pass to the other questions. The wider point-----

Joe Neville (Kildare North, Fine Gael)
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I could not cut off the Minister, Deputy Harris.

Jack Chambers (Dublin West, Fianna Fail)
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The wider point of protecting capital investment and growing it, as we have done, for infrastructure and housing is critical to build growth and prosperity where there are significant constraints for communities and industrial development. We must also moderate the overall growth of current expenditure. That is the sustainable fiscal path that reflects the wider feedback that the IMF referenced around the medium-term fiscal and structural plan that we published.

Joe Neville (Kildare North, Fine Gael)
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I will pick up on that point. Either of the Ministers may wish to follow on. We have excess money, but we have political and cost-of-living issues. How do we ensure the future through sustainability in our decisions? We have seen decisions made by the Government in recent weeks in respect of our significant savings. There are going to be decreases in taxes and there will be a delay to the carbon tax. How do we ensure that we balance those with a sustainable economic and financial system into the future?

Simon Harris (Wicklow, Fine Gael)
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We do so by not intervening every week, fortnight or month. We must get to a position. There was good work done last year by the Minister, Deputy Chambers, and the former Minister, Paschal Donohoe, to try to get back to one annual budgetary situation. It was difficult, as we tried to unwind temporary payments, but the aim, and the prize here for the Irish people, is to identify a number of areas where we try to make structural change. I do not see this as a Government versus Opposition point. We all have a view on, for example, childcare. We all have a view on energy and the different things we can do. However, we can do a lot more if we get back to one annual budgetary process. We had to intervene and there was a compelling case to do so. There was an inflationary benefit, from a downward pressure point of view, to the intervention we made, but we now have to look firmly to the next budget. That is the balanced approach.

Joe Neville (Kildare North, Fine Gael)
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I will ask a quick question of Mr. McCarthy.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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The Deputy has one minute remaining.

Joe Neville (Kildare North, Fine Gael)
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I have one more question after this one so I ask Mr. McCarthy to be quick. What is his view on how the difficulties with the cost of living have impacted consumer spending? Are we seeing that in the data? I am asking whoever has an answer. I do not want to put anyone on the spot. It is more of a technical question.

Mr. John McCarthy:

That is the main channel through which we see the economy. Our forecast for modified domestic demand, MDD, was revised down because of the impact on consumer spending. What is going on is that you have higher inflation dampening household disposable income, and that is eating into purchasing power. Households appear to be dipping into their savings to finance consumption, but nonetheless, consumption, or consumer spending, is revised downwards relative to what we thought it would be last autumn. That is the main transmission channel.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I thank Mr. McCarthy.

Joe Neville (Kildare North, Fine Gael)
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Then the last question-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I am sorry, we have a list of questions and I am sticking to the seven-minute slots. The Deputy can come in at another time. I call Deputy Farrell.

Mairéad Farrell (Galway West, Sinn Fein)
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I have a number of questions and might start with something the Tánaiste said. This is about talking out the issue. One of the questions he answered related to waiting until the budget to assist people. One of the things that I like to do the most in this job that we are lucky enough to have is to do clinics, when I see what is going on in people's daily lives. I am sure we all do clinics. Yesterday, I spoke to a single mother of two sons who works in a factory. She works nights and days, and tries to make it work. She simply cannot stay afloat in this economy. She is renting and is very concerned that she will have a notice to quit towards the end of the year because the landlord, who she has worked with on a good basis, has indicated that given their age profile, they will probably have to sell. She is not in a position to buy and will not be in a position to buy. She broke down in my office, and I can understand why with the stress and pressure. It is frustrating for me to hear us talk about a strong economy when we have realities such as that. People have loads of different issues in their lives, including health issues and things like that, which cannot be controlled, but given the state of the economy, you would hope that we could help those types of people.

The Tánaiste said today that the Government is looking to go for an annual budget cycle and will wait until October to give those supports to people. I do not know what to say to that woman who was struggling and crying in my office. She has two young kids and is facing homelessness. In Galway city, there are no alternatives in terms of renting. What should I say to that woman? What hope is there out there? What actions will the Government take in the budget in October, if it is not going to move before that, to assist somebody like that woman? It was stark for me yesterday and I have this opportunity so I thought I would ask the Tánaiste that question first before I go to my other questions.

Simon Harris (Wicklow, Fine Gael)
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I will be more conscious of the clock this time. I am sorry.

Mairéad Farrell (Galway West, Sinn Fein)
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That is okay.

Simon Harris (Wicklow, Fine Gael)
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I too have met a lot of the Deputy's constituents in Galway over the past few weeks and we have been engaging with them.

The cost-of-living challenges people face are real; there is no doubt about that. However, the Government is not saying people have to wait until the budget. The Government has already made one of the largest interventions in the European Union and we were able to do that because we had a surplus. We did not have to borrow. The Chancellor of the Exchequer in the UK had to borrow, was able to put in place a much smaller package and was charged 5% interest by the market, but because we had the ability to not need to borrow, we had an ability to do more. We did reduce the diesel and we did reduce the petrol. That has had a benefit not just on diesel and petrol. It has had, as I said in my opening comments, a general benefit on inflation. Whatever the price of food in the supermarket is now, we project it would have been around 0.5% higher in terms of inflation had we not made this package. We have also obviously done the fuel allowance and the likes too. To that person Deputy Farrell referenced, it is not a question of "See you at the budget". We have taken a very significant package. What I am saying, which is a legitimate point of difference between the Deputy and me, is that we cannot intervene with a new package every couple of weeks because if we do that, we will limit our space.

Mairéad Farrell (Galway West, Sinn Fein)
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What is the Government saying to her now? We are talking about people who are not able to afford their rent because everything has got more expensive. I deal with an awful lot of older people and people who are reaching pension age who are not going to be able to rent once they have to retire. It is not going to be a possibility for them. What do we say to them when they are facing emergency accommodation? Unfortunately, that is the reality. What can be done in the here and now to support those people? None of us want to see more and more people plunged into emergency accommodation and homelessness. What can be done now? Telling that woman that we acted on diesel and petrol while she is still struggling is not going to cut it. What do we say now? What can we do now to help her?

Simon Harris (Wicklow, Fine Gael)
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We are helping her.

Mairéad Farrell (Galway West, Sinn Fein)
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She is not seeing it.

Simon Harris (Wicklow, Fine Gael)
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I have not had the chance to meet this individual the Deputy has met. I meet people regularly in my clinics too and right across the country. I met thousands of people in Galway in the last few weeks and engaged with them on these issues too. We have taken a number of measures to help. We are constantly endeavouring to do more when it comes to housing. The housing data on real houses that are being built, including in Deputy Farrell's county, are going in the right direction. We provided more social houses last year than at any time in the Deputy's lifetime or my lifetime. That is a statement of fact. We do, obviously, have more to do. That is why part of this is not just about funding. A part of this is also about accelerating the delivery of infrastructure and the work that the Minister, Deputy Chambers, is moving on as well.

We have significant supports in this country for people who find themselves on hard times, including through our social protection system. Is there more we need to do? Of course there is. Is there always more to do? Absolutely. However, regarding the roles the Minister, Deputy Chambers, and I hold in Government, I am making the point that we have an ability to do more at a budget if we do not have constant calls and clamours for a mini-budget every fortnight.

Mairéad Farrell (Galway West, Sinn Fein)
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I am conscious of time and I want to ask something completely different. However, I will ask that when the Minister is drafting that budget that he thinks of those people who have no hope. I have no hope to give them at the moment. I do not want to be in that position. If somebody comes into my clinic, I want to look at actions we can take to try to assist. We try to look at those but there is very little hope when it comes to renting in Galway city and very little hope in terms of housing.

I have a totally different question prepared. It relates to the news that 250 jobs will be lost at Meta's Irish offices as a direct result of AI. The report from the IMF stated we are relatively more exposed to AI than many other advanced economies and that up to 40% of jobs here could be exposed. Do the Ministers present consider those forecasts accurate? I do not mind which Minister responds.

Jack Chambers (Dublin West, Fianna Fail)
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We are conscious of the risk and the disruptive effect of AI on the labour market. It has been reflected in some of the publications by the Department of Finance and others. That is why the Minister, Deputy James Lawless, is leading out on work around upskilling, reskilling, trying to build resilience in our labour market and preparing for that. There are also opportunities that will come if we embrace AI and digitalisation in our economy, which is reflected in the Future Forty report. The Government is essentially trying to embrace both how we manage it to build future economic growth and also in working with a lot of the labour force who may be impacted by the disruptive effect we are seeing here and elsewhere. It is also about examining its use in the public service and the opportunities that will emerge from there.

Gerald Nash (Louth, Labour)
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My first question is for the Minister, Deputy Chambers. Voted spending is €0.7 billion ahead of where we anticipated it would be in budget 2026. We are aware of some of the factors feeding into that. How far ahead of the out-turn or the forecast for budget 2026 will voted spending be by the end of the year?

Jack Chambers (Dublin West, Fianna Fail)
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There are a couple of variations which have occurred. One is that we have obviously decided to deliver cost-of-living interventions in the transport sector and in the agricultural area where we have revised the general Government ceiling. We have separately provided an additional allocation for the Department of education. The third aspect that has created an uptick in overall spending related to an additional payment for social protection in the month of April, which should moderate downwards. Overall, the feedback from the Department of Social Protection and in our overall Vote management or monitoring of it is that it is broadly in line with what had been planned for.

The Department of Health currently has a structural overrun where it is taking corrective action to moderate spending downwards. We will have to monitor the out-turn for May. Health spending had an uptick post Christmas, which is typical in any given year. It was falling from January to March. It spiked in April and the new CEO of the HSE has taken action. We have to see the outworking of that. The Minister for Health, the CEO of the HSE and I are all agreed on the need to moderate health spending.

They are the structural contributors to the overrun. Overall, most Departments are in line with profile. On education, I referenced the expenditure levy which we have introduced. Health is taking corrective action and social protection is a timing issue. That affects the wider picture. To the question, right now we obviously have two structural changes which will impact the end-of-year position, but our position on health is that it is taking corrective action.

Gerald Nash (Louth, Labour)
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Would the Minister rule out Supplementary Estimates for Departments later this year, given he said he believes that most of the spending is on track in terms of what he anticipated it would be in budget 2026?

Jack Chambers (Dublin West, Fianna Fail)
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We are seeking to minimise any sort of Supplementary Estimate. Obviously, we have had two in respect of the cost-of-living interventions we are making in both the transport and agricultural areas and there is one relating to the Department of education. The work we are doing on an enhanced and more effective control environment is to minimise Supplementary Estimates. The introduction of an expenditure levy is to put expenditure back on a specific path in 2027. That is why it is a central part of the Estimates process.

Gerald Nash (Louth, Labour)
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On the new expenditure control framework, in many ways that is an expression of collective Cabinet responsibility. The entire Cabinet is responsible for the overall expenditure policy of the Government. I understand and appreciate that. Conversations on the downstream impact of this are probably for another day, but it was made clear a number of weeks ago that there was a €646 million deficit, for the want of a better description, in the Department of education. How did the Minister for education, last summer and leading into the budget last October, get the figures so badly wrong? The Department of education is not like health. It is not a demand-led service. We can anticipate the number of children who will be entering education. We can, with a reasonable degree of certainty, anticipate and understand the number of children with additional needs who will need additional support and specific kinds of interventions. How did the Minister get it so badly wrong?

On the composition of the €646 million that needs to be found to address that problem, the Minister articulated that a levy comprising of €446 million would be imposed and that will affect expenditure in 2027. My understanding is that €200 million of that will be provided for out of the €1 billion contingency that the Government provided for in the last budget. I have also been led to understand, and correct me if I am wrong, that some money from that contingency will be used for the European Union Presidency. Is that right?

Jack Chambers (Dublin West, Fianna Fail)
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Yes.

Gerald Nash (Louth, Labour)
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Again, we could anticipate that the European Union Presidency was happening. We knew this. We knew when we would have it 20 years ago. Why is a contingency required to be reached into to allow us to spend money on a Presidency that we anticipated a number of years ago and successive Governments have been planning for? Will the Minister answer specifically on the education point?

Jack Chambers (Dublin West, Fianna Fail)
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I will come back on some of those. Deputy Nash has a number of questions there.

Gerald Nash (Louth, Labour)
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A sum of €200 million has been used from the contingency to address the education gap.

Jack Chambers (Dublin West, Fianna Fail)
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There are a few parts to that. First, on the reason the contingency is being used for the European Presidency - there happens to be an additional payday which is also being used from the contingency - it is one-off temporary spending, which is a better basis on which to use a contingency fund in terms of wider fiscal planning. That is the reason it is being used on that basis.

In the context of education, we have used €200 million of the contingency but because it is of a significant sum greater than that, there is €446 million of the €646 million being taken and it has a distributional impact across other Departments. In the budgetary settlement we had with the Minister for education, there was a 10% year-on-year uplift, which is a level of current expenditure far in excess of what we have agreed collectively as a Government. As we want to prioritise education, there were additional demands that emerged following the budget. To be fair to the Department of education, it would get into the granular detail of the outworking of that but as a Government, we all collectively agree on the need to provide for additional places for children and families whom we all represent across communities. There is, however, a reprioritisation required. We cannot just continue a policy of finding more and providing additionality. That is why there must be greater political recognition of the need for Departments to look within their own base of spending, which has increased significantly in the last five to six years. We should better challenge the base position of expenditure. It is why we have tried to move away from existing levels of service, ELS, and why reforms and efficiencies should be part of the annualised budgetary process in order that Departments create their own space to do more in addition to what we allocate in additionality. That is the context of the levy and the Department of Education and Youth.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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We all agree that there needs to be additional resources and supports for children with special needs. The way the Minister has put this out is to set that off against a levy being imposed on other Departments whereby less will be spent in 2027 in other Departments because, rightly, the Government has decided to prioritise special needs. Does that not inevitably mean that things will be tighter in other areas?

I want to follow on from the contribution made by Deputy Farrell because it is not one individual. A pattern is emerging in my clinic and I suspect, if we go around the House, we will see this. I am now getting council tenants coming to my office who cannot pay their rent or bills on a level that I have not seen before. It is ratcheting up and they cannot get help. Often when this is said to the Government, the response is that for certain things an exceptional needs payment is available but for ongoing "recurring issues", as they call them, like rent there is no help from the community welfare officer. Now we have people who want to pay their rent but just cannot make it add up. Some of them are now being hit by increased council rents - just to make their lives even worse - when everything is going up. They cannot manage it and are falling into arrears in their rent and energy bills and are asking where can they go. These people are not flaithiúlach. They live on absolutely derisory low incomes and they cannot make it add up. They need help and I am worried from what the Government is saying that there will be less available to help them because we have made the correct decision to put in more resources because the Government underestimated how much money needed to be put into special needs and so on.

Is there not another alternative instead of playing two areas against each other? I do not want to go into the details because I have not studied them. Mamdani has pointed to an alternative, which is to tax the multimillionaires. He has claimed that he has now reversed a deficit and made additional spending in a whole number of areas possible such as childcare, affordable housing, etc., by imposing a tax on multimillionaires, which is something that we have been proposing that the Minister does for a very long time because multimillionaires are doing very well. The number of multimillionaires has increased. As net household wealth in this country has consistently and dramatically increased, could we not impose a small wealth tax on the multimillionaires, which, according to Oxfam, could generate billions of euro? Would that not be a better way to cover the additional spending we need to do in special needs while having money available for things like people who cannot pay their rent by increasing their payments, expanding schemes like exceptional needs or not increasing their rents?

Jack Chambers (Dublin West, Fianna Fail)
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My ministerial colleague and I will reply as the question has two aspects and one relates to expenditure. The point that the Deputy has made would stand if we were to freeze spending at €118.5 billion for next year but it is in the context of expenditure due to increase to €125.5 billion. There is an expansionary track for 2027 and the expenditure levy is being applied for all of 2027. In fact, we are not pitching one area against another. What we are saying is that there is a need to drive efficiencies, reforms and productivity across all Departments and agencies notwithstanding the decision relating to the Department of Education and Youth. It is better financial management and it is a better longer-term fiscal path to use that in terms of having a levy when additional priorities emerge. This is a standard that is used by many Administrations across the world. We are reprioritising and it is in the context of a growing expenditure line. By forcing Departments to drive greater efficiencies in an expanding budgetary environment, there is huge scope to do a lot more across many areas. The point would stand if spending was to stop at the current position.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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With inflation and demographic changes, just to stand still more money must be spent anyway. Is the actuality not-----

Jack Chambers (Dublin West, Fianna Fail)
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The Deputy is making the assumption that we cannot drive efficiencies or productivity enhancements in the public service. I do not accept his hypothesis or assumption that solely by looking at inflation and the cost of how we do things today that things cannot be improved without just adding more. I think that the public service, Departments and agencies need to drive greater efficiencies as a matter of policy.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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I would love to know what the efficiencies are.

Jack Chambers (Dublin West, Fianna Fail)
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Ultimately there would be better outcomes for the people we all represent if service delivery is improved with the level of spending, which has increased in the last five years. Having as much focus on that in the context of budgetary planning will yield better delivery for all of us and for all the people we represent. That is why we are prioritising it in the context of our management of the economy and within our budgetary planning for it.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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And never wealth taxes?

Jack Chambers (Dublin West, Fianna Fail)
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We have a very progressive system and the Tánaiste will speak to that.

Simon Harris (Wicklow, Fine Gael)
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We looked at this as recently as yesterday. Public expenditure in this country has gone from about €67 billion just before the pandemic to €118 billion this year. Even allowing for inflation and the likes, that is a very significant level of expenditure. It behoves all of us in government and in opposition to ask the following question. Is there more benefit we can see for our citizens in relation to that? I am no longer convinced that it is just about writing a cheque in terms of the improvement of the lives of our citizens. Of course, there is a need for continued investment and I support the work that the Minister, Deputy Chambers, is leading on.

We already have a very progressive income tax system. I mean 80% of income tax is paid by the top 20% of income earners in this country. By any measure, we have a very progressive income tax system. The more a person earns then the more he or she pays. Indeed, we have taken many people out of paying any income tax at all in Ireland. In fact, sometimes when you look at the IMF and the like, they highlight that in terms of the narrowing of the tax bases or risk to it. I am very satisfied that our income tax system is progressive.

Edward Timmins (Wicklow, Fine Gael)
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Property tax is effectively a wealth tax because most of the wealth in this country is held in property.

Richard Boyd Barrett (Dún Laoghaire, People Before Profit Alliance)
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It is not.

Edward Timmins (Wicklow, Fine Gael)
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We have a hugely progressive income tax system. The IMF, I think, even suggested that we should tax lower paid workers more but obviously we disagree with it.

Going back to the Department of education, which was my main thing, two weeks ago I asked that we bring the Department before this budget committee, when the €650 million overrun became apparent. It is coming before us in two weeks, so we are hoping to get more detail then. Does the Minister have any thoughts on why it has gone over by €650 million? On a €13.1 billion budget, that is almost a 5% overrun, which seems extraordinarily high. I hope to get more detailed answers when the Department of education comes before us, but does the Minister have any thoughts on how that happened? Was it just not given enough money in the first place?

Jack Chambers (Dublin West, Fianna Fail)
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I do not accept the summation that it was not given enough in the first place. A 10% year-on-year increase is very significant compared to most Government Departments. That is my initial point.

The increase we have now given the Department is a 15% year-on-year uplift, which is probably one of the biggest across government. In an education system that has a falling demographic, and we have pressure in health because of a demographic challenge on the other side, there are some demands which emerge after the budget that are greater than expected, specifically some of the demands relating to the special education side. Some of it relates to the budgetary allocation and the specific circulars and ratios that it has for staffing. That is one element where, at times, there is no convergence. The Department can get into better, more granular detail on that.

We examine this as a Government. Obviously, we want to ensure that everyone has a special education place and that we support the most vulnerable people in our primary school system. There is no disputing that. While we provide that additional resource in that instance, there is also a need within the Department of education. It is not immune to reform in its financial and budgetary management. We have a budgetary oversight group in my own Department, which has been stood up so that there is strength in financial management.

Edward Timmins (Wicklow, Fine Gael)
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Sorry, I am just looking at the time. I thank the Minister for that, and hopefully we will get more detail on that.

We had one of the most generous packages of €775 million recently to the end of July. Does the Tánaiste envisage that this will continue, as obviously it will have implications on an annual basis?

Simon Harris (Wicklow, Fine Gael)
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The factual position as of today is that the current measures in place are in place until the end of July. The Government has consistently said we are keeping all of that under review. That is for very good reason, in the sense that it is almost impossible to predict where the world will be in energy prices and the likes by then. The Government will make a decision on that towards the end of July. We are purposely not going to make the decision too prematurely, so we will look at it towards the end of July.

Edward Timmins (Wicklow, Fine Gael)
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I have a couple of technical questions. Mr. McCarthy might come in on them. The PBO did a presentation for us and gave us a copy the other day. It put in a figure for windfall corporation tax. It did not know how that was actually calculated. Does Mr. McCarthy have any more information he could share, even after this committee meeting, on how that is calculated?

Mr. John McCarthy:

We do indeed, Deputy. We have published a paper on it. I will arrange to have it sent to the committee.

Edward Timmins (Wicklow, Fine Gael)
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Similarly, on a related matter, the figure for interest in the five-year projections was the total interest charged. This year it is about €3.2 billion, but in 2030 it is up to €6 billion. That is a dramatic increase, given the deficit. The whole debt-GPT ratio is dropping, and the absolute figure of debt is remaining pretty stable.

Mr. John McCarthy:

It is a very good point. The Deputy is right that the interest bill doubles between now and 2030. The reason is that most of the debt instruments that were issued from about 2017 onwards under quantitative easing, QE, and subsequently during the pandemic were issued essentially at 0% coupon, so 0% debt. They were ten-year debt. As they are refinanced, they will have to be refinanced at whatever the prevailing market rate is. At present, it is 3.3%, and because you are refinancing zero-rate debt with higher-rate debt, the interest bill will rise.

Edward Timmins (Wicklow, Fine Gael)
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I am also slightly concerned to note in the budget lines the witnesses have that some of the figures are round figures, like €350 million. I just wonder about the full basis of that. Maybe we could get more detail on that as well. That would be very helpful.

Mr. John McCarthy:

Absolutely, we can also supply that to the committee.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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We have a minute and a half left. I call Deputy O'Callaghan.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Tá fáilte roimh na finnéithe. Ar dtús, labhróidh mé faoi chánachas. I have just a quick point on taxation. We have a very progressive taxation system, but we also have very high structural inequality. The taxation system has to do an awful lot of heavy lifting, as well as the welfare system. Ultimately, we need to address that structural inequality so that we do not have to do so much of that heavy lifting.

As regards the point on the education budget allocation being so wrong, my question for the Minister, Deputy Chambers, is not how the Minister for education got the budget allocation for education so wrong, but how did he and his Department get it so wrong? Clearly, the €646 million extra is an admission that the initial allocation was wrong and insufficient. That has happened within months of the budget. Given the nature of the Department of education's costs being mostly fixed, such as teachers' wages, SNA wages and capitation grants, it is not a very complicated Department in terms of budgeting.

How has this happened? Were the Minister for education and the Department of education not listened to properly when the Minister, Deputy Chambers, was setting the budget allocation? Can he explain the engagements there, and how he got it so completely wrong?

Jack Chambers (Dublin West, Fianna Fail)
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I reject the Deputy's analysis and conclusion. As I said, the Department received an allocation far in excess of what most Government Departments received. We structurally align the broader parameters of our budget package with respect to the asks that come in across Government Departments. Within education, we re-based an excess of €300 million in the level of overspend last year, and provided additionality across several other areas which the Deputy would be familiar with, such as new measures around DEIS plus and other interventions we have made.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Respectfully, if the Minister got it right, how come there was a €646 million additional allocation within months of the package?

Jack Chambers (Dublin West, Fianna Fail)
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I have explained that part of that relates to a demand which accelerated following the budgetary process, and we were engaged in following it. That is one element of it. Another related to the additional decision made around school transport, which was different from what was agreed at budget time.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Does the Department have a breakdown of where exactly the €646 million is coming from?

Jack Chambers (Dublin West, Fianna Fail)
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The Department of education will be able to provide that to the Deputy.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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We have not been able to get those.

Jack Chambers (Dublin West, Fianna Fail)
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It is the line Department. We set the overall budget following negotiation.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Given that the Minister has authorised the €646 million additional spend, and given that he is levying other Government Departments on foot of that, surely he should be able to provide us with the breakdown of the €646 million.

Jack Chambers (Dublin West, Fianna Fail)
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The Department of education will be able to set out the policy developments underpinning the additional €646 million.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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Regarding the existing level of service and the overspend that is happening, as the Minister knows, the medium-term fiscal plan limits annual spending increases to 6%. In the first four months of this year, it is already up at 9%. There is already an issue there. The fiscal council has warned for three years in a row now that the Minister's Department is underestimating existing levels of service, and that the starting point for the budgeting process is all wrong. It has criticised this quite strongly, as well as the fact that existing levels of service have been negotiated between the Minister's Department and other Departments. The council makes the point that it is something which exists and cannot be subject to negotiation. You cannot haggle over what the existing level of service is or negotiate it; there should be an objective calculation of what the existing level of service is.

What does the Minister say to the council's criticism? Does he see the point it is making that it should not be subject to negotiation, and that the Department should be examining exactly what the existing level of service is in order to make a provision, rather than having a negotiation with a Department over a funding measure for existing levels of service and then getting it wrong year after year?

Jack Chambers (Dublin West, Fianna Fail)
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We have taken an approach which, first, does not look at the additionality in any given budget; it looks at the total quantum expenditure.

We examine reforms and efficiencies and improved productivity from the existing basic spend and then we negotiate the budgetary Estimate process in that context.

My point to Deputy Boyd Barrett was that we can get more for what we are already spending. By accepting a base position around existing levels of service, we are accepting there is an inability to increase efficiencies or outputs. I fundamentally do not accept that. I believe we can do more with our existing level of spend. We can have an improved level of service on our existing level of spend. In the budgetary process, we are looking at the total spend, what more might be available and how it can, in its totality, improve delivery for citizens. That is the context in which we have set out the budgetary environment and published the medium-term expenditure framework, which looks at expenditure drivers in the budgetary process over the past five or six years. Most Departments are within their allocation. Where they are not within their allocation, they are taking corrective action or there has been burden-sharing across government in the context of the Estimates for 2027.

Cian O'Callaghan (Dublin Bay North, Social Democrats)
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I will quote the Irish Fiscal Advisory Council:

The bad budgeting in the base year spills over into the following year ... The Fiscal Council has warned for three consecutive years that the starting point was wrong. The Department of Public Expenditure has consistently underestimated the cost of maintaining existing services.

This is an independent body. It continues:

The budgetary allocation was too low from the start. Delivering planned services on budget becomes nearly impossible if funding was never sufficient. That responsibility lies with the Department of Public Expenditure.

Is the Minister dismissing what the Irish Fiscal Advisory Council is saying? Is he listening to what it is saying? It is an independent body that was set up to give advice on good budgeting process. It is giving advice and the Minister is dismissing it. Will he not take what it is saying seriously?

Jack Chambers (Dublin West, Fianna Fail)
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I take what it is saying seriously and that is why we have introduced an expenditure levy, why we are focusing on efficiencies and reform, why we are putting ourselves on a sustainable expenditure path in our medium-term fiscal and structural plan and why we are responding to the prioritisation of infrastructure and housing delivery, which is a core reference point for IFAC as well. Existing levels of services need to be reflected in the context of overall levels of spend. We have taken a different approach. The committee has had engagement with my officials and many members have had bilateral engagement. We should not accept existing levels of service from a base level of spend and just negotiate additionality. That is not a good or sustainable way to budget. I am seeking to take corrective action where we identify expenditure pressures, which we are doing, and to have collective responsibility across government with an expenditure levy, which puts us on a more sustainable expenditure path. That is quite different from what has happened in recent years in terms of medium-term planning. It will be better for overall sustainability. I share IFAC's view on that in the context of ensuring medium-term planning is correct, safe and sustainable.

John Paul O'Shea (Cork North-West, Fine Gael)
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I thank the Tánaiste and the Minister for their statements on the annual progress report. Given the prolonged period of economic stability, are we better prepared than ever before for economic shocks related to tariffs and conflicts in the Middle East?

Simon Harris (Wicklow, Fine Gael)
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I think the answer is "Yes". I was very clear, honest and upfront about the downside risks to our economy and the global economy but we are in a country that has stronger fiscal rules and lower unemployment and which has built up significant reserve funds. We have agreed a medium-term plan that commits the Government to a fiscal strategy of sustainability, resilience and readiness. That is an important point to make. People we represent across the country hear about and are rightly concerned about this moment of global challenge, but this is not the financial crisis or Covid. Each challenge needs to be seen in and of itself. We have worked hard as a country and often been criticised in this place for trying to run budget surpluses, build up fiscal buffers and establish those funds. Those funds are often described as rainy day funds, which irks me. They are funds for our children and their children. They are funds for delivery in response to demographic pressures that we know will exist. Future Ireland 2040 makes that clear.

In an aggregate sense, the balance sheets are in good shape, certainly much better shape than in the times in the past that the Deputy referenced. That is not just the country's balance sheet; the level of indebtedness of Irish SMEs and the likes is encouraging. Notwithstanding downside risks, it is a position of relative strength.

John Paul O'Shea (Cork North-West, Fine Gael)
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Sticking with the conflict in the Middle East, would the outcome of this report be different if we did not have that conflict?

Simon Harris (Wicklow, Fine Gael)
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Very much so. The actions in the Middle East have had a significant economic impact. In the annual progress report, we can see clearly how the Irish economy will grow in all scenarios but will grow at a lower rate. Inflation will be higher in all scenarios as well. Geopolitics and economics used to be seen as two different things but they are now very much interdependent. Decisions being taken thousands of kilometres from here are having a direct impact on our economy. We cannot be immune to that. No government can wish all that away or immunise the public from all of it, but we can take some action. The stark thing is if we had not had the bombing of Iran, we would be revising upwards our forecasts for growth. I say this as a testament to the Irish people. That is how well the economy is growing. We would have been upgrading our growth forecasts, not downgrading them.

John Paul O'Shea (Cork North-West, Fine Gael)
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There have already been two references in this session to AI and the positive and negative impacts it has on the labour market. Are we already seeing the impact of those technological changes?

Simon Harris (Wicklow, Fine Gael)
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"We are", is the short answer. When it comes to AI, there are both opportunities and challenges. We have to try to maximise the opportunities and minimise the challenges. That has to be the north star. My Department has done a lot of research on this. We publish a lot of research which is of use to the committee and the wider public. I am not sure I like the term "churn" because these are people, their jobs and their careers, but we are seeing an impact on the labour market. We are probably seeing it disproportionately in the sectors we would expect to be the first movers in relation to AI.

The Ministers, Deputies Burke and Lawless, are investing a lot. In the case of Minister, Deputy Burke, it is in training in AI through the IDA. There is already a significant uptake from IDA client companies upskilling staff in AI. The Minister, Deputy Lawless, today updated the Government on the work being done on skills around AI. There is a skills deficit in the country and globally that we need to address.

We cannot look at the private sector's huge productivity advantage from AI and think there is not something in the public sector for that as well. There is a small number of examples where digitalisation and use of technology have really improved public services. The Passport Office is one. Revenue Online Service is another. Perhaps motor tax is another. How can we use AI appropriately and ethically to improve public service delivery? The broader productivity gain to the economy from AI should be a benefit too.

John Paul O'Shea (Cork North-West, Fine Gael)
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In protecting households from inflation, how has Ireland compared to other European countries?

Simon Harris (Wicklow, Fine Gael)
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I will ask Mr. McCarthy to comment if he has any data on that. I understand why and I understand the politics and the reality, but the €750 million package we put in place some weeks ago has often been described as a package for farmers and hauliers. There are measures in that specifically for farmers, farm contractors and hauliers, but a further benefit of it is it keeps downward pressure on a rising inflation rate. We estimate that to have been 0.5%. Mr. McCarthy will answer on how our inflation is relative to the rest of Europe.

Mr. John McCarthy:

The policy response is one of the largest in the EU. I think the Tánaiste referenced it earlier. One or maybe two countries have done more than we have but we are certainly at the upper end.

John Paul O'Shea (Cork North-West, Fine Gael)
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In terms of the two funds referred to earlier, how much of those funds will be invested this year? Are they for the future?

Simon Harris (Wicklow, Fine Gael)
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The aim is to have €23 billion in the funds by the end of 2026. The two funds are slightly different in terms of their legal mandate.

One fund, the Future Ireland Fund, is to be built up over a sustained period to deal with demographic pressures. The other fund is available at an earlier point for investment in infrastructure projects and decisions to be taken by the Government in that regard.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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It is my own time now. I have a question from the point of view of inflation. This is from my records. I have been a building contractor all my life. I priced materials in January for a job at €70,000. I took the VAT off that, which was €16,100. That was in January. The contract did not start until February. I bought the materials for €75,600 in February, which meant there was €17,388 VAT on those materials. On 1 March, those materials had gone up to €81,200, so there is €18,676 in VAT. That means that in eight weeks the Government has taken in, with the same cost of the materials I priced, €2,576 more in VAT. Now we are looking at the cost of building houses. As I said, I am in construction. The price of housing went from €120 per square foot to €200 per square foot in five years. We are looking at the tax. This glass of water would cost me €1 and the Government takes 23% of it. I still only get the same glass of water but it now costs me €1.30, so the Government is taking a high percentage in taxes. How can we bring down the cost of houses? For the hospitality sector, because the price of food was going up, the Government dropped the VAT rate back to 9%. The Government's purse is no worse off at the 9% rate because the cost of the food is higher. The 9% comes back, so the Government is at no loss, but it has a gain on this, and this is where I have an issue. That is one question. That is on the 23% VAT rate.

The price of fuel is €1.95 per litre at the moment. The Government brought in a rebate system for truckers of €1.92. With the VAT back, it is €1.56, and when you have done the rebate over the truck based over the month, it brings it back to €1.38. I asked the Government why it did not bring in a cap on fuel of €1.70. It also equals €1.78, but anyone in this country would have benefited from it. If we go back eight weeks or ten weeks, we were getting under €1.70. Why can the Government not bring in a cap on fuel at the start of the year and allow businesses to forecast, such that if there is a cap in place and the price hits €1.70, there is no more tax on it? The Government has to get tax - I understand that - but it now has to pay the increased cost on the fuel, so they are paying only 50% more than the tax they paid on it.

As regards all the subsidies the Government brought in, 50% of it is tax on top of what we are paying now, so nothing comes down. This is what I am trying to say. If a cap were introduced at €1.70, the Government would still get the same tax today that it had ten weeks ago. We would pay the increase in the cost of the fuel, which would mean at the pumps today the cost would be €1.82 for everyone in this country. Why is the Government taking extra tax on an increased cost? This is putting a greater burden on everything in this country. When the Government did the target on the transport network, which I had to correct it on, it was giving it only to the road hauliers. It did not give it to anyone who was drawing their own goods. It introduced that this time.

This brings us back to taxation. How can I make forecasts for my business if there is this fluctuation? The Government has been reactive every time something has happened in the past five years. Why is it not proactive? Why not put things in place in order that when something does happen, we do not have people marching on the streets or having protests because a system would be put in place? In my business, I have to put a system in place if there is a problem. Why can the Government not do likewise?

Simon Harris (Wicklow, Fine Gael)
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First, we have reduced VAT on gas and electricity to 9%, and we made that a decision until the end of this Government's term, I think. We also have to comply with the EU VAT directive when it comes to fuels. I cannot remember the exact words the Chair used but I can respectfully say to him that the measures we have taken on diesel and petrol have clearly had a real effect at the pump. There is not a constituent of his or mine who has not seen that the cost of petrol and diesel would have been a hell of a lot higher were it not for the measures we have taken.

I will make a fundamental point. It might be a bit of an old-school idea, but paying tax is a good thing, and we use those taxes to fund the public services. Generally in here - I do not mean in this committee; I mean in these Houses-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I do not mean to cut across the Minister but the question is about paying excessive taxes on something the Government is benefiting from. The person who is actually getting something is not benefiting.

Simon Harris (Wicklow, Fine Gael)
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The figures do not show that. I am not suggesting it was you, Chair, but there was a kind of misinformation going around, from a different political party, in relation to the amount of extra tax the Government was taking in in relation to the fuel crisis. We debunked that. The excise figures and the Exchequer returns clearly showed that not to be true, in terms of the quantum that was being put out there.

The cap idea - I say this respectfully because we look at everything - does not work because what it does is basically transfer the cost from the forecourt to the Exchequer. It does not get rid of the cost. It just transfers the risk and takes all that risk onto the Exchequer balance sheet, which is not about you or me but about every single person in this country. This is not the Government's fault. There are two wars that have brought about a significant impact on energy crises. We have put in place the largest or second largest package of support in the European Union. As to what we did - and the Chair referred to hauliers and the likes - those packages were co-designed and agreed with representatives, who said, "This is what would work well for us", and they are working well. On the 9% VAT rate for the hospitality sector, I stand by-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I agreed with that.

Simon Harris (Wicklow, Fine Gael)
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The only point I will make is that it has not come-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I have a further question and I am short on time.

Simon Harris (Wicklow, Fine Gael)
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You are the Chair so you can give yourself a second. The 9% VAT rate has not come in yet but it will come in in July, and I hope it helps the sector.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Even in the agriculture sector the Government brought in a rebate system. The agriculture sector has two different sectors and two peaks. There are the people who harvest silage, hay and so on in one sector and then there is the tillage in the other sector. The Government based its funding over 12 months, which brings the funding down that they needed today based over 12 months of their receipts from last year, which means the 12% they were given was actually 8%. It was not 12% because the Government based it over the year. I do not know anyone who cuts silage in the middle of the winter but I do know people who do tillage. Some people who do tillage do not do silage, so why did the Government not base it on a half-yearly system, so that the rebate is given on the peak time? Even if were broken into six months, it would mean they would have got the benefit of it. The 12% was not 12%. It was 8% when it was based over different contractors over the year. There are different contractors in the agriculture sector, so why can we not base it over that? I do my VAT returns every two months. I do all our different taxes. They can all be based over a two-month period. Then there are other ones over three-month periods. Why can the Government not break it down into six months where the full benefits of the 12% go directly into those sectors that we want to come back to? As regards silage contractors at the moment, their costings are still up. That means the farmer is paying. That means the cost of everything is going up, even though the package the Government introduced does not cover the 12 months.

Simon Harris (Wicklow, Fine Gael)
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I will make a couple of points. We have to be very honest here. There is no government in the world, including the Irish Government, that can insulate everybody from the full impact of this. Farmers get that. People right across the country get that. We can take measures to help. None of us can provide full immunity from the impact of these costs from all of these wars. We just cannot do that, and I have to be honest about that.

Second, as to what was done and not done in relation to the package, what I do know is that there was substantive engagement with farm contractors, the IFA and others and this package was welcomed by them and those involved in the talks.

Third, we will have a budget in October and we will be able to take stock of where the Irish economy is at and where the most prudent use of tax policy and expenditure policy is at that point.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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The package that was given was based on the same package the Government brought to the transport sector, in respect of which a relief was given over four months, not 12 months. The Government put in an extra relief for the four months to counteract something that was there. For the agriculture sector, it brought in a relief over 12 months, so it was not the same package and it was not the same details of what needed to be represented. The one thing the Government did do - and I will give praise where it is due - was include people this time who carry their own goods. It had never done that before. That was something I highlighted. Someone getting a load of stone from a quarry does not get a relief, but if I have a haulage licence and I send a truck into the same quarry, I get the relief. It is the same for all goods across the country, if a person is drawing their own goods.

The Government implemented it this time, but it did not do it before. It has actually learned something but why can we not be proactive? We know that wars are going to happen more frequently going forward. We know this. We know that there will be upsets to the different forecasts going forward. Why can we not put in measures now so that we do not have a panic situation every time this happens?

Simon Harris (Wicklow, Fine Gael)
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I agree with the Cathaoirleach at least on the last part. On the last part, not just Ireland, but Europe and the world in general have to now recognise that we live in a world where - I do not want to call it the era of permacrisis - volatility certainly is likely to be a much more permanent feature of the global economic environment.

We may or not agree on this but the intervention we should be looking at is how to get ourselves off this hamster wheel in terms of every time a decision is taken by somebody far away from here, it has such an economic impact on Ireland and Europe. These are conversations we are having at a European level as well. Part of that is the push around energy independence and energy security. It will be harder for some sectors in terms of transition and what do we do for them. The Government is giving a lot of thought to this, and we have had detailed discussions with the Minister, Deputy O'Brien, on what we can do to make ourselves less reliant on external factors. That is why we are all reacting. We are reacting to decisions taken by others. The Government's focus has to be on trying to build up that energy security.

In the here and now, we needed to do something. The much more important conversation that the Irish people want us to have is how do we get off this hamster wheel where twice in a half a decade we have seen an energy shock not caused by the Government or the Opposition but by two wars.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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It goes back to income tax. As the Minister said, I am the Chair and it looks like I am the only person who wants to speak, and we have a bit of time to speak. I might not get the opportunity to sit down with the two Ministers again and have an over and back, so they will have to endure these 28 minutes that are left and I have no problem holding them to it.

From the point of view of income tax, inflation has gone up. The Government is taking 23% VAT on an inflatable cost. The cost of a house has gone up €80 per square foot in five years. The Government's income from VAT has gone up. The person who is buying or building a property is borrowing more, but the Government's income tax has actually risen. It is making it unaffordable for a person to build a house. For example, my son and his partner were saving for a house. They saved hard. They did not go out much. They are living with me and they saved and saved. They were more responsible with minding their money than one could imagine because they were saving to get more money to build their house. I go out to quantity surveyors all the time, and I have the price fluctuations coming into me. The extra that they thought they had saved throughout the year by doing without was brought back in by inflationary costs. They could not pass the cost of inflation. It moved €22,000 in 12 months. They were saving so hard and had done without but the €22,000 was brought back into the project.

I had another person who had priced a house for €535,000, including their garage. Everything was done, including all of the remedial works. They asked me to take off the garage. They said that they would not do that work at the moment and might get a garage down the line. The price was taken back, and it came to just under €500,000 by the time all of the remedial works were done outside. That was in January. The garage was lost but the cost has gone back into the house due to the cost of inflation. The Government has 23% of that increase in costs but how are they going to manage? How is the Government going to help the people who want to build their own houses? They are working and want to build their own houses. We are trying to provide for people across the sector in public housing and I agree with that if we can build them fast enough. The houses should be got to people and they will have cheaper rents. However, for people who want to build their own house on their land, how is the Government going to contribute to that?

Simon Harris (Wicklow, Fine Gael)
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The first point I will make is that we have to be careful that we do not chase inflation. We have to make sure that anything we do at a time of high and growing inflation does not accidentally push inflation up further. Sometimes there are policy arrangements - not necessarily anything the Cathaoirleach suggests - but sometimes we can do something that we think will be helpful but actually just causes a sugar rush in terms of inflation being even worse in the time ahead and therefore making everything worse for people. That spiral of chasing inflation is very dangerous.

Objectively speaking, we are taking a number of measures to help people from a viability point of view. The help to buy scheme, which, in fairness, I think the Cathaoirleach supports but most of the Opposition wants to get rid of, is a scheme that we are committed to until the end of the Government. The first home scheme is again something that most of the Opposition wants to get rid of, I do not think the Cathaoirleach does, but we are committed to keeping it.

From a supply-side point of view, we did the significant rebate situation for Uisce Éireann. We did the development levy waiver. We revised the apartment standards. We have provided certainty around the rental market situation. We cut the VAT on the building of apartments. We got politically hammered in relation to that.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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The Minister has not answered the question about those who want to build their house. He is going around in circles.

Simon Harris (Wicklow, Fine Gael)
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It is all about supply. I am not going around in circles at all. It is a very straightforward road in that we have to build more supply.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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These are people who do not want to put the burden on the Government to build a house for them, and they want to build their own.

Simon Harris (Wicklow, Fine Gael)
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We are making it easier for people to build their own homes. Some of those schemes we have available through both the tax and spending sides do make a difference. The Minister, Deputy Chambers, may want to add something.

Jack Chambers (Dublin West, Fianna Fail)
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I totally agree, and the Minister, Deputy Browne, and the Minister of State, Deputy Cummins, are both working on proposals to make it easier for people to build one-off homes which I think the Cathaoirleach supports as well. It is not only the issue of the cost of construction, the ability to get permission is also a huge issue in rural Ireland as the Cathaoirleach is more familiar with than I am.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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This is my day job as well, so the Ministers are going into a sector that they will not come out of. I was on site this morning at 6.30 a.m. before I came here. I see the cost of materials on a weekly basis. Any project or contract that the Government might take on, it puts in 5% for inflationary costs. We saw what happened with the children's hospital when the contracts were not properly done.

I spoke to the Minister before about design-build where the contractor takes the risk and the customer gets more bang for their buck. That is design-build where the costs are built into the system. If the Government goes on an overrun, however, there is no accountability. It comes from somewhere else and it spends it. If I go on an overrun, I am out of business. This is what I am trying to say to the Ministers. Every budget that we come to under the Government's fiscal policy is on an overrun. Money is being spent and there is no accountability.

Going back to the bike shed at €336,0000, that would have built a three-bedroom house at the time. In Kerry, another €150,000 was spent on another bicycle shed and nothing was learned. That is people spending taxpayers' money. The Ministers want to try to protect people and jobs. If that type of money was spent where it is needed, it could have employed a couple of nurses to get training.

It seems that mistakes are being made with taxpayers' money. The Ministers give money to the different Departments to spend, and they come back after spending it on something that is not necessary, but because it is pink and in Kerry it had to be €127,000 when they refused to take one for €6,000. It would have done the same job. It was not in a listed area. It was not in an area that they need a fantastic-looking bike shed. They just needed something to do the job, but they had no problem spending that type of money. If it was their own money, would they spend it?

Simon Harris (Wicklow, Fine Gael)
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We need to very careful that we do not paint with one broad brush. Projects come in on time, on budget and under budget all of the time every single day. The Cathaoirleach and this Oireachtas are right to, and the people who elect us expect us to highlight those-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I will acknowledge those projects when I see them.

Simon Harris (Wicklow, Fine Gael)
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I will give the Cathaoirleach an example. In respect of the national broadband plan, which again the Cathaoirleach did not oppose but a lot of people did, we have managed to bring high-speed broadband to the most rural and remote parts of this country on time and on budget. That is one example.

Jack Chambers (Dublin West, Fianna Fail)
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It was ahead of time.

Simon Harris (Wicklow, Fine Gael)
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It was actually ahead of time.

There are loads of examples including primary care centres, school building projects and road projects. That is not in anyway to take away from the point that the Cathaoirleach makes and which drives people absolutely nuts - and it should -where there are issues. It should be our job to home in on that but I want to be fair to that public service where so many projects are delivered on time and on budget. Where they are not, there should be accountability and part of that accountability is Oireachtas committees like this and the PAC. However, there are countless examples.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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May I ask one of the other witnesses how much their VAT and income tax is up this year compared to other years? It has to be up because inflation costs are up. That means that their VAT has to be up.

Mr. John McCarthy:

We are projecting a 6% increase in VAT for this year, which would be slightly lower than in previous years. As VAT is driven by both volume and price development, yes, higher inflation is having an impact but as I mentioned to one of the Deputies earlier on, people will be consuming less because their disposable income has taken a hit.

It is pluses and minuses. I think that 5% or 6% is our projection for this year. That is a lower increase than in previous years.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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What of the small to medium-sized businesses? I am not making it political but it is a statement that was made by the last leader of Fine Gael when he said that rural Ireland was costing money. There are thirty two counties for me in Ireland. Whether we are getting windfall taxes from international business or whether it is farming or a small shop somewhere, everyone is adding to the wheel to make the wheel turn around. It integrates every citizen. It should not be put down that something is costing money. Without the rural side of Ireland the urban side of Ireland would not move. I believe that collectively they have to work together to make it go around. A lot of the witnesses I brought in here in the last two or three months have been talking of where they are. There are witnesses coming from infrastructure areas. Their mindset is completely different when they are doing research for the country. I believe that when a researcher comes in here they have to be from both sides so they can collaborate together and come up with some plans together for how we can improve urban and rural together and create the wheel to go around better. From the point of view of anyone in an urban area at the moment, the fuel issues did not impact them as much as the people in a rural area. There are 2.3 million vehicles on the road at the moment. I am not against green energy or anything like that in its place but look at the age group of those 2.3 million vehicles. We talk about people watching their money, which is less. They are not going to invest in a new vehicle, and if they have repayments in a vehicle they are going to try to keep their old vehicle going. The average vehicle at the moment is from 2010 to 2018. That is the average age of the vehicles on the road at the moment and most of them are fossil fuel vehicles. I think that at a maximum about 7% may be electric vehicles within those year groups. They cannot afford to change the car. Again, it is about getting to work where they do not have the infrastructure. I cannot come here on a bus or a train. I have to travel 20 minutes either which way. If I go to one place I cannot get a train back down this evening that will take me back to the same train station late, so I would have to be collected somewhere else. If I came up on the train and if I was delayed here tonight, or if there was a vote, for example, tomorrow night at 11.30 p.m. I would have to go down to O'Connell Street to get on the green bus and get dropped to Limerick on the green bus and my car would be above in Charleville or in Limerick station, where I cannot get to. The nearest station to me is actually in Country Cork at Charleville, but I cannot do that as a public representative.

John Paul O'Shea (Cork North-West, Fine Gael)
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Charleville is a fine place as well.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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It is a grand place and it is well represented now. From the point of view of infrastructure, would Deputy O'Shea not like to be able to hop on the train again and go back down again on the same night if it was a case of being able to do it? If you were to go down tomorrow night at eleven o'clock-----

Jack Chambers (Dublin West, Fianna Fail)
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We have to get the M20 built between the two places.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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From the point of view of infrastructure for people that are in a rural area-----

A Deputy:

Your point Jack.

Jack Chambers (Dublin West, Fianna Fail)
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Absolutely, yes.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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The same people that are in rural areas are outside Dublin because infrastructure is not there in a lot of places outside Dublin. I believe in a fast-speed train, whether it is from Limerick to Cork to Dublin so wherever you are in the country you should be able to get to here. If you go to west Cork, you will not get the train into Cork. If you go up to Donegal you could not get a train down. You will not. Infrastructure is key and we have to let people use the transport. We can be talking about electric vehicles here all day long. I would use one if it was beneficial for me but I am going in every different direction and it would not work for me. For anyone who can use them I would encourage them to use them as long as they do not need massive money to do so because they will not get a return on their car for three years if they have 100,000 km mileage up like I do after two years. How can we improve these things so more people have that infrastructure? People can afford to live better because they can hop on a bus, a Luas or the DART, which I use myself when I am in Dublin when I park my car. How can we improve something for people who are on lower earnings and living in areas outside of Dublin? How can we improve their lives and give them a chance?

Simon Harris (Wicklow, Fine Gael)
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The Cathaoirleach is right on the rural-urban point. This is a small country that is interdependent. We all play our part in making the country tick. I take the Cathaoirleach's points in relation to electric vehicles and some of the cohorts he referenced. I will just make a broad point that obviously the number of electric vehicles being purchased now is rising very significantly. I will also make a tangential point to that on the changes the Minister, Deputy O'Brien, made to some of the retrofitting grants such as the windows, the doors and likes, which are seeing a really high uptake level. This is a recognition of a point that he got, that I am not sure had been got in the past, that some people wanted to retrofit their home, could not afford to do what I described as the Rolls Royce version but were happy to do a bit of this year and a bit next year. The grants, however, were too stringent and too rigid. Since the Minister changed them we are seeing a very positive uptake.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I would agree except for one point. Since the Minister has mentioned it, this is my game. On the retrofitting-----

Simon Harris (Wicklow, Fine Gael)
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The last point I will make, and then I will stop, is on the infrastructure. The Minister, Deputy Chambers, is delivering on accelerating this. The broader point, as in all of the conversations that happen in here about day-to-day current spending, is that we as a Government are recognising from a quality of life point of view, one of the biggest issues people need us to address is the delivery of infrastructure, be that road infrastructure, public infrastructure or those capacity constraints. This is why we as a Government made a conscious decision to prioritise-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I will let the Minister go now shortly, but I have another question since the Minister mentioned retrofits. I agree with the grant system coming in for retrofits. I agree with it but the price of insulation has gone up 36% since January. The Government grant has been sucked in to that. With all oil-based materials it is the same. Wavin went up 16% last month. Silicone and PVC for sewerage and for water has gone up 16%. The 23% VAT is inside that 16% as well, so that is a tax intake. If people are looking at retrofit they might get €8,000. They might do external insulation and put in new windows but the grant system the Government has put in has now been eaten up by inflation and costs over the past three years. The Government grant is no longer worth anything because of inflation costs going in. Should the Government not index link the grant based on the cost of insulation, which is an oil-based product, now that the oil is going up all around the world when we have an influx in oil? Why not index link this if you want to make a grant work properly?

Jack Chambers (Dublin West, Fianna Fail)
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I will say this, just to be provocative. The Cathaoirleach has referenced a number of price points and asks that the Government corrects on all of those price points. How is it going to be sustainable if we were to correct every price point and respond to it? Where would our budgetary cycle be in the context of being sustainable? That is what the Cathaoirleach is saying, essentially. The Cathaoirleach has referenced fuel, retrofitting and a number of areas. If we were to respond to each of those, where would expenditure growth be?

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Can the Minister imagine being in business today and trying to do it then?

Jack Chambers (Dublin West, Fianna Fail)
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I am just saying I hope the Cathaoirleach would accept that one cannot chase inflation. It is a road to nowhere-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Correct.

Jack Chambers (Dublin West, Fianna Fail)
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I would ask the Cathaoirleach to look at where he would prioritise-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Capping the fuel system. You can do it.

Jack Chambers (Dublin West, Fianna Fail)
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If we look at comparative economies elsewhere, chasing inflation as a policy response worsens the bottom line. That is where we have to make choices. What the IMF says very clearly in their interventions is that responses should be targeted, temporary and timebound. This is how we should manage and take other measures in the context of the overall budgetary parameters. If we were to create a policy system that responds to every external shock and connects that price development with an expenditure implication, we would have a budgetary process that would go into massive double digit growth, have a huge inflationary impact and would probably shrink our surpluses to the point where we would have questions around our international credit rating-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Just going on one, which is fuel-----

Jack Chambers (Dublin West, Fianna Fail)
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We cannot just take each individual issue and-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Forecasting-----

Jack Chambers (Dublin West, Fianna Fail)
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I hope the Cathaoirleach would accept the point that if-----

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I understand what the Minister is saying that we cannot go into all of them but transport costs in this country is probably one the highest ones. Consider forecasting. The Government goes from budget to budget and the Government would only take tax on €1.70 fuel, which you were taking ten weeks ago and you were happy with it. People will pay the increased cost on fuel, if it goes up four cent or five cent, above €1.70 now and not below it. The Government will actually be hitting most of the people that are vulnerable in this country. You can also put in the system that you put in for the haulage sector at the moment. When it goes below €1.38 you can bring in something because at €1.70 they already have the same temporary measure that the Minister was talking about. The Government had its taxes based on €1.70 ten weeks ago and it was happy with that tax intake. At the moment at the pumps, it is €1.95. Even after the Government put in the measure that brought it down it is still €1.95 at the pumps now, but the Government was happy with €1.70 ten weeks ago and that tax intake.

Everything the Government has given to the Irish Road Haulage Association and all the other transport networks has come out of the ordinary working person paying extra at the pump.

Simon Harris (Wicklow, Fine Gael)
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No. We can have different political debates but we cannot have different facts. That is not true. That is absolutely, factually, completely and utterly untrue and we will provide the committee with a note to show that the additional taxation we have received in relation to excise and the likes is far less than the cost of the package.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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So what we will do so because we have ten minutes left-----

Simon Harris (Wicklow, Fine Gael)
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I know the Deputy is the Cathaoirleach but I should be allowed to speak as well. This is how misinformation spreads. The Irish Government has put in place the largest or second largest intervention in the European Union. The cost of that package far outweighs the additional taxation we have received and the chief economist to the Department of Finance has also told the committee that we expect to receive a increased rate of VAT that is slightly lower than what we have received in previous years. We need to be careful here because of the dynamic effect in relation to all of this. I am not being argumentative but when the Cathaoirleach says things in isolation, they sound terribly reasonable. When we put all of the things together cumulatively, however, and take on board the dynamic or interdependent effect of doing one thing on another part, it is more complex than that. We have to be conscious of that. The pressures people feel are real. The point the Cathaoirleach is making about different sectors of our economy being more impacted than others is true. That is true and how we challenge ourselves to use policy levers in a more sophisticated and targeted way to address that is also is a valid point. However, I reckon that if we were to tot up all that we have had over the last while, the point made by the Minister, Deputy Chambers, about budgetary sustainability would be very valid.

Mr. John McCarthy:

I wish to correct a figure I mentioned earlier. It does not change the narrative but I think I said 5% or 6%. That is the no-policy change. When we take into account the VAT rate of 9%, which obviously comes in, that reduces our forecast so we are just over 3%. I emphasise the point that we are getting an even lower VAT take this year.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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Because we see the cost of certain things going up, which reduces the volume of certain works being done and leads people to be more careful with their spending, if Mr. McCarthy could do one thing now to counteract inflation and allow businesses to forecast, what would he do? The Government brings in a budget every year. Why can we not bring in something proactive, knowing that something could come down the line? We could put in lines. Our tax rates are 20% and 40%. Why can we not bring in something for a sector? We might not agree on it 100% but we can put in a line that if something hits here, this will automatically knock in so the Departments do not have to run and race every time. It has been happening over the past five years. It is happening all the time. Something could kick off in another country, the same thing would happen again and Ireland would feel it. Why can we not put in parameters whereby we are actually proactive so that when something happens, this kicks in with a budgetary status rather than intermittently between the years?

Jack Chambers (Dublin West, Fianna Fail)
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That is why we have a contingency so we have some buffer in a given year to respond. This year, we have had an exceptional spike, which has created additional demands or challenges beyond the contingency, but that is why we have built a structural contingency into our medium-term fiscal and structural plan.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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When prices inflate, there are gougers. People start inflating their own costs in different places. Usually it is the larger ones. If they move it by 1%, by the time it goes out a certain distance, it has become wider and wider. How can we counteract something like that from the perspective of protecting Government forecasts where there may be a difference and also putting something in place so that when it hits a certain level, something kicks such that we will not have a reaction such as what we had at the protest?

Regarding the protest, I was out there for five days. These people had been the grassroots of all parties for years. I saw men and women who had never asked for anything. They would give everything they had but they were broke. It involved the Iranian war - fine - but we saw people in their 60s, 70s and 80s who had lived through a lot of things and got to a stage when they saw no more and were broken, like the farming sector before. If someone had a son or a daughter who wanted to take on the farm, the parents worked hard and they got a leg up. That does not happen any more. There is no kicking it forward. It seems to be just a basis. They see the same thing now. Can we not put something in place so that when something like this happens budget to budget, we can put in some markers so that when it hits a certain amount even with fuel, something cuts in automatically so that the Government does not have to sit down with the Irish Road Haulage Assocation? Can we not introduce something so that when it hits a certain mark, the rebate automatically knocks in? The Government does not have to negotiate. When it hits that mark, there is no negotiation, the rebate is there and this is what happens so the Government is still in control of it. It still has its taxes up to that date but it automatically kicks in. If there is a marker in there, it can stop inflation. Is this something the Government could look at?

Simon Harris (Wicklow, Fine Gael)
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The answer is that we always look at everything. We get a document produced by the European Commission every week or fortnight as to what other countries in Europe are doing. A small number of countries - I think Portugal and Belgium - may have done something so that if their fuel reaches a certain point, A, B and C happen but there are swings and roundabouts to all of these things. First, there is a risk that we place all that risk on the taxpayer, who is represented by the people the Cathaoirleach mentioned, so in thinking we are doing something, we are increasing the risk to the taxpayer.

There is also the possibility that some of what we have done here is much more generous and effective in terms of quantum than some of the things those countries have done. Then there is a practicality issue. This is a boring process but it involves financial resolutions and primary legislation and whether it is the speediest way to do these things. We keep everything under review. The Cathaoirleach made a point that I do agree with and I have heard the Minister, Deputy Chambers, make this point as well. As I said earlier, we are living through an era of volatility and it involves all State agencies. We have an issue with roads at the moment as a result of the storms. Local authorities are going to need to say in the time ahead that bad weather happens and is happening more often and that people should not be surprised when bad weather happens in terms of the impact on roads. As a Government as a whole and as agencies, people need to be preparing in their annual budgets insofar as we can - we could not have predicted President Trump deciding to bomb Iran - and building up those contingencies. We obviously have the national contingency the Minister, Deputy Chambers, spoke about too.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I thank both Ministers for coming in today.

Simon Harris (Wicklow, Fine Gael)
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That was very impressive filibustering.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I would like it if the Ministers could come up with one budgetary measure we could use as a template even for one year and just trial it with one sector. I have no problem working with the Ministers on this. I would love to see us putting in a cap in one sector so that if something volatile does happen, this kicks in, in any sector the Government picks. I would love it if we could work on even one.

Simon Harris (Wicklow, Fine Gael)
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I will circulate to the committee a list of what the other countries have done as well. I would be very interested in the committee's feedback about whether there is a model there that it thinks is of use or is not of use. We are happy to engage further with the committee.

Jack Chambers (Dublin West, Fianna Fail)
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I would just add that that creates a potential permanent expenditure commitment, which has an implication for something else or somewhere else. While the Cathaoirleach's reference point might be something that is targeted in nature, it would undermine the critical test of something being timebound and temporary. The Cathaoirleach is essentially asking us to build in a permanent commitment for something that might happen. First of all, if it does not occur, then we are forgoing that expenditure for something that could otherwise be prioritised in another area of expenditure policy. The Cathaoirleach is asking us, therefore, to further reduce priorities, which might be in education or health or elsewhere, to build an additional level of contingency for a particular sector. If repeated across multiple areas, that would leave less room for manoeuvre in other areas where the Cathaoirleach's constituents also want to see improvements.

The contingency is important, but I am cognisant of what happened during Covid with the cost of living where temporary interventions fed their way into the permanent expenditure base. We need to be very careful in how we intervene now and into the future in our wider medium-term plan.

Richard O'Donoghue (Limerick County, Independent Ireland Party)
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I thank the Ministers and their officials for coming.