Michael Noonan (Limerick East, Fine Gael)

The HERMES computerised model for the economy used by the ESRI is the only economic model that is accepted. The Minister has taken a strong position on the need for the adjustment over four years to be €15 billion. Achieving this target is highly contingent on the growth rate applied in the model. As far as we can ascertain, the Department of Finance does not have a well developed economic model.

I draw the Minister's attention to remarks made by Professor Philip Lane of Trinity College Dublin when he appeared before the Joint Committee on Finance and the Public Service recently. He stated:

Macroeconomic models are of limited value if there is an insufficiency of adequate macroeconomic data. While the Central Statistics Office has a very good reputation for high-quality statistics, it is also the case that limited resources and inadequate coordination across State agencies means that there is a scarcity of timely data in relation to a number of key areas. For instance, the earnings data are insufficiently detailed to provide clear guidance on the full distribution of wage dynamics across the economy. The lack of a survey of consumer finances until now means that key financial dynamics at the household level are not adequately tracked. Similarly, the inadequate data on the distribution of transacted housing prices and commercial property prices has restricted analysis of the macroeconomics of the boom-bust cycle in the property sector.

When Professor Lane can identify three essential pieces of data that any modern economy would use to measure economic growth, it is difficult for the Opposition to rely on the Minister's figure of €15 billion as that which will be required to close the gap, as it will be based on whatever growth figure the Minister includes. It also is difficult to rely on the Minister's prediction of an average growth rate of 2.75% over four years. I presume that encompasses a growth rate of 2% in 2011 followed by three years of growth at 3%, which averages out at a rate of 2.75%. However, given that the Department of Finance has no sophisticated economic model that I know of, given the ESRI's model is coming up with different answers and that Professor Lane has stated there is an inadequacy in the data coming from the CSO in any model used in Ireland, are the Minister's estimates on growth and on the correction needed something of a punt or a guesstimate, rather than anything that is soundly based?

I cannot recall whether the Minister was present yesterday when Deputy Gilmore asked the Taoiseach what were the assumptions that were entered into the model to produce the projected growth levels and the figure of €15 billion. He received a very dusty answer from the Taoiseach and the Minister might reflect on this in his reply. If he wishes to bring Fine Gael with him for part of the road, it would like to be going on correct, rather than incorrect figures. Moreover, I am highly conscious that practically every figure the Minister has announced in this House over the past two and a half years subsequently proved to be wrong.

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