Committee on Budgetary Oversight debate -
Wednesday, 18 Sep 2024

No apologies have been received. The purpose of today's meeting is pre-budget engagement. The afternoon engagement is the first of two sessions today and forms part of the committee's scrutiny of budget 2025. The committee is due to meet later this evening to hear from the Ministers for Finance and Public Expenditure, National Development Plan Delivery and Reform.

On behalf of the committee, I welcome the following witnesses: from the Central Bank, Dr. Martin O'Brien and Dr. Robert Kelly; from the Economic and Social Research Institute, Dr. Karina Doorley and Dr. Conor O'Toole; from the Irish Fiscal Advisory Council, Mr. Seamus Coffey, Professor Michael McMahon, Professor Stephen Millard and Dr. Eddie Casey; and from the Nevin Economic Research Institute, Dr. Tom McDonnell and Mr. Ciarán Nugent. Tá fáilte rompu anseo.

Before we begin I want to explain the limitations on parliamentary privilege and the practice of the House regarding the references witnesses can make in their evidence. Witnesses are protected by absolute privilege in respect of the presentations they make to the committee. That means they have an absolute defence against any defamation 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 this privilege is not abused. Therefore, if statements are potentially defamatory in relation to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official, either by name or in such a way as to make him, her or it identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the place the Parliament has chosen to sit, namely, here in Leinster House, in order to participate in public meetings. I will not permit a member to participate where he or she is not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting. Gabhaim buíochas leo.

Ansin, leanaimíd ar aghaidh leis na finnéithe. I now invite Dr. Kelly from the Central Bank to make his opening statement.

I thank the Chair and committee members for the opportunity to address them today. Dr. Martin O'Brien, whom the Chair has already introduced, is the head of our economic analysis division. Our Quarterly Bulletin, published today, paints a picture of a resilient domestic economy poised to grow in the region of 2.5% annually out to 2026. The labour market remains robust, and inflation has fallen below 2% for the last six months. However, revisions to national accounts data for 2023 and evidence on wage developments highlight the risk of persistent domestically generated inflation. Service inflation, in particular, has been stubbornly high, hovering between 4% and 5% over the last year. These factors necessitate a measured and targeted approach to budgetary policy that balances the need for economic stability with the imperative to address structural deficiencies. The summer economic statement, SES, outlines a fiscal package of €8.3 billion for budget 2025. Nearly half of this increase directly supports maintaining the current level of services, doubling the allocation from budget 2024. More than one third of the package targets additional current spending and tax reductions, while the remaining 17% is reserved for capital spending under the national development plan. This represents a net spending increase of 7% in 2025. This procyclical budget stance will add further to domestic price pressures. As outlined in the last bulletin, spending increases of this magnitude above the 5% rule since 2022 have added half a percentage point to inflation annually.

I want to draw out the vital interaction between fiscal and monetary policy. Last week's governing council meeting saw the second 25 basis point cut in interest rates.

This follows a sharp increase of 450 basis points in response to rising inflation from the strength of the pandemic recovery and more prominently, Russia's invasion of Ukraine. The ECB governing council has communicated that the future path for interest rates will be data dependent and calibrated to economic developments across the euro area as a whole. Fiscal policy is the key instrument available to national governments to manage the economy. However, a prolonged period of expansionary fiscal policy during an upturn in the economic cycle risks generating persistently higher domestic inflation, allowing wage growth to outstrip productivity gains and erode competitiveness. Ireland’s fiscal stance this year is in contrast to the contractionary stance of the aggregate euro area.

Let me turn to the pressing issue of addressing housing market imbalances. Housing supply has not kept pace with the rapid growth in job creation, with a ratio of one home for every four new workers, and is now acting as a constraint on job growth. Housing demand pressures are not unique to Ireland, and we have seen a rapid increase in delivery over the last couple of years. Demographic pressures and pent-up demand will likely require an upward shift to more than 50,000 units of new builds annually. An increase of this magnitude fundamentally hinges upon making construction both financially and practically viable. Such viability is linked to three interconnected pillars: preparation of zoned and serviced land; an efficient planning processes; and construction productivity. Preparing serviced land ensures that land becomes available and is equipped with essential infrastructure. Without the requisite services, land cannot be developed efficiently, stifling the ability to meet housing demand. Protracted approval times and complexity in the planning process can significantly delay housing developments and exacerbate costs. A range of indicators point to labour capacity constraints in the construction sector. Policy can support productivity, reducing the amount of labour needed per unit by promoting and incentivising more expanded use of modern construction methods. Addressing the viability of housing requires a multifaceted approach encompassing fiscal and non-fiscal policy interventions, with some measures exerting minimal direct pressure on public finances. Nevertheless, given the social and economic implications of the housing challenge, there is justification for increased capital expenditure, particularly in infrastructure development and serviced land provision. Such spending, however, must be carefully calibrated to ensure it does not jeopardise fiscal sustainability or contribute to the overheating of the economy. The final component here is financing. An upward shift to more than 50,000 units will require an estimated additional €7 billion. Additional financing alone cannot rectify housing imbalances; trying to do so would exacerbate overheating risks. Addressing viability concerns and lowering risk will strengthen the construction sector's ability to attract equity capital, which in turn will improve its capacity to raise debt and maintain an essential diversity of finance. The State will continue to have an important role to play by providing social, affordable and cost-rental housing. However, the State’s role has to co-exist alongside a sustainable, privately financed and developed market to ensure a diversity of housing and tenure types. International investment will remain an important source of financing, as will the domestic banking system’s balance sheet capacity for lending that can play a role in scaling up housing delivery.

I will discuss sustainability of public finances. While addressing that public housing demands is warranted, additional capital spending must be funded in a manner that does not increase vulnerability in public finances. The summer economic statement, SES, captures well the known risks on both the revenue and expenditure sides well. Corporation tax receipts continue to outperform expectations, yet these revenues remain highly concentrated across a small number of firms. Almost half of the funds collected are delinked from domestic economic activity. This concentration poses a significant sudden-stop risk, immediately turning the current headline surplus into a deficit. On the expenditure side, challenges loom large. An ageing population will place increasing pressure on public services, particularly in healthcare and pensions. At the same time, Ireland's commitment to reducing emissions will require substantial investment.

Sustainability is also at the heart of the European Union's revised economic governance framework. However, the effectiveness of EU rules is limited for Ireland. GDP is used as a measure of economic activity, which is distorted by the global activities of large multinationals with a presence in Ireland. In addition, the rules do not account for excess or windfall corporation tax revenues. Therefore, the Government's net spending rule is crucial in ensuring macroeconomic and fiscal sustainability. The net spending rule is not mentioned in this year's summer economic statement, and the projections show non-compliance in 2025 and 2026. This rule is designed to prevent overheating during periods of strong demand and high inflation while enabling supportive fiscal policy during downturns. Adhering to the rule should facilitate difficult decisions necessary to ensure fiscal sustainability and avoid the boom-bust cycles that have damaged the Irish economy in the past.

In conclusion, our economy is set for moderate but steady growth but is operating at capacity across several sectors. The health of our public finances presents a unique opportunity to address the infrastructural and housing deficits built up over a decade. By maintaining an overall budgetary stance that is prudent and prioritising capital investment, we can safeguard Ireland's economic future and deliver long-term prosperity for all. I thank the committee members for their attention, and we are happy to take any questions.

I thank the Acting Chair for the invitation to appear before the committee to provide our views on the economic outlook ahead of budget 2025. I am Dr. Conor O’Toole and I am joined by my colleague Dr. Karina Doorley. We will be publishing our next quarterly economic commentary on 26 September, but we will aim to give some insight into the recent trends that will underpin those forecasts.

To frame the discussion around the appropriate Government budgetary policy, it is critical to understand the current macroeconomic context. The last number of years have seen the Irish economy perform particularly strongly even after experiencing repeated external shocks. This economic strength has come through growth in the multinational sector but also a robust performance domestically. It is typically difficult to get an accurate picture of the domestic economy due to the distortion of key indicators by those multinationals but nonetheless, most domestic indicators are performing relatively well.

In our latest published commentary, we expected GDP to rebound this year following the multinational led decline in 2023. It would be our expectation that that was going to continue, but the recent quarterly national accounts again displayed considerable volatility from those multinational transactions and that provides more uncertainty around the indicator for this year. In contrast to the volatility in these trends, the indicators for the domestic economy continue to point to a robust performance and an economy operating at or close to capacity. Modified domestic demand, which captures underlying investment and consumption levels, is set to increase by over 2% in 2024 and potentially increase further next year.

One of the main reasons for the expected continued growth in the domestic Irish economy is the strong performance of the labour market and a quicker than expected decline in consumer price inflation. Employment levels are forecast to continue to grow this year and next with the unemployment rate remaining near to 4% over the forecast horizon. This is despite the strong increase in population levels that have occurred recently. Exchequer receipts, another accurate indication of the Irish economy, are also continuing to register strong increases. The buoyant labour market and moderating inflation rate are likely to lead to increases in real incomes. This will boost household spending power on aggregate for this year and next. All of these indicators point towards a domestic economy that is growing strongly and operating with little slack.

While the current economic outlook is positive, there are a number of long-term challenges that will impact the potential growth rate and likely require significant State resources. These include infrastructure bottlenecks in housing, the requirement to invest in climate-related actions and population ageing. Over the past number of years, it is clear that Ireland has been producing insufficient levels of housing for a growing population. While previous estimates suggested that around 35,000 units per annum had been required to deal with the demographic demand, new estimates by the ESRI and others, based on updated population data, clearly point towards housing requirements being revised upwards notably. Many of these new units will be needed for low-income households and affordable housing thus requiring significant policy interventions and substantial State investment levels. A policy focus on supply side reforms and planning efficiencies is likely to yield positive impacts in the medium to long term. Alongside the housing requirements are the very acute investment needs to transition the economy away from fossil fuels and towards renewables as discussed in the ESRI’s review of the NDP in 2024.

The present budget occurs at a time when the domestic economy is performing very close to capacity. The recent substantial improvement in the public finances does present a certain opportunity for policymakers. In areas such as housing, healthcare and climate change, it is clear that significant investment by the State is required if infrastructural bottlenecks are to be addressed. However, addressing these bottlenecks at full employment with capacity constraints poses a risk to inflation. As was noted by Barrett and Curtis in the ESRI review of the NDP priorities, adding additional demand to a capacity constrained economy will increase construction inflation through wage and other channels. However, if investments can take place that do deal with infrastructure bottlenecks, both the long-term productivity and potential output of the economy can be raised. To create space in the economy for such investments, the targeting of investment priorities, be they in housing, health or climate-action, should be shifted towards those with low domestic labour intensity or high import content in the investment phase. Given that infrastructure bottlenecks need to be addressed, restraint is needed in other areas of fiscal policy to create the space for the investment that is necessary. In particular, taxation policy must be particularly prudent if the risk of increasing inflation is to be avoided. The ongoing risk of relying on increasing corporation taxes, if directed for current expenditure, continues to rise as their share of overall tax receipts continues to increase. It is imperative that these receipts are increasingly targeted towards the longer-term investment funds to ensure buffers are available to deal with long-term economic challenges, support infrastructural development and have funds available if the windfall elements decline.

To re-emphasise, the use of the windfall element to cover current expenditure is not advisable.

Regarding household incomes, the ESRI’s distributional impact analysis of budget 2024 last year revealed that it would result in average real income gains across the income distribution. However, most of these gains came from temporary changes to the tax and welfare system, including the provision of energy credits and once-off top-up payments to recipients of social welfare. Considering only the permanent changes to the tax-benefit system, we estimated that the purchasing power of low-income households has been eroded over the last four years as a result of successive below-inflation increases to social welfare.

More recent ESRI research, carried out for the fourth annual report of the poverty, income inequality and living standards research programme, highlights that material deprivation, or the inability of households to afford essentials, increased markedly between 2022 and 2023, especially for children. Permanent above-inflation changes to welfare will be needed if policymakers wish to maintain the real incomes of low-income households when temporary measures expire. Targeted measures, such as a second tier of child benefit, as suggested by Roantree and Doorley, may also be needed to achieve the reductions in child poverty envisaged by the child poverty and well-being programme office of the Department of the Taoiseach.

In conclusion, while the public finances appear in a robust position, there are notable risks, and careful use of the budget surpluses over the coming years will be needed to deal with bottlenecks while not overheating the economy. We thank members for their time and look forward to any questions they may have.

I thank the Chair and members of the committee for inviting us to appear. We value these engagements and see them as integral to our work. As we know, the fiscal council is responsible for providing an honest and independent assessment of how the Government is managing the public finances and the economy. Ahead of each budget, we produce a report setting out our views on the Government’s plans. We published our report two weeks ago and this is what we will speak to today.

In our report, we made two warnings. First, we warn that the Government is adding to price pressures by breaching its own tax and spending rule. Drawing on Central Bank research, we noted that the Government is likely to have added €1,000 to the average household bill by breaching its rule. The Government might put money back in people’s pockets but by raising prices, these indirect costs take out of their pockets in a lasting way.

Many note that inflation has fallen below 2% and this is thanks to falling energy costs in particular. However, prices remain high and there are still many areas seeing fast price increases. We can see continued pressure on areas such as rents, medical services costs and prices in hospitality, cafés and restaurants. These are things Ireland does not import and the pressures are now similar to what we would have seen in the 2000s.

This pressure comes at a time when Ireland is posting record job numbers. Employment is at record rates. Some 84% of those aged 25 to 54 are in work. The highest Ireland achieved historically was previously around 79% in the pre-financial crisis era. Reflecting working shortages, wages are finally starting to outpace price increases and this is providing relief to households after years of high costs.

By expanding in all areas of its budget - “everything now” - the Government is not making choices and it is not lessening these pressures. Tax cuts, higher day-to-day spending and a continued ramp-up in capital plans are all in prospect for budget 2025. The Government’s budget package is already large and overruns and untargeted cost-of-living measures will add further to the pressure.

The second warning the council made is that the Government might have to reverse some of its promises later on. The reason for this is that the boasts of a surplus are misguided. Ireland’s surplus is entirely driven by taxes from a handful of foreign multinationals. Without these, Ireland would be facing a large and growing deficit. To take 2025 as an example, the Government expects a surplus of €6 billion next year, but corporation tax receipts are driving this and they are incredibly concentrated. The windfalls are estimated to be close to €11.5 billion. As an example, let us remember that we collected about €10 billion from as few as three companies in 2022. If the windfalls were to suddenly disappear, we would be left with a deficit of over €5 billion, and if employment rates went back to more normal levels, this could push the deficit to almost €10 billion as taxes on incomes fall and jobseeker payments rise. That is about the size of our annual spend on primary and secondary schools.

What is the risk? The risk is that the Government might be forced to renege on its promises if things changed suddenly, for example, if corporation tax revenues suddenly shrank or if exceptional job numbers reversed. A reversal like this could come at a time when the economy most needs support. In leaving Ireland more poorly placed to fight the next recession and prevent job losses, we believe this would repeat Ireland’s past mistakes.

Ireland’s economic engine is running fast and certain parts are struggling to keep up. We are struggling to build as much housing as is needed and other areas, such as energy, water, and transport, are also struggling. Some argue that we just need to be more radical or ambitious. It is fine to be more ambitious but if that means throwing more money at these problems, we will probably not be able to produce more with that extra money. We are limited by the number of workers we have, for instance, but also by the ability of the planning system and authorities to absorb new demands. In just throwing more money at this, we are likely to make some problems worse, driving up prices for everyone and getting bad value for money. Ireland is already grappling with high costs. Pushing things further in this direction could harm our engine of growth - our exporters - making it less attractive to bring new jobs here.

Our view is that the Government first needs to stick to its own rule. This will help to keep living costs down for households and it will also help to avoid needless job losses in the next downturn. As for infrastructure deficits, the Government needs to look beyond just providing more money. There are ways to unblock delivery and enable better outcomes. There are hopes that the Planning and Development Bill will deliver on this front. The Government can also look at ways to encourage the private sector, which includes giving private investors more certainty and more incentive to play their part.

Another option is to focus on areas that require fewer workers. In our report, we give one example relating to the green transition. A substantial portion of spending will ultimately have to fall on imports of electric vehicles to meet targets and this relies more on financial incentives and providing charging infrastructure. By contrast, retrofitting targets need a substantial amount of direct worker involvement. This approach would lessen the draw on domestic resources, such as construction workers, and it would avoid aggravating price pressures. Let us remember that not meeting targets could lead to non-compliance costs as high as €8 billion. This is money that would be more usefully invested in the Irish economy.

I will conclude by noting that the fiscal council was set up to help Ireland learn from its past mistakes. If we are to learn from those past mistakes, we need the Government to start sticking to its own rule. This can help us to avoid adding to pressures today and it would avoid the need to have to hit reverse later, potentially in the next recession.

Mr. Nugent and I thank the Cathaoirleach, members and staff of the committee for the invitation to appear. We will comment on a number of specific issues that we believe should be addressed in the budget, as well as Ireland’s upcoming medium-term fiscal-structural plan. Two key factors should always underpin budgetary policy: the current state of the public finances and the current cyclical position of the economy. Other factors, such as the adequacy of incomes, services and infrastructure, are also relevant.

I will turn first to the economy. It is clear that it is booming relative to historical standards and is close to or at its current capacity. We will touch on the issue of capacity again later. Employment and employment rates are at record highs, as are participation rates for females. The number in employment increased by 71,500, or 2.7%, in the 12 months to quarter 2, while average hours worked increased by 2%. High inward migration continues to boost the labour supply. While the fast employment growth of the last half-decade is unsustainable, there is limited evidence of an impending downturn in the economy. We should remain at close to full employment over the short term, albeit with a slowing in the rate of employment growth, perhaps to about half its current level. The unemployment rate was 4.3% in August and should continue to hover between 4% and 4.5% over the short term.

The domestic economy has grown rapidly in recent years, though growth is now reverting to its more normal long-term trajectory. Consumption and modified domestic demand are on track for real growth of slightly over 2% this year. Real growth of closer to 3% is in prospect for next year. This assessment is based on a loosening of monetary policy, expansionary fiscal policy, increasing real disposable income as wages outstrip inflation in the context of a tight labour market, improving household and business confidence as price pressures recede, and an assumption of modest but positive growth in Ireland’s main trading partners.

Price pressures are receding with the annual HICP measure of inflation at just 1.5% in July and 1.1% in August. The annual CPI measure of inflation rose 1.7% in August. Real wage growth has returned, with nominal weekly earnings up 5.6% annually in quarter 2 and real earnings up by 3.1%. Price inflation is likely to be close to the 2% target over the short to medium term. Notwithstanding this improvement, prices have jumped by close to 20% in recent years and rates of material deprivation have increased. Lower-income households need to be prioritised in budget 2025. The strategy of untargeted once-off supports does not adequately protect vulnerable households in the medium term.

There are many uncertainties to the outlook.

Major downside risks include but are not limited to weakness in our major trading partners, political turmoil in the United States with radical shifts in trade policy, a slowdown in foreign direct investment, rising geopolitical tensions, and further shocks, perhaps, to the cost of energy imports.

The headline fiscal position is clearly very healthy and there will be a significant surplus in 2024 and again in 2025 and 2026. Debt servicing costs continue to fall. However, Ireland’s surplus owes its existence to highly concentrated and potentially non-recurrent corporation tax receipts. The potentially transitory portion of these receipts may be in excess of €10 billion per annum. It is true that there is as yet no sign of these receipts being transitory but the risk remains. For this reason, NERI has consistently supported the establishment of the two savings vehicles. Indeed, it is unclear why all of the estimated windfall corporation tax receipts are not being placed in the savings vehicles.

If some of the excess receipts are to be used, then they should be hypothecated to once-off capital expenditure, for example projects related to the green and digital transitions. While there is obvious uncertainty about the transitory element of corporation tax receipts, there is no uncertainty about the once-off windfall nature of the €14.1 billion from the judgment in the Apple case. Clearly it should not be used for current spending or for tax cuts. It is also important to note that the headline fiscal balance is flattered by the strong cyclical position of the economy and labour market. The structural position is somewhat weaker. Recessions are inevitable so we need to be cognisant of the structural position.

It is also worth recalling the expected impact of future megatrends and their profound negative implications for fiscal policy. The medium- to long-term fiscal position is extremely challenging. We know that demographic change from longer life expectancy and falling birth rates means greater future public spending on pensions, on social care and on healthcare as well as fewer receipts from income tax when the working age ratio starts to decline. Climate transition costs will also be significant as will the loss of green tax revenues as emissions decline. Responding to technological disruption will require increased investment in skills while de-globalisation has implications for FDI and attendant tax flows.

Budgetary policy should be countercyclical. If the economy is in a downswing, it makes absolute sense for government to stimulate the economy but the opposite is true when the economy is close to capacity, as it is now, with labour shortages in key sectors. There appears little justification for an expansionary budget in the current macroeconomic climate. A countercyclical approach should be pursued and the scale of the €8.3 billion package outlined in the summer economic statement must, therefore, be seen as questionable. The scale of the package will add to inflation. However, there is certainly a strong case in budget 2025 for increased investments in public spending beyond the 4% to 5% or so implied by the economy’s medium-term output growth potential. An important reason is the recent inflation surge which added to the cost of providing existing real levels of public services and income supports. In addition, Ireland’s per capita public spending is low relative to peer high-income western EU countries. Our evident deficits in energy, water and public transport infrastructure, housing, childcare, and our spending on public research and development all add to the case for increasing public spending beyond 5%. Such interventions will eventually increase the economy’s productive and carrying capacities. However, a budgetary spending package in excess of 5% or so should be financed by targeted and sustainable increases in Government revenue. Ireland’s bleak history of pro-cyclical budgets and their consequences should warn us against making similar mistakes this time. We have an economy of winners and losers. Net household wealth is at record levels on the one hand while material deprivation is rising on the other.

Once-off cost-of-living supports have no obvious rationale in the current economic climate. Such policies only make sense if we expect prices to decline. Instead of once-off, untargeted, and-or ad hoc supports, we need to move to an evidence-based approach to welfare payments based on income adequacy. The Commission on Taxation and Welfare made a number of recommendations in this area and NERI supports its approach. We need a mature conversation about fiscal policy and fiscal sustainability. Budget 2025 cannot and should not do everything. It should prioritise those who have not been fully insulated from the cost-of-living crisis and take steps to restore living standards for those most in need.

This brings us to tax reform. We strongly agree with the analysis of the Commission on Taxation and Welfare that Government revenue must increase materially as a percentage of national income. Tax cuts are obviously deeply problematic in this context and we strongly caution against them. Indeed taxes, in aggregate, should be increased both for cyclical reasons and for longer-term structural reasons. Tax cuts now mean larger tax increases in the future. The eventual burden of future tax increases is, therefore, being pushed onto younger workers and onto future workers.

Of course, a specific tax cut might have some policy merit on an individual basis. If so, such a tax cut should be offset by a tax increase somewhere else. For example, cuts to taxes on labour could be offset by increasing taxes on capital stocks and capital transfers. Such a measure would likely be broadly progressive and good for growth. Ultimately, our decisions about tax should be based on social equity, economic efficiency and sustainability.

Unfortunately, it seems some questionable decisions may be coming in budget 2025. Consider, as one simple example, the calls to cut inheritance tax by increasing the threshold to an enormous €400,000. This would be an extremely regressive move that will merely benefit those few lucky enough to receive a large unearned inheritance to the tune of more than €21,000. A minimum wage worker on 35 hours would have to work 48 weeks to reach that amount, while someone working for their income for ten years to reach €400,000 would pay close to €68,000 in tax. Inheritance tax is one of the most growth friendly and progressive of all taxes - it should be increased not reduced. Cutting it simply worsens intergenerational inequities.

Overall, and as per the commission’s recommendations, the tax-to-output ratio will need to increase in the years to come. This should be reflected in the medium-term fiscal structural plan and, hopefully, it will be acknowledged or debated in political party manifestos. The balance of taxation should be recalibrated to ensure fairer taxation of capital, including inheritance, gifts and land, property and capital gains, alongside the gradual winding down of the regressive, distortive and non-transparent system of tax expenditures.

Budget 2025 needs to be a budget that builds towards sustainable consistent well-being gains over the next generation for everyone in society. We want to avoid the booms and busts that have caused such pain in the past and we need to ensure that our revenue base is sufficient to meet our public spending needs. If we want better services, adequate income supports and structural improvements in areas such as childcare, public transport and housing, we will have to pay for them. I thank the committee.

I thank the witnesses for their contributions. They are very interesting and timely. There are a lot of commonalities in what they have said. IFAC's submission makes for stark reading. We would be in a deficit of more than €5 billion if it was not for the windfall tax. This is difficult for people to understand. It would suggest there has not been good management of the economy if we are totally reliant on three big corporations. What if they were to go tomorrow? It seems like very precarious management of the economy in this sense.

We have this on one hand and then NERI has stated recessions are inevitable so we need to be cognisant of the structural position. It states we could be running a €5 billion deficit but whatever happens we will have a recession sometime in the future. The question is how we protect against this and what type of infrastructure we invest in. Again the commonality all of the witnesses share is the housing crisis and what needs to be done with regard to housing, and not alone housing as infrastructure. Housing has to be fixed.

My first question is for Dr. McDonnell of NERI. What type of infrastructure do we need to invest in?

It is across the board. We do very poorly in infrastructure rankings relative to many other advanced OECD economies. Certainly with regard to where we are falling down at present, we all know about housing but energy infrastructure and water infrastructure are constraints on the ability of the economy to grow over the next five to ten years. We have had very fast population growth and the economy has grown very quickly but our infrastructure has not been able to keep up. The fiscal policy and the issues of the early 2010s put us behind the curve and then the economy grew as quickly as it did. Energy and water are the two areas I particularly note. I also point out, with regard to our greenhouse gas emissions and green transition, the sheer weakness of our public transport infrastructure in Ireland. I do not just mean the cities, obvious failures though there are in the cities. This also applies to issues such as rural bus networks. There are many infrastructure problems. As Mr. Coffey pointed out, there are failures in terms of our infrastructure to support electric vehicles. Why would people buy electric vehicles if they cannot charge them anywhere? It is across the board.

Obviously projects such as the western rail corridor, which is shovel ready and not greatly labour intensive, and the rebalancing of the regions are very important. I hate to think what would happen if we did head into recession again with such a deficit of infrastructure in regions. We would tip over completely.

What it points to is the absolute need to ensure we have these funds in place, that we do not enter a period of austerity and that the capital budget is protected throughout that period. We want to get to a position where capital spending is set at a particular percentage of output each year and is not slashed as it was post 2008, from which we are still suffering. Being careful and prudent now, and not being overly expansionary in the budget, is the best way to do that.

We obviously have to invest in infrastructure, including the infrastructure Dr. McDonnell has talked about. Putting funds away until 2040 is all well and good and it is laudable, but we need to fix the infrastructure to maintain our competitiveness and expand foreign direct investment in order to ensure we are not reliant on three multinational companies. That is hugely important.

Dr. McDonnell referred to how we have an economy of winners and losers. Who are the losers?

As the ESRI mentioned earlier, the focus on once-off payments means that once they are withdrawn standards of living will not have kept up with the costs of living, so people will fall further into deprivation. Some people are already falling further into deprivation. We have seen material deprivation numbers increase in recent years. When I refer to the people who are losing, that is who we are talking about. My colleague, Mr. Nugent, can give the percentages of which cohorts in society are experiencing deprivation at particular rates.

In the past couple of years, it has mostly been workers driving the increases in deprivation, even by household composition. Households with three workers have seen their deprivation go up. We talked about real wage growth. A lot of that was being driven by top earners until 2023. If you look at the median wage earner for the last year where we have the latest distribution data, they are down over five years compared with 2018. A lot of workers outside the top 10% have not seen their wages keep up with inflation. Housing is on top of that as well. We have seen the deprivation rates of renters go up. As we continue to spend on HAP, it is not even working in terms of the minimum essential standard of living for workers. There are a lot of people still below the living wage. It is €2 between minimum wage and the minimum essential standard of living. Those are the groups that are being-----

I have a question for the Central Bank that I need to ask. I apologise, I may get back in again, but I have to speak in the Dáil. I need to ask the Central Bank about its decision to renew the agreement to facilitate the sale of Israeli sovereign bonds, and how that reconciles with ISIF, which said it would divest from six Israeli companies active in the occupied territories. It is a question everybody is raising with me today.

I thank the Deputy for the question. I will be brutally honest and say I am not the person closest to the issues, but I have a general understanding from conversations within the bank. As far as I know, the Governor and senior colleagues will not appear before this committee, but before the Oireachtas joint committee on finance. They will be more capable of speaking to this. My understanding of the prospect at issue is that we are the competent authority under EU legislation for approving these. There is a legal basis across three things, namely, completeness, stability and consistency. The reality is that unless we do not see across the three of those aspects a legal basis not to approve, then we do not actually have a choice. We would not have a choice in a legal context to not do this. We need a legal basis to refuse approval. If, for example, we had EU fiscal sanctions, that would amount to a reason not to do the process. As the Deputy said, it is essentially the issuer's choice as to which country they come to within the EU. This is a Brexit outcome to a large extent, whereby they were issued through the UK before Brexit and that has now moved to Ireland. I do not have a huge amount more detail, but that is my understanding of it. It is actually a legal requirement. Unless we see a legal basis not to approve it, it is not something we can do.

I appreciate that, but I am sure that Dr. Kelly understands that people are absolutely horrified that our own Central Bank would facilitate the sale of war bonds when there is a genocide and more than 40,000 people have been slaughtered in the past months. It is appalling, but it is something we will take up with the Governor of the Central Bank when he comes in to the finance committee. I know we are here to discuss the budget, but I could not have representatives in from the Central Bank and not ask that question.

I welcome our guests and thank them for their input. A couple of issues come to mind. The issues requiring attention at this stage, which have already been mentioned, are housing and health. Education needs to be noted as an area for further investment. There are bottlenecks arising there that need to be dealt with. The other thing that is necessary nowadays is to look at where we spend our money and when we can expect a return. This relates to infrastructure and whatever else. When is the return from it likely to be? In some cases, we have always needed long-term investment. That is fine. As regards the building of houses right now, I am not suggesting we should stop retrofitting because while it is helpful, it is also expensive. There needs to be building of affordable houses in a way that makes them readily available to the people who are either facing homelessness or are in danger of being priced out of the market. Well, they are priced out of the market. The emphasis should be on providing homes for people who need the homes. We should not allow financial institutions or funds to move in, purchase the properties and rent them back to the people who are caught in a trap and forced to rent at extraordinarily high rents. I find it difficult to believe that nobody has mentioned this. The rents are just extraordinary. They are extortionate. I am not suggesting that people go out to do that. The fact of life is simply that construction funds are borrowed at a high rate of interest and put to use and the finished product is put back on the market, to be purchased, in many cases, by the same venture or vulture funds. We have countless cases of this at the moment. People have rented houses in the open market for up to 25 years and now the landlords want to sell the properties or want family members to take over or whatever the case may be. The renters, having paid the landlord or investor's rent for 25 years, now have to start again and are almost too old to get a loan. The local authorities are not in a position to award them a house because their income is too high. They are forced to pay a high rent on the open market. These people's problems need to be addressed in a meaningful way and it needs to be done soon. It is not something we can wait for. I have listened to the advice that we have to build more houses, but we need to know who we are building them for. We need to ensure that, when built, such houses are available in an even-handed way to people who need the houses for themselves, not to rent on to somebody else. That is increasing in importance.

I do not want to go on too long about this but I could go on for ages. I remember all of the advice we got when the financial crash came. There were countless economists, soothsayers and everybody else advising the Government of the time to do something different.

They also stated that it was going the wrong way. Those people were wrong. I hate to say this to an economist, and I apologise to our economists for saying that in passing. The fact is, however, that we need to look carefully at the moves we make now. Increases in taxation cause inflation too because the people whose taxes are increased have to find money somewhere else. The theory in some quarters is that they have enough money anyway.

I ask people to pause for an instant. If we look at the persons who earn €50,000 or thereabouts, they do not think they are in a bed of roses. They are right because they are heavily taxed, and their tax is increasing. Their contribution to taxation is high. In the same way that people who are dependent on social welfare need to be well treated in any budget now and in the future, we must think about those who are at work and who are paying to such an extent that it is a burden on them. They will tell you this regularly. We need to dampen our views in that regard with a view to ensuring that people in that income bracket are recognised and catered for.

Another issue is that of inheritance tax, which has been mentioned already, and capital acquisitions tax. Let us take inheritance tax first. Everybody seems to have forgotten that house prices have increased to an extraordinary degree. Sons and daughters are inheriting from parents who paid tax, and high tax in most cases, on what has now become the subject of inheritance tax. Taxes have already been paid. The theory that the people who are calling for a reduction in inheritance tax or a change in bands or thresholds are all wrong and should not get any relief is not correct. They strove to provide that asset, and they did provide it. They did not do it painlessly. They did it through sheer hard graft in very difficult circumstances over a period of 30 to 40 years prior to the issue of inheritance arising. We need to bear that in mind and stop the fanciful thinking about how much we can penalise people who are going to inherit. Incidentally, as a result of increases in property prices, people are in the lower income bracket and the houses they are due to inherit are coming into scope for such tax. In order words, those responsible want to penalise these people more.

There has been discussion in the House regarding the Apple tax case, etc. Reference was made to windfall taxes and the degree to which we are dependent on foreign direct investment. We need to be careful not to create a situation whereby an antipathy develops towards foreign direct investment or whereby we dissuade foreign companies investing here. There is no need to dissuade anybody. For reasons best known to it, the European Court of Justice decided that we had treated foreign direct investors in the wrong way and that there was a sweetheart deal in place. I do not know that there was a sweetheart deal. We have discussed this many times in the past. What I do know is that we live in a very competitive society globally. We find ourselves being criticised almost on a daily basis for allegedly having sweetheart deals with certain companies. We can dissuade people from coming here. If that is what we want, by all means we should do that. Remember, however, that there will be consequences. The consequences will come fairly quickly, and we know that from what happened in the past.

We have to take into account the advice that we should refrain from inflating the economy as much as possible. Any move we make that creates inflation within the economy is not to anybody's advantage. We should be very careful in this regard. If you talk to people in the catering and entertainment trade about the domestic economy, you will discover that many are in difficulty. Restaurants and cafés are closing down. That may well be for a multiplicity of reasons. We need to examine carefully what are the input costs that are causing the problem. A complaint we hear regularly is that increases in the minimum wage do not necessarily impact only on the minimum wage, they affect all wages. There are knock-on effects. We need to look at individual cases and examine carefully the contributory inflation factors that exist in the domestic economy. We need to do that now.

Rent costs in the commercial sector are definitely a factor. Businesses will close down if they cannot afford to operate. I could recount lots of stories about that matter but I will no do so now.

I listened with interest to the contributions of the witnesses. I thank them for attending.

I come from a construction background. I am very frustrated by the lack of new ideas as to how we should get the private housing market, which is dysfunctional, working. I listened with interest to the proposal that we should not spend any of this surplus money we have and that we should be bank it all. I am of the view that we should spend some of this money, not all of it, on providing the infrastructure that is required. In the context of this morning's report from the Central Bank on housing, it is obvious that the one thing we need is serviced land. We have charged Irish Water with delivering wastewater and water services. It is struggling badly to do that. If you are looking for a connection from the company, you might have to wait six months. Imagine asking it to bring sewerage infrastructure to the east side of Galway city in order to open it up for development. I would argue strongly that if money was invested in that, it would not be a recurring charge; it would happen once. The economic benefit from that investment would be delivered for years to come.

Let us consider public transport, which was mentioned, and rail in particular. Take the example of the western rail corridor. For a very small amount of money, we could deliver infrastructure that would link Ballina, Castlebar, Claremorris and Tuam to Ennis, Limerick, Foynes port, Galway port, Cork port and Waterford port. We need to put in place another connection from Rosslare because that would provide connectivity right around the country for rail freight, which speaks to the green economy we need to get to. Businesses want this. How come we cannot do these kind of things? It is because we have set up - I ask the witnesses to comment on this - a system for the spending of public money that contains many barriers and that has added costs in the context of delivery. We set up all of these processes, the initial idea was to ensure we were getting value for money. I would strongly argue that we are not getting value for money because the processes we have set up are taking the value out of it. They are delaying project delivery. Time is money, and always has been. Inflation means that we are getting less for our money every year we delay starting a project.

I will give the witnesses one little example of a project, the Gort lowlands flood relief scheme, which would bring relief to a lot of people. In 2016, I set up the project to be surveyed and the works to be done on it. It is 2024 and we still have not got to a stage where we are going to go for planning permission for the project. We have the same type of scenario with the Galway city outer bypass, on which €50 million has been spent with absolutely nothing to show for it. Economists and others advise on how to spend money but I would like the witnesses to take a right good look at how we are doing our business in terms of the processes we have put in place. We have this thing about cost-benefit analysis and it is strangulating the economy and our ability to deliver infrastructure in my books. If we are to deliver on the private housing market, we have to invest wisely in delivering homes that will last for generations using some of this money that we have, and enough not to overindulge in or overheat the market. It is not that long ago since we were talking about demolishing houses because we had too many houses in the country. It probably demonstrates that we go in starts and busts, and stops and goes, and whatever. That is why we need to hold on to a good bit of that surplus money we have or the once-off money we get to try and fill the gaps when we get troughs in the economy.

I go back to the point that we have a planning system that is actually not working and it is costing people money. If one has a local area plan and land is designated to be used for residential purposes and has gone through a public process, I believe what we should be doing is building on that land without having to go through another planning process which could take years. I will leave those thoughts with the witnesses for the moment and maybe they might give me some comments on them.

I will start this one off. I thank Deputy Canney for the comments. We have had conversations in the past six years that I have been here with the Deputy about the same issue. The challenge we highlighted in the most recent fiscal assessment report was that when we talk about some sectors operating above capacity, construction is the one that comes to most economists' minds. That is where we really have problems. We have discussed in the past how an overheating construction sector that hit a bust contributed to some of the problems of more recent years because we lost a lot of capacity in that sector. We had builders, plumbers, electricians, etc., who were departing for other shores when there was no work in Ireland. The argument that we would put forward for responsible public engagement is, as the Central Bank outlined in its statement, there are things that are non-fiscal that can be done at this time that can really help. Many of us referred to the fact that projects which do not require a massive drain on the domestic construction sector would also be well supported and may involve fiscal costs. Alongside that, what we pointed out in the most recent report was the need to invest in the sector - to invest in apprenticeships - to encourage these sorts of things. These are all things that can be done and not all of them involve a fiscal cost.

When we look back at the lessons of failures from the past, one of the things worth pointing out is that one reason we had conversations - I was not here having this conversation with the Deputy at the time but that was a discussion point - about destroying houses was because we believed we built the wrong houses in the wrong places. That is one reason that argues in favour of having some checks and balances, but the Deputy is correct that we do not want to have so many that they end up holding us back in our ability to meet the growing needs of the economy. As our colleagues from NERI pointed out, we have had an expansion in population and our infrastructure on housing, energy supply, transportation and in so many areas has not increased.

I will give the Deputy the worst economist answer and the committee members can all hate me for it. The points the Deputy makes are important and correct, but the answer that we would give from this side is that throwing money at the problem right now with a constrained construction sector is not necessarily the right thing. That does not mean we cannot do the non-fiscal things, or that we cannot expand and target it in ways that will not draw on the domestic resources, but we have to do it in a gradual way. We cannot fix infrastructure deficits overnight and that is the challenge.

I believe the witnesses, as independent observers and experts, can look at how we are doing our business, the processes we are using, what that is costing and how we can save money by doing things differently. I go back to the Dublin Port tunnel. It is the example I will give. There was talk at the time that it was not high enough to take trucks, it was leaking and it was going to fall in on top of people. There were delays with it, etc. We have the same repeated now with the children's hospital. After the Dublin Port tunnel, we brought in all these checks and balances and all these gateway approvals so that one could not do anything until one got approval from somebody to do something, etc. Still we are repeating the mistakes up in the children's hospital. What I am saying is that is where we have to be looking. We need to focus on the way we are doing business, the methods we use and the time delays we have caused ourselves by putting in so many checks and balances. We have so many people who are checking on something and checking on something else and one has Departments cross-checking one another. Genuinely, when the Office of Public Works prepares a flood relief scheme, it goes through all of the checks and balances and the tender comes back. It then has to go back into the Department of public expenditure and reform, which will spend 18 months trawling through the lot of it before it gets onto the ground. That is wipeout.

The Deputy makes really good points there. One of things we might easily conclude from the recent experience is that the checks and balances are the problem, but actually it might just be that the capacity is not there now because we have had such a surge in demand in a very short space of time. We have not developed the capacity in the sector in terms of the numbers of workers in construction but also the capacity of the State to absorb these demands as well and put them through those checks and balances. It might not necessarily be the checks and balances themselves but the ability of the State, its planning authorities and other bodies to take on all of this work and push it through the system. Part of the problem is setting up a system that has the steady capacity to deal with these types of things. There is a danger in concluding that the checks themselves are a bad thing when actually there might be a good reason for those.

I agree that we need checks and balances but I believe we have gone from correcting what was wrong to overcorrection. Now we end up at a stage where we have probably a worse situation and we are using a lot of resources in it which should be better employed and still have checks and balances. If one takes housing, for example, one should devolve the authority to the local authority to deliver social housing rather than them having to go back to the Department when they appoint a design team. When they do a brief, everything has to go back to the Department and that delays the whole thing. I sound frustrated.

I thank all the contributors. I am sorry I missed the opening statements but I was over in the Dáil. I had read through most of their submissions and I thank them.

I want to ask about the State construction company that NERI asked about because I am very much in favour of that. Does anybody have an opinion on that? NERI mentioned in its document that one way to use some of the windfall funds might be invest them as seed capital for a State construction company. Maybe they would like to elaborate on that point. I strongly agree with it.

If we are talking about capacity constraints, it is fairly clear. Goodbody did a thing recently that said there are very few builders and private developers who can undertake on-scale delivery of housing. There are just too many small builders and not enough scale. Would the witnesses agree that is a problem and that we must do something about it? Especially now that we have to, in effect, more than double our housing output, would it not just be really foolish to just hope that the private sector will be able to ramp up to the scale necessary to meet these targets? Is it not the case that the State must intervene and that it would be a prudent use of money to have a body very actively trying to recruit, train and get back from Australia and Canada those people who we could possibly lure back? Should we not do whatever we have to do to get the construction capacity we need to deliver the amount of housing necessary, especially in the social and affordable area?

I do not know if the witnesses can give opinions on this aspect, but if we are now talking about 60,000 to 70,000 houses being necessary annually to address the crisis, which is not going to be addressed for some considerable time, and that is very depressing, how many of these houses must be social and affordable? It seems to me that a very high proportion must be social and affordable houses. I do not see how the market's supply and demand is going to bring down the cost of housing any time soon, given we are talking about such a long period to even get close to meeting demand, with the level of pent-up demand we have. I would like to hear the witnesses' comments on this point. It seems to me, however, that as there is no way supply is going to reach a level where prices or rents will go down any time soon, we are going to have to subsidise housing and we are going to have to subsidise it on a very large scale. Otherwise, we will be building stuff that nobody can afford. In fact, that is already what we are doing. I would almost go as far as saying that I do not see any point in building stuff that nobody can afford. What is the point in doing that? Is that not what we did during the Celtic tiger years and why the whole economy crashed? We then had ten years where we were told we should not spend anything, and now we have an even worse situation. I would like to hear comments on these points.

Turning to the use of money, I take the point that too much money chasing too few goods and constraints in that regard can cause inflation. How much of inflation, however, comes about for that reason and how much of it is down to profiteering? An example is a bicycle shed that cost more than a house. Is that happening because we are putting too much money in or is it because people are profiteering and charging us too much? How much of that is going on? Is this not an issue that must be addressed? I do not know if the witnesses are looking at the stuff on the breakdown of the cost of a house, but I saw something recently stating that approximately €150,000 is accounted for by actual construction costs, while there are then many other things involved, including profit margins, VAT, the cost of land, etc. These are things we can address that could actually bring down the price of houses. Does this impact on the witnesses' concerns about inflation? How much of inflation is profiteering? Do we not need to look at this issue? It strikes me that we do need to do so.

I will have to give the witnesses some time to respond to these questions, but on the water infrastructure issue I wish to agree with Deputy Canney in terms of spending. In my area, the council has been sitting on land that is zoned for development but it has not put in the water infrastructure. I wonder if there is a bit of mystification about how difficult it is to service land. The Ó Cualann housing body, for example, has told us that it was looking to develop some of that land but that it was for some inexplicable reason told "No" because of servicing. I talked to people close to Ó Cualann and asked them if servicing was really a big problem. They told me it was not and that it is not rocket science to service land. Apparently, it takes years, but actually it should not. The Shanganagh site is a good example of this problem. It was handed over to the State 17 years ago for the building of social housing but only now are we going to see the first houses being built there because of all this servicing stuff.

I will also ask the witnesses for their opinion on planning. Is it not the case that planning permissions far exceed commencements? Getting planning permission is not the problem; rather, the problem lies with building the stuff.

My last question goes to the witnesses from the Central Bank. It is a flipping scandal that we are facilitating the sale of Israeli war bonds that are being openly touted as financing the genocide going on in Gaza and now terrorism on an absolutely despicable scale in Lebanon. We are facilitating this activity. I think I heard the witnesses say to Deputy Conway-Walsh that this depends on Europe and so on. I do not know how much of this is the responsibility of the Central Bank or of the Government, but we have legal obligations that I would argue Europe is in breach of. Do we have the right to meet our legal obligations? Under the Genocide Convention we are legally required not to contribute to genocide and to do anything necessary to stop it. I would say this gives us the legal right and, arguably, the obligation under Irish and international law to not facilitate the commission of genocide, crimes or breaches of international law. I ask the witnesses about this aspect because I do not really buy the European legal excuse. I think we should be suing Europe for its breach of its own treaties with Israel and its own obligations under international law.

I will start at the end and work backwards to the economics. As I answered earlier on the subject of the investment prospectus from Israel that the Deputy is talking about, I am not a legal expert. The Deputy's question has gone outside my understanding of how exactly they come together. As I said earlier there are people much better placed to talk about the detail of the subject, but the understanding I have seen from our side is that this matter falls under an EU regulation. This means that unless we have a legal basis to refuse approvals, such as financial sanctions in Europe, we do not actually have a legal basis not to approve the prospectus. The country issuing the prospectus chooses across the euro area if it wishes to sell to European bonds. There could be legal aspects that the Deputy has pointed out that perhaps could be true, but I do not know because I am not expert enough to comment and would not like to misinform the Deputy. I really cannot go any further on that issue.

I can talk a little bit about the inflation profits piece and then perhaps work backwards to housing. On profits and inflation, I will not talk about individual projects but we did quite a lot of work on this across the economy generally. Early in the pandemic, when we decomposed the information, we saw there were additional profits relative to wages in the components of inflation, especially in domestically generated inflation. We said then that the thing we were watching most was whether the firms would absorb wage pressures or whether they would become further inflation. What we have seen since then is that profit margins have actually become compressed on aggregate and have absorbed the wage pressures. What has actually happened over the past year or so is that we have seen less of the domestically generated inflation coming from profit margins and we are seeing them instead absorbing some of the wage pressures. We saw strong wage growth from looking at the national accounts figures for last year, with an increase of more than 6%. That has not been reflected through into inflation, so what is absorbing those wage increases is the previous markup. It is, therefore, a balancing through the cycle that we have seen on aggregate. I cannot speak to individual instances.

Turning to the Deputy's housing questions, there was quite a lot in them. Let me make a general statement. I did not want to come in after the last question on how we think about the spending here. We use the word "additional" quite a bit. I would change that to "prioritise". I think there is a key difference there. It is about making space. One of the opening statements referred to this. It is about making space in the economy. In terms of demand pressure, construction is particularly strongly constrained by capacity, but it is about making space for these investments, so we are moving demand elsewhere. This can be done by looking across total spending. It can be done by looking at taxation. It really does, however, bring us back to the rule we talk about so often. This gives us a guiding post to think about how we balance these elements. It is really about prioritisation.

The Deputy talked about a State construction company. I think the State has quite a lot of involvement in this area. My view is that what the Deputy referred to actually speaks a great deal to productivity within the construction sector. There is a decision to be taken about whether the State or the private sector will own it, but the reality is that we need to think about how we can take a constrained labour base and, essentially, create more housing units from them.

That is the big challenge. Looking at a European basis, we are below European averages when it comes to productivity in the construction sector. What does this mean? It probably points to, for example, scale. We have all talked about small builders, which the Deputy said was potentially a solution. However, the other one is the scarring impact of the financial crisis. We have not invested in the machinery used in construction at a rate that is comparable with Europe. We are about 20% below the levels we had in 2008. It means we find it hard to harness new technologies.

There was a good Department of housing report that looked at modular housing, for example. Much of the focus was on the cost reduction of using modular houses, which is 20% to 40% lower than other ways. Crucially, also in that report, the labour usage was 70% lower. This is about thinking about productivity and how we harness more output and more housing from the same labour base, because we are not going to drastically increase that labour base in the short term. That is the reality.

Some of what was talked about, such as making Ireland more attractive for its skilled labour and so on, are all things that will benefit, but it will not happen immediately. That is a process that builds upon itself.

The other element, which the Deputy mentioned, is that the State has a role to play, and it is the infrastructural piece. That crosses housing. The degree to which services are impacted was mentioned. However, when we talk to people and investors, one of things that comes up from engagement is serviced land within Dublin that is ready to invest in. It is a blockage to seeing future investment from the private sector. Even when we think about businesses, we talk about the attractiveness of FDI. The reality is they are all using the same infrastructure. They are all using water, electricity, communications and the transport networks. It crosses all of these things together. The State could prioritise that and think about private capital unlocking potential housing delivery with a focus on productivity.

The Deputy directed one question specifically at me. I will follow on from Dr. Kelly’s point. I refer to the issue of scale and the ability to improve productivity by increasing scale, whether it be through new methods, prioritising modern methods of constructions or building factories within Ireland, effectively making it a manufacturing good as opposed to just construction. Ultimately, with regard to that issue failure, we have had market failure in construction for a full quarter of century now if the few years up to 2008 are included.

The Deputy asked me specifically about a State affordable housing company. That would be a solution over a longer term because the labour capacity issues cannot be dealt with in the short term. There is no silver bullet there. However, there are a number of advantages, such as, for example, creating an improved perception of construction as a sector to get into so it is not considered as volatile. There are still the scars of 2007-08, which is disincentivising and discouraging people from going into the sector. We need to reorient our education system more towards apprenticeships as well. We have a fragmented private sector. There are only two big players. We do not have a properly competitive market that can produce the high levels of productivity we want. There are planning issues as well. In addition, a housing company of that ilk ideally would focus on lower cost housing, that is, affordable housing, with the private sector focusing on the higher cost, higher yield builds, as it were. We have done some work on this. A housing company would not be the panacea in the short term. There is no easy way out of this in the short term. It will take a number of years to ramp up the scale no matter how it is done, unfortunately.

Regarding the labour supply, it simply is not there. If we want to deal with it, we cannot do so through apprenticeships in the short term because that will take too long. However, we can incentivise people to come into Ireland with work permits, for example, and dramatically scale that up. That could help some of those constraints in the short term.

On the health of the public finances, financing from the State perspective need not be a problem in the short term. However, all of the issues around service delivery, planning and regulation will all remain as institutional impediments and constraints in the short term. It is worth investigating why Ireland is so poor at these things and which countries in Europe and beyond are able to do these things quicker and cheaper. What are they doing differently from what we are doing? We need to have that analysis to understand the impediments. What is unusual about Ireland that makes it so bad at these things? Where are the successful examples, not just in housing but in infrastructure, full stop?

We can talk about State housing companies, cost-rental models, affordability and all of these things. It is definitely there as a mechanism for the longer term, over 20 or 30 years, to deal with the persistent and consistent market failures in housing we have seen for so long now. However, unfortunately, it would not be a panacea over the next two to three years.

I warmly welcome the witnesses. I thank them for the benefit of their time, their expertise and the knowledge they have in the various organisations they represent. It is very beneficial for us as members that they are here to give their presentations and to hear the questions we have.

I will start at the end, where Deputy Boyd Barrett was rightly raising the issue of construction and all of that. If you stand back from politics sometimes and analyse it, it is amazing to see what happens. Over recent years, we have had absolutely no problem in the world – that is a debate for another day – in welcoming people who have come here for whatever reasons they have had to come here. Whether it has been seeking the protection of the State, fleeing persecution or just seeking a better way of life, the Government has had no problem accepting them. However, God help people in the hotel, construction or quarrying industries who have wanted to get permits for individuals they know but who are not living in our jurisdiction and who want to come here to do a thing called work: work hard for a week, get a week’s pay, pay tax and pay for wherever they are going to stay. God help people looking for those permits because every obstacle that can be put in their way by the agencies of this State are being and have been put in their way, and that is the case to this day. That is one of the reasons we have a such a labour skill shortage. We are not allowing people who want to work to come. We are making it increasingly difficult for them. It is not as though they are randomly coming here. They have been, in many instances, targeted by employers and different groups that have places for them and want to pay them well. They want to come here but, my goodness, no. We put every obstacle we can in their way. That is not the witnesses’ problem. Actually, in a way, it is their problem because it is one of the causes of the issues they have been discussing here in different ways. It is something we should all be discussing because it is an issue.

Coming back to whether the State should start a building company and take on the building it is felt the private sector might not be able to develop and do the required work, the model that happened last time is not a model we should be looking back at and saying worked. We did not have an awful lot of big builders when the last boom came. We did not have that many. Because the work and demand were there, smaller builders became bigger builders. However, it all went pear-shaped because they went from small to big to bust. There are Deputies who like to talk about cowboy builders and so on, trying to give the picture that there is something wrong with you if you are a building contractor. Whether small, medium or big, some politicians like to demonise people because they do work. I am the exact opposite. We need all types of people – builders who operate out of the boot of their car, those who have one or two men in a bigger van and big building contractors. What happened last time? The man who had one van and two people might have, for example, finished up with five vans and 50 people because the work was there, they were able to bring in the resources and they managed to get workers. It is to be hoped that will happen if politicians will allow it to happen.

Some of the people who want to be involved in construction and in doing good things themselves are being demonised so much in the Dáil that they would nearly rather stay away from it. We have people in the Dáil who if you are a worker and you want to create employment, will want to put you down. I am delighted that Deputy Canney is not one of those people because he is a worker and he knows what it is like to pay people on a Friday. We need more people like that in the Dáil because it would help us greatly in trying to get out of the situation we are in.

Coming back to the Central Bank, I will outline my experience with banks. Is there any possibility that the banks would start doing what they are supposed to and start lending money to people? I have said this before at meetings and I do not want to name any particular people. When I see ads announcing, "We're backing brave" and all this - I do not use bad language unless something hits my thumb - it is the biggest load of what I will not say that I have ever in my life heard. The Acting Chairman knows exactly what I am talking about. I hate pointing my finger at the Acting Chairman, but he is a very good politician. When he is doing his clinics, he has nice young men and women and business people coming to him. They are saying they are trying to get a loan from such and such a bank but cannot get in the door even though there is a sign saying, "We're backing brave". However, when they get in, they are told "Oh, we're very sorry. We can't lend to you because ... ". Can we try to persuade our banks that the whole model of a bank is some people put money in so that other people get it out, the bank charges interest and makes money? This is a very simple philosophy but some of our bank managers seem to have lost that.

Another thing seems to be gone, and it does not have to be gone. Some of us have had the pleasure over the years of going in - it could have been men or women in charge of our banks - and we sat down and had a relationship with the person and knew whom we were talking to. Now the bank managers of today seem to have an attitude. I think they like the attitude because I think they like to be able to pass the buck. Our bank managers should have more autonomy. They should be more involved in the day-to-day dealings of that bank, in other words whom they give money to and whom they do not, what business they give it to and what business they do not.

The one thing about business today is that there are so many difficulties. We have all heard the headlines that 50 restaurants are closing each week, and that is true. It is more than the 50 restaurants that are closing; an awful lot of other small businesses are also closing. It tells us one thing: the man and the woman, the husband and the wife or the partner who are struggling away and are managing to keep the door open deserve to be backed. If they are looking for money from their bank or their lending institution, for God's sake, could we encourage them to loosen up?

There is no good in saying we have to learn the lessons of what happened to us before. If you keep looking backwards, you will fall over what is in front of you. Our banks seem to be living in the past in claiming they are constrained and this and that. It is all about what happened before but nothing about what we are going to do in the future. We need the Central Bank to be knocking heads together and to be saying, "Right lads, is this country open for business or not?" It does not matter whether people are in Kenmare, Clonakilty, or Dunloe, anybody running a small business is relying on the bank. They are the people who kept the banks' doors open and stuck with them. All the banks are doing is running campaigns and poster campaigns about what they are doing when in actual fact they are doing nothing.

Of course, prudence is very important. It is very important in life to be frugal. The old saying mind the pennies and the pounds will mind themselves is true. However, there is such a thing as being financially stupid. People only live once. If they do not take a gamble every now and then, they will have an attitude of not giving someone a loan in case it does not go right. If you do not take a chance in life, you will get nowhere; you have to take gambles. I accept we do not want to do foolish gambles and we need to learn from the mistakes of the past. However, we still realise that people in business need support. At critical times, it could be the simplest thing like an overdraft, a term loan or a mortgage.

When are we going to start backing young people and trying to make it in such a way that young people will be able to get a mortgage? I know plenty of people, who have identified houses they want as their forever homes and are looking for mortgages today. They are diligent young men and women and they are starting out in life. They can see their way to pay the bank but the bank will not listen. All they are told is: "Ah well, you know 'tis Dublin. Sure, I'd love to give you the money but 'tis Dublin that's saying it". My God, is it any wonder people are getting set against Dublin around the rest of the country when all they hear from their banks is, "Well, we'd give it to you only for Dublin".

I appreciate the witnesses' coming here today and saying what they are saying. I hope they will go away and appreciate what I am saying. What I am saying is from the bottom up. I will give an example from last Monday night when plenty of other people might have been snoozing, I was travelling around the Dingle Peninsula meeting people in clinics up until a quarter to one in the morning. Many of the people I met that night were talking about mortgages and loans for businesses. Dingle is a great place for business and there are great plucky people there who want to do this and want to do that but they are getting no support.

If the witnesses go away from today with anything in their heads, it should be that Ireland wants to do business but we need the banks to back us as well. We need the banks to be a bit more plucky and courageous. They should stop looking behind them and talking about what happened before. We all bloody well know what happened before; we are not thick. We want to see what is in the future as well. The witnesses mentioned the financial projections, the annual growth, the fact that we are at what could be called near full employment and all of that. While all that is great, we want to develop that and make it better. We want Ireland to become better and better. We could talk forever about the problems we have as a society, but if we allow for more growth and if we progress and develop more jobs and sustain businesses, will that not help everybody? A rising tide lifts all ships. The banks are not bloody well helping us in raising any ships, but they are sinking a share of them. There is no need for it.

I have a great relationship with banks myself except for when I have to fight with them. It is not a personal chip on my shoulder or anything like that. The reason I have the chip on my shoulder is because of the people I represent, the people I am talking for. When I meet people next week and the week after, the one complaint they will all have is about the banks and of course about Dublin.

I could go on forever but I do not want to because I do not want to be taking the witnesses' time. I really appreciate their being here today. They are all brilliant people in their own roles. I ask them to try to get that message back if they can. They need to see that there is an island out there that wants to get on but we need the Central Bank to work with us.

I cannot speak to individual cases. Retail banks make commercial decisions when they are making individual decisions. However, I can take a step back and try to set a bit of context when we think about the aggregates. I can give the Deputy a sense of what is happening in the banking system even though that might not reflect individual people's engagement with the banking system.

I will start with firms. In the past few years, we have seen credit conditions tighten. Interest rates have gone higher; that is part of the cycle with monetary policy. However, we have seen very little reduction in lending to firms. What we have seen is a substitution. This goes to some of the points the Deputy was making. There is now less lending for investment which makes perfect sense from a monetary policy point of view. We would expect less demand for investment at this point in the cycle. However, we have seen an uptick in working capital. The banks are lending almost the same amount to the SMEs, the firms of Ireland, but we are seeing a substitution from perhaps thinking about expanding their business to now thinking about more short-term pressure on their payments, overdrafts and all of that. We have seen this substitution effect happen.

The second part is we have also seen an evolving financial system. Previously, it was very much a bank-driven credit-to-firms piece but now the non-bank lenders have a big role to play in lending to firms in particular.

In the construction sector, 35%, or over one third, of lending comes from non-bank lenders, which one might not think of as traditional banking sources. They operate in a different segment of the market. They almost operate in some of the areas the Deputy spoke to. They will give higher loan-to-cost ratios, for example. It costs more but it is higher risk compared with other forms of lending. We are seeing a more diverse pool of lenders. We are also seeing a broadening of some traditional lending. We have seen the credit union sector broaden from a more traditional base into mortgages and even some firm lending. We are seeing quite a change in the financial system.

I am not for one minute saying there are not individual circumstances that are hidden in this aggregate, but one of the things coming out of the crisis was that we wanted to develop our understanding of what is facing firms with regard to the demand for credit, rejection rates and what they are looking for. The Department of Finance regularly does a credit demand survey. It indicates that firms are not reporting an uptick in demand for credit. Much research has been done across institutions here to understand that better. It may be a scarring effect, for example, They do not have the demand for credit. When we survey firms, we are not seeing in the aggregate that they are saying rejection rates are much higher. They are actually saying they are quite conservative about using their own capital to invest relative to lending. The demand for credit is not increasing strongly relative to that supply. We are not seeing evidence in the aggregate. It will not necessarily talk to individual cases and obviously I cannot talk to such cases. To give a sense across the system, we have an evolving financial system which is interacting with firms and what credit and financing they need slightly differently.

I listened carefully to what Dr. Kelly was saying, that he does not see evidence of rejections because people are not asking. Is there any fear that the people are so turned off that they are not even going to the banks at this stage because they know the banks are not lending? He did not touch on one subject. Can we ever get back to the situation we had before, where the bank manager would actually do something to earn the title of manager, rather than having a sign saying “Manager” over the door but not managing anything because it is all in Dublin? Can we get back to that stage where a person could face a manager in a bank, look for a loan and have the manager size up the situation from his or her point of view, as happened before? If there is a big money, such as a mortgage for a house, it could involve the recommendation of the manager. Dr. Kelly did not touch on mortgages as such. Can he see what I am saying? Banks are not user-friendly at the moment. Nobody is working in the branches. Instead, they are full of machines are, which is not good either and will not be changed overnight. God damn it, could we get to a stage where they would be more user-friendly and the manager would earn the title of manager of the bank?

I think the Deputy is speaking to how individual retail banks are setting their operations up. I cannot speak for how an individual retail bank makes its decision on credit. It is up to the banks how to structure themselves. Maybe they can answer some of the questions on the pros and cons of different models they have adopted. Whether they decentralise or centralise them, I am sure there are pros and cons to how those are thought of and done most effectively.

I can certainly talk about the mortgage point. This has to be considered in the context of what we have seen with interest rates over the last while. We always thought we had an issue with switching and value for customers coming into this. When we saw interest rate rises and people’s expectations of interest rate increases rising, we saw many people fixing, changing their product and moving bank to get better products. In the mortgage market, we have seen an increase in new net credit going out through different products. What we have seen since then, as one would expect in a higher rate cycle, is fewer second and subsequent buyers moving around the housing system, but the first-time buyer credit continues to rise. We are continuing to see growth in terms of first-time buyer credit. There are individual circumstances here and of course we have the macroprudential measures, but they are well-meaning in terms of understanding how we put guardrails around overall lending. On the Deputy’s point, there were issues almost 20 years ago when those guardrails were not in place. They are there to protect all customers and us, especially as we face into affordability challenges like now. Credit being the answer to those affordability challenges is a problem down the line. It is not the answer. We are continuing to see growth in the numbers for sustainable credit, where people meet credit standards and can cover the cost of what they are taking on in a sustainable way.

The biggest blocker to further growth is actually new homes being produced. The quantity of transactions is just not there. Every time we look at new data coming out on the number of houses for sale on various websites, we see increasingly constrained numbers. This is starting to act as a natural blocker on how much the first-time buyer market can grow. One then gets into tenureship, and I will not go any further there. Certain things we see are features of the housing market and others are features of banking. Overall, we are seeing growth, with new people coming into the system, to the firms we have just talked. It is more diversified. It is also more diversified for first-time buyers. They have competition driven by non-bank lenders within the system and we have the main pillar banks. It is a more diversified base than we had five or ten years ago.

I will add a point on SME investment. We have done much work over the past years in the ESRI, trying to think about these issues. One thing that is clear, as Dr. Kelly has said, is that Irish firms are not demanding credit at levels we expect, either in comparison with other European countries or those they had the past. Our big question is why that is the case. This credit hesitancy has a potential impact on investment activity which leads to long-term productivity growth, which is the good stuff we need to grow our economy in the long run. It is an important question.

A couple of things have come out of the previous surveys we have published. One is the uncertainty factor. The world has become uncertain and many firms do not want to make big capital expenditure decisions in a world that is hit by repeated shocks. That has held many companies back. There is another factor we need to think a little differently about, which is about historical credit levels and the types of firms that might have operated in a more manufacturing-based economy. In a knowledge-based economy with more service firms, their credit requirements are potentially different because the capital they use is different. They do not necessarily need bigger machines or such. It may be that the investment or credit requirements relative to output are different. There is a range of factors which explain this investment hesitancy and self-financing and keeping the demand side down for enterprises.

I thank the Chair and our guests. I will be brief because I am aware it has been a long session. Unfortunately, I do not talk to constituents at 12.45 at night. They are usually in bed because they have to be up early the next morning for haulage, farming or whatever it is. Moving swiftly on from that, Deputies Canney and Boyd Barrett both spoke about infrastructure, as did the witnesses. They both mentioned water, which is a constraint in my area, particularly in south Kildare. New houses are being built but cannot get the water supply in. The people who are depending on those houses are still living in rented accommodation, at significant expense because the rent is exorbitant. That needs to be addressed. Somebody said we cannot leave it until 2040. I totally agree that we cannot do so. I would like to see some sort of input there.

Deputy Durkan spoke about retrofitting. In many areas, local authorities are wasting money on retrofitting. They are perhaps putting air-to-water heat pumps in their own stock but not replacing windows and doors, so they are effectively heating outside rather than inside. There is a significant problem with that. We need to be more careful with how money is spent on infrastructure and on houses that we will build in future. We need to make sure the money is correctly spent.

Will our guests elaborate on the continued use of once-off payments? I got the feeling that they are not in favour of these payments and that they are not increasing the standard of living. I will go through my questions consecutively if that is okay, because of time restraints.

The IFAC representatives made several comments about being left out of the Government’s forecasts, such as those relating to climate transition costs. Will they elaborate on that? Are there any thoughts on what we can do with the gains from the Apple tax, which is the elephant in the room?

I will kick off on the question about one-off payments. We conducted a post-budget analysis last year where we looked at the effect of all the direct and indirect tax and welfare measures in the budget on household incomes, and we split out the permanent from the temporary measures because we felt that if we are thinking about the long-term evolution of the tax and welfare system, it is the permanent measures we want to look at for long-term forecasting. As for the temporary measures, of course, in the early stages of the cost-of-living crisis, there was a really good case for them because we had no idea how high inflation was going to go. We argued last year, and even in the previous year, that the case for one-off payments was becoming much less clear and that, instead, policymakers should focus on permanent changes because inflation was not going away. It was coming down but the cost of living was still high. When we looked at the effect of permanent versus temporary measures last year, if we take the four budgets between 2020 and 2024 and exclude the temporary payments, low- and middle-income households were, on average, worse off compared with what they would have been with a budget that kept their real incomes constant and evolved in line with income growth, whereas high-income households were not because there were several above-inflation increases to tax credits, bands and so on.

A question arises, therefore, as to what happens when we get rid of the temporary payments. Do we have some sort of compensation or catch-up mechanism for low- and middle-income households to restore their standard of living? There is no clear indication that is going to happen. It seems there will be more one-off payments this year, but we would like to see a plan for benchmarking social welfare payments to something that appears reasonable and is linked to a standard of living and then looking at either indexing them from there based on price growth or at least comparing what policymakers are going to do to an index benchmark such that we will see where the real gains and losses are.

On the climate side, there are two main issues we can think of, one of which relates to the loss of all these taxes we need to replace. We will lose several streams of revenues coming in through motor tax, fossil fuel and so on. While we could introduce distance-travelled taxes or congestion charges - the tax strategy papers look at some of those solutions and they have been looked at elsewhere - those are really just taxes we would have to figure out a way to replace.

In terms of the spending, which I think the Deputy is talking about, there are three main areas we can think of there. One is the massive level of retrofitting, which we referred to and which is labour intensive, so we know that is going to take a long time. It is going to be expensive if we try to do it all now, given there is so great a shortage of workers in those areas. We are looking for the same types of workers to do housing, transport and infrastructure, so that is difficult.

Another area is the electrification of Ireland's vehicles. That can be anything from public sector vehicles, such as ambulances and Garda vehicles, to private transport, which is basically people switching from a fossil fuel, internal combustion engine to an electric vehicle. We know that is going to be difficult for people to do, but the good thing is that it is mostly imported, so it is not going to add to domestic pressures such as on prices. It is good we can do it at a point such as this in the cycle without adding to the existing pressures.

That is one way we could use a lot of this money to hit targets that are going to be binding in any event, and we know from research done on the costs of non-compliance that those costs are looking exceptionally high for Ireland. A recent report from T and E looked at the costs throughout Europe and Ireland is at the bottom of the league table because of its failure to meet its targets and how far out it could be. It looks as though Ireland will find it difficult in 2032 to buy compliance from member states that are overperforming because the likes of Germany and Italy are so far behind as well that they will probably buy up most of these credits from other member states. That leaves us in a very difficult position, and we could be looking at non-compliance costs of more than €10 billion and potentially up to €20 billion in some scenarios, which dwarfs the Apple money. When we talk about these issues, we need to think about the cost of these sanctions coming down the line, and they are just a payment to our neighbours. If we think of that as a lost opportunity against the steps we could be taking to benefit citizens, that is a stark trade-off.

I am conscious this is a long session, so I will make just one or two brief points because a lot of the ground has been covered. Without doubt, many of the economic indicators are positive, from employment to interest rates and across the board. Much of the emphasis from the various contributions relates to being steady and keeping an eye out for the days when things will not be so good. At the time of the previous budget, two sizeable funds were established. Only one contributor referred to those funds They are intended specifically for difficult days ahead. Is there any reason the other contributors did not refer to them? What are the views on them? Will they be ready for that rainy day when it comes?

Turning to the representatives from the Central Bank, interest rates have come down and there is a second opportunity for tracker customers. They will be the first to benefit from the ECB reductions. Will other mortgage holders soon get the benefit of the reduced rates?

Much of the focus was on infrastructure, in particular housing but also water and energy. In some places, the water infrastructure is in place, such as in smaller villages spread throughout the country, including the likes of Baile Bhuirne, Coachford and Inchigeelagh, communities where the infrastructure has been put in place and schools are there, yet smaller builders who might look to build 15 or 20 homes in those places tell us they are struggling to get access to funding. I heard what the witnesses said and it is at odds with what we are hearing locally, so I am trying to understand why such builders would be constrained and unable to get building in those areas and why they would tell us they are finding it difficult to get access to funding.

On the opening points about references to funds and the use of moneys, most of the contributors referred to them indirectly in the context of the Government running surpluses, which is the most important outcome. The secondary or subsequent step relates to what happens to that money. Yes, two funds have been established and they could be useful savings vehicles. The level being contributed in 2024 will be about €6 billion between the two funds, but the Department of Finance's own estimates for the windfall corporation tax receipts are about double that, so even if we are saying we are setting money aside, we are setting aside only half of what the Department of Finance estimates to be level of windfall corporation tax receipts, which continue to rise.

The funds are useful and when the next downturn comes, they should see the State with a good capacity to absorb it. In Ireland, we have seen both sides of the fiscal policy coin, including the unsustainable fiscal expansions that led to difficulties in the 1980s and post 2008, when the recession was prolonged and deepened because of the fiscal policy that was followed when it hit. On the other side of the coin, as we saw during Covid and with the cost-of-living crisis, the public finances were able to step in and the State had a strong enough balance sheet to absorb some of those costs. When we shut large parts of the economy during Covid, the implications would have been far more catastrophic if the Government had not had the financial capability to step in and fill the hole that was created. We have seen the importance, therefore, of the public finances on both sides, that is, when we get it wrong, which led to significant problems, and when we get it right. The issue now is that we face opportunities on the tax side. Having a tax coming in at such high levels is a good problem to have, but it is one that can create problems down the line.

If we pump this money out into an economy that is performing well, we could spend a lot of it, perhaps build up some permanent commitments, see prices rising now, and then possibly having to reverse, if the windfall nature of these corporate tax receipts was to be welcomed. The key from the fiscal council perspective is the impact the budget is having on the economy. We are in a surplus, and in the conditions we find ourselves in now, it is absolutely appropriate. The use of that into different type of funds is subject to some analysis, but that is the secondary step. The key is to get the balance right first. Perhaps we are not quite there, given the extent and estimated size of the corporate tax receipts. The economy is performing very strongly now. If both of those were to reverse, we would not be in a position perhaps to be making contributions to these funds and could see this underlying deficit opening up. We welcome that the overall position has been reasonably positive. We see the merits of running a surplus and can see the merits of putting it into those funds. It is a matter of getting the overall position right rather than the design and nature of the individual funds.

I will come in on the questions directed towards us. On interest rates, yes, we have seen deposit rate changes, most recently last week. As was pointed out, the operational framework review had an additional technical change. They are closing the corridor. What it means for trackers, which are priced to the MRO, is they will see an additional 35 basis point reduction in their mortgage rates.

More generally, we know there is quite a lot of segmentation across the mortgage book. Many people have fixed-rate loans, so the reset will come when the time expires. On the SVRs, my expectation is it would be symmetric with how we saw the rise. There were various degrees of pass-through. It comes with a lag. It is a commercial decision for individual banks in that pass-through, but the expectation would be that we see something symmetric relative to what we saw on the way up.

The Deputy also asked about access to finance for small builders and realisation. It is important to segment this into two components. One is debt financing – raising debt. I think there are products from the likes of Home Building Finance Ireland that are targeted at smaller builders, and it has raised a balance sheet of approximately €300 million since 2019. It has products that particularly target small builders. The retail banking system also has precommitments and they are doing something a little bit different. They total about €1.25 billion and they are trying to do a partnership model. I think the biggest challenge is the other side, which is the equity component. Builders will need to provide equity to go with the debt for the total package. The challenge for smaller builders is that much of that means retained earnings, for example. They have to come up with the equity themselves. When they become larger, it is easier to access external capital, for example. There are ways in which the State can help with this, such as the NTMA’s strategic investment fund. It can tranche to crowd-in. There are projects there. Even the design of the retail banking system and this dual model is to allow smaller builders - it comes back to that scale point mentioned earlier - to overcome this challenge they see of creating equity. The reality is – not to bring us back to where we started – that the equity piece comes back to the viability, derisking and making it more attractive for the external investment to come in.

Before we begin, I remind members that the committee will be meeting in private session immediately after this evening's engagement. This is the resumption of our pre-budget engagement process. There was an earlier meeting and my apologies for being unable to attend that. This evening, we are resuming engagement on the committee's pre-budget 2025 scrutiny. On behalf of the committee, I welcome the Minister for Finance and the Minister for Public Expenditure, NDP Delivery and Reform and their officials.

Before we begin, I wish to explain some limitations to 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 presentations they make to the committee. This means they have an absolute defence against any defamation action for anything they say at the meeting. However, they are expected not to abuse this privilege and it is my duty as Chair to ensure this privilege is not abused. Therefore, if witnesses' 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 any such direction.

Members are reminded of the long-standing parliamentary practice to effect that they should not comment on, criticise or make charges against a person or entity outside the Houses or an official either by name or in such a way as to make him, her or it identifiable. I remind members of the constitutional requirement that they must be physically present within the confines of the place where Parliament has chosen to sit, namely, Leinster House, in order to participate in public meetings. I will not permit a member to participate where they are not adhering to this constitutional requirement. Therefore, any member who attempts to participate from outside the precincts will be asked to leave the meeting.

I now invite the Minister for Finance to make his opening statement.

I thank the members for the invitation to appear before the committee to discuss budget 2025, which both I and the Minister, Deputy Donohoe, will present to the Oireachtas in a little under two weeks’ time.

To begin, I will briefly set out the economic and fiscal background for this year’s budget. At an aggregate level, the Irish economy is in reasonably good shape. With more than 2.75 million people in employment, our labour market has proved remarkably resilient. Despite all the unprecedented challenges we have faced over recent years, there are more people at work in Ireland today than ever before. Indeed, since the end of the pandemic, we have essentially maintained full employment. This is a noteworthy achievement and a reflection of the fundamental strength of our economy.

Since its peak in mid-2022, the rate of inflation has eased significantly. Last month, Ireland recorded inflation of just 1.1%, the lowest in more than three years and among the lowest in the euro area. After a challenging period, this easing in inflation will have a real and positive impact on the day-to-day lives of households and will help to drive solid growth in the domestic economy over the short term. Of course, as has been evident in recent years, we are living in a far more shock-prone world. The reality is that, as a small, open economy, Ireland is particularly vulnerable to changes in the global economic environment. Strong and stable public finances are essential to ensure we have the capacity to respond as needed to external shocks, and, at the headline level, we are in a very good position. The committee will have noted the August Exchequer returns, which showed a surplus of €3.8 billion in our public finances. For the most part, we are more or less where we expected we would be in terms of most of the tax heads. The steady growth in income tax and VAT receipts demonstrates the underlying strength in our labour force and our economy. It also speaks to the success of this Government’s careful and balanced approach to fiscal policy. Of course, the stand-out feature of the tax figures in the year to date is, once again, corporation tax. As I have said before, this a highly volatile and unreliable source of revenue. Corporation tax is now more than €3.5 billion ahead of the same point last year, but there is no guarantee that this will continue indefinitely. These receipts are reliant on a small handful of large, highly profitable firms in a small number of highly profitable sectors. If estimates of windfall corporate tax revenues, in other words, those not linked to our domestic economy, are excluded, there is an underlying deficit in our public finances.

We know from recent history the risks of relying on windfall tax revenues to fund day-to-day expenditure, and this Government is determined that we will not repeat the mistakes of the past. That is why we have established the Future Ireland Fund and the Infrastructure, Climate and Nature Fund. Instead of using potentially transient revenues to fund permanent expenditure, we will set aside a portion of the windfall to invest for the future and in particular to help part-fund our response to the future structural challenges that we know are on the horizon: the four Ds of demographic change, decarbonisation, digitalisation and the risk of deglobalisation. This also prevents these revenues from becoming part of the permanent expenditure base. Of course, while the establishment of the two new funds is a major step towards mitigating our exposure to windfall corporation tax, this must, as always, be coupled with the appropriate approach to budgetary policy.

In relation to the Apple case, the Irish position has always been that Ireland does not give preferential tax treatment to any companies or taxpayers. In 2016, the Commission issued a decision which determined that further tax should have been paid by the company. Both Ireland and Apple rejected the that decision and while the General Court annulled the Commission’s decision, the Court of Justice set that aside last week. This judgment provides the final determination in this case and the process of transferring the assets in the escrow fund to Ireland will now commence in the manner prescribed in the deed governing the operations of the fund. It is a complex process which is expected to take a number of months.

As I said last week, I want to make it absolutely clear that this one-off revenue will have no impact on the fiscal parameters for this budget. We will not formulate budgetary policy on one-off revenues and we respect the judgement. Our fiscal strategy is based on what is the appropriate approach for our economy and society. Separately, I am considering how the proceeds from the sale of the AIB bank shares may be used for an infrastructure injection to capitalise key strategic priorities, which are housing, energy and water.

As set out in the summer economic statement in July, budget 2025 will consist of a total package of €8.3 billion, comprising €1.4 billion in tax measures and new expenditure of €6.9 billion. This is a significant budget package. It provides us with the necessary resources to address the pressing challenges of today. It will allow the Government to continue to invest in our public services, boost the productive capacity of our economy, and shield workers from paying more in tax just because their wages have risen.

I believe that budget 2025, the fifth and final budget of this Government, reflects a continuation of a sensible and sustainable approach to fiscal policy that has helped to deliver a resilient economy and budget surpluses. My Department will be updating the fiscal projections for this year as part of the budget and forecasting both macro and fiscal numbers out to 2030. For the first time this year, shortly after the budget, Ireland will submit and publish its first medium-term fiscal plan, which will set out a binding pathway for net public expenditure growth. This plan, which forms part of the new European fiscal framework, will bring a welcome, long-term perspective to budgetary planning. It will be a matter for the next Government to submit a new plan.

Budget 2025 comes at a critical juncture for Ireland. On the one hand, the picture is, in many respects, a positive one. Our economy has, in the main, proven remarkably resilient in the face of dealing with a pandemic, a cost-of-living crisis and the war in Ukraine, and our public finances are, at a headline level, performing very well.

However, it is also a time of considerable uncertainty. The international environment seems ever more prone to economic shocks. We know that our public finances remain exposed to volatile windfall tax revenues and that while structural changes to our economy over the coming years will bring new opportunities, they will also bring new challenges. We need to ensure that we continue to have the financial ability to react in as agile a manner as we have done to date.

This budget will build upon the progress we have made in guiding our economy through a series of unprecedented global shocks and returning the fiscal position to health. It will provide further investment in our public services and infrastructure and shield households from an increased tax burden. It will reinforce our economic resilience and ensure that we will be in the strongest possible position to address future challenges over the medium term.

When I appeared here in July, the Government had published the summer economic statement and we discussed the agreed budget parameters. Today I will brief the committee on developments since then that will affect the considerations being made as part of the budgetary negotiation process ahead of budget day on 1 October.

While budget 2024 was framed in the context of the cost-of-living crisis, thankfully, inflation rates have now eased significantly with headline inflation falling to below 2% in August. Budget 2025 is, therefore, being prepared with a view to building on the progress made in the Government’s previous four financial statements. It will aim to continue the improvement made in public services and our schools, roads and public transport to support a population that has grown faster than expected, to sustain strong economic growth and to support improvement in living standards.

The past four budgets delivered by this Government have successfully balanced the dual challenge of remaining responsive to economic and social developments while ensuring the public finances remain safe. Throughout the many challenges experienced during the past four years, we have delivered sustainable and continued investment in public services and infrastructure and also targeted help at those who need it the most. The use of temporary measures helped households and businesses with elevated costs while avoiding adding to the inflationary pressures.

In terms of delivery, the previous budget packages supported strong economic performance in a number of ways - delivering increased capital and infrastructural investment under the NDP; expanding public services to meet increased demand from a growing population; reducing the cost of key public services such as public transport, childcare, education and healthcare; and extending the public sector pay deal to ensure continued industrial stability in a challenging economic period.

As the Minister for Finance has already pointed out, our economy continues to perform well and we expect that this will continue over the medium term. The recovery and strength in the economy has delivered record levels of employment with a projection for almost 2.8 million in employment next year compared to just over 2.3 million pre-pandemic. This has driven higher tax revenues, which in turn has helped to drive demand across the economy for goods and services. We, of course, face many competing pressures as we finalise the Estimates process for 2025. At the end of August, gross total Voted spending was €63.6 billion. This is 4.3% above profile and 12.9% higher than during the same period last year. The key drivers of this overrun are health spending on the current side and housing and education spend on the capital side. These challenges continue to be assessed and reviewed as we progress the preparation of budget 2025. Discussions are now being finalised within all Departments to agree a budget that will benefit Irish society and improve standards of living.

Budget 2025 will see total expenditure increase by €6.9 billion or 6.9%. This can be broken down into total current expenditure ceiling of €90.9 billion and a total capital ceiling of €14.5 billion. A key element of the overall expenditure amount for 2025 is the agreement reached with the Department of Health and the HSE over the summer. An additional amount of €1.5 billion has been provided for the health sector in 2024 with existing level of service, ELS, funding of €1.2 billion to be provided in 2025. This additional funding provides an opportunity to strengthen financial planning and governance within the HSE and it is crucial that there is a clear link between the significant funding provided and the delivery of healthcare outputs and better health outcomes for patients.

The overall medium-term expenditure strategy set out in the stability programme update, SPU, included the provision of a €4.5 billion contingency reserve from 2025 onwards. At this stage, it is envisaged that the full amount or nearly the full amount of the contingency reserve will be required to meet spending commitments in 2025. These commitments include the provision of humanitarian assistance to arrivals from Ukraine, the funding our agencies need to provide services to people seeking international protection, legacy impacts on the health service from the Covid-19 pandemic and certain European capital funding programmes such as RePower EU and the Recovery and Resilience fund. All of this is included in the overall ceiling and will be allocated to Departments. Given the uncertainties in relation to the quantum and duration of the bulk of this expenditure, the contingency provision will be reviewed as part of the annual Estimates process.

The budget will see the expenditure level move to €105.4 billion. This will provide against all the outcomes I have described before: higher levels of investment in the NDP; new measures in line with Government priorities, including in childcare and disability; meeting the demand for public services; and continuing to fund measures to provide humanitarian support.

Approximately €3.7 billion of current expenditure increase is available to meet ELS costs. This includes the full-year impact of measures carried over from budget 2024, funding for demographic developments and the public service pay agreement.

Capital expenditure will increase by €1.4 billion next year with capital investment reaching some €14.5 billion. The remaining €1.8 billion will fund new measures in the budget, including a social welfare package and other measures to improve the overall quality of life for our people. With regard to capital investment, all of this will be part of the NDP, which commits €165 billion of our country's money. The committee will be aware of the decisions I made earlier in the year to allocate an additional €2.25 billion between 2024 and 2026 to schools, hospitals and transport projects. We also took additional measures to meet the climate and environmental challenges we face now and in the future. In addition to the existing NDP allocations, there will be additional capital available from 2026 to 2030 through the infrastructure, climate and nature fund. This is made possible only because we have been running budget surpluses in the first place.

Budgetary reform remains central to public expenditure management. Every summer, my Department publishes the mid-year expenditure report, which provides details of the different ways that the Government aims to deliver better outcomes for public services and better value for money. The issues included range from the well-being framework to the green budgeting initiative to performance and equality budgeting to published research papers such as the spending reviews, all of which help in forming the budget.

In less than two weeks' time, the Minister for Finance and I will be bringing forward a balanced and fair plan that will build on the progress of the past four years rising to the challenges we still face. We aim to minimise the risk of addling to inflation and I am confident that the expenditure and tax package proposed will avoid us doing that as we have done in the past.

In framing this year’s budget, the Government is very cognisant that while 2024 has presented challenges on the expenditure side, the forecasts and outlook again look positive and we are in position to address these issues because of our public finances. I thank the Acting Chair for the opportunity to address the committee and I look forward to members' questions.

I welcome both Ministers.

I am sure the Ministers are aware of the Central Bank's commentary on housing which confirms the growing gap between the Government's targets and what is needed to fix the housing crisis. The report estimates that between 52,000 and 67,000 new homes are needed to meet existing and emerging need over the next decade or more. This is broadly in line with the Housing Commission's recommendations for new homes over the next ten years to deal with pent-up demand as quickly as possible. The Minister, Deputy Donohoe, talked about capital ceilings of €14.5 billion in next year's budget while the Minister for Finance has talked about AIB and using the proceeds from AIB. Is the €14.5 billion inclusive of the AIB sale receipts or is the Minister intending to go further, on top of that, in terms of additional one-off capital investments during 2025? How do the Ministers expect to respond to the Housing Commission, the Central Bank and, indeed, to every other report that is coming out on almost a daily basis that talks about how the Government's housing strategy is failing? We need far more done, given the level of capital investment that the Government is planning for next year.

The €14.5 billion does not include the allocation of any additional money that could come from the sale of bank shares, either in the future or what has already happened. I am as aware as Deputy Doherty of the pressures that our country faces in the building of more homes. I do not accept that our plan is failing. If I look at the number of new homes that have been built, the number that have received planning permission, as well as the number that I expect to see completed this year and next year, I see that our plan is making a difference. Of course I am aware of the pent-up demand that is there but the increase in housing supply that this Government has delivered in recent years and our ability to maintain and accelerate that in the future will allow us to respond and meet more of that demand.

The Minister, Deputy Chambers, talked about the proceeds of the sale of AIB. Are proceeds due in next year and if so, what are they? Is this a separate allocation that the Minister is planning to spend in the budget, on top of the capital ceilings that have been announced by the Minister, Deputy Donohoe, so far?

We will set out the mechanics of how we propose to spend or utilise the €3 billion which we have on account now from the AIB share sales. We will set out the mechanics of that on budget day. We have discussed this in the context of infrastructure in the economy and I have set out the three priority areas which are housing, energy-----

It is in there already. The money from the share sales is in ISIF. In terms of the additional future shares, that is a matter for future decisions in the context of the share position of the Irish State in AIB. That is a matter for future sales that may or may not occur. We have set out previously that we have had an ongoing sale of shares from AIB and at the appropriate time in the future a decision could be made on that. That is a matter of market sensitivity but what we are speaking about here is €3 billion which is on account and which we want to use to address infrastructure needs in the economy, including housing.

In relation to the tax package in last year's budget, half of the population of workers benefitted by €870 while the other half of workers got just above €300. The Minister was out this week saying that average workers will benefit by €1,000 but he knows that the young nurse earning €37,000 did not get the €800 benefit last year. Half of workers will not get that benefit. Is somebody on €37,000 or €38,000 going to be able to bank on what he has told them, which is that they will benefit by €1,000 in this budget?

We will set out our tax package on budget day. We have been clear that reducing the income tax burden is a priority for the Government. All of the budgetary decisions we have taken have been highly progressive to date. Many people in our economy have been taken out of the income tax net, as the Deputy knows. We want to make sure that the effect of our decisions is progressive in the context of both income tax and cost-of-living payments.

The Minister knows that over half of workers do not pay tax at the higher rate which means that the average worker does not benefit from the change that the Government is planning. The Minister told the media that average workers will benefit to the tune of €1,000. Can he tell this committee, to which he is accountable, albeit that the media has an important job to do as well, whether an income earner on €40,000 will get the €1,000 benefit that he was happy to tell the media about? He was happy to put out that spin for the last couple of days. It is a very simple question.

With respect, the Minister set it out to the media a couple of days ago. Why can he not give the same commitment to the budgetary oversight committee, to which he is accountable? Is it because those who earn €40,000 will not benefit to the tune of €1,000, in the same way that they did not benefit last year and the Minister does not want to puncture the spin of the Government narrative at the minute? Is that the case?

That is not the question I asked. I did not ask whether it was progressive or not. I asked if the Minister can give a commitment to average workers on €40,000. Will they get €1,000? He was happy to spin that at his party's think-in but he is unable, under questioning, to say the same thing here because he did not do it last year and is unlikely to do it this year. Is that not the case?

No they did not. The average worker on €40,000 did not. That is a mistruth that the Minister is presenting to this committee and he knows it.

The Minister put out a press release saying that he is going to increase the standard fund threshold to €2.8 million. We are talking here about gold-plated pensions. At this point, someone can retire on €72,000 or €73,000 and get the taxpayer to help to subsidise that pension in full. Somebody can retire at the age of 66 on a pension in the mid-70s, around €75,000, which most people do not even earn while working, and the Minister is now planning to increase that pension pot threshold to €2.8 million. How much is that going to cost? How many people had to pay the excess tax that was only payable when their pension went above the pension pot threshold of €2.5 million?

I can send the committee detailed figures on the numbers who have paid and what it has taken to date. I am happy to provide that information. What we have done here is taken the recommendation of €2.8 million and we are phasing that in from 2026 onwards, with an increase of €200,000, which addresses wage growth in that interim period. It also addresses a specific concern that has been raised around retention and promotion issues which has been well flagged publicly. We are not changing the charge in excess tax-----

The number of people who actually had a pension pot above €2 million in the last year for which data is available from Revenue is just over 230. These are gold-plated pensions that are costing hundreds of millions of euro. Ordinary taxpayers, people who are working in Tesco at the minute, are paying taxes to subsidise these pensions. The Minister not only wants to see these pensioners being subsidised to the tune of €75,000, which they can get at the minute under the rules, but wants them to be able to draw down pensions in excess of €80,000 or €90,000 and still get the State to subsidise them.

Why does the Minister believe that workers whose pension pots are not €2 million or even €2.8 million, which he wants them to go up to with tax relief, should subsidise that? Think of most people in the State. The average pension pot in the State is €110,000. Most people do not have a whiff of retiring on €60,000, €70,000 or €80,000, which can happen at the minute with full tax relief, and now the Minister wants to put that up to €2.8 million. This is back to the mad old days. These are gold-plated pensions. Does the Minister think it is a gold-plated pension where someone is able to retire on €100,000? How many people in this State does he think are able to retire on pensions of €100,000? Why does he think that the taxpayer should be subsidising that pension because that is exactly what happens. For every euro that goes in, the taxpayer puts in 40% of that. That is what the Minister is arguing for.

What we are doing here is having a phased change to this over five years, which addresses specific retention issues and supports promotion to particular positions. First, it is not near what it was. Second, the Government is not changing the chargeable excess tax which was recommended. Third, we are trying to respond to the retention issues which have been well flagged. I am sure the Deputy would be concerned if we could not fill particular positions in the public service as a matter of-----

I welcome the Ministers and their respective staffs. I congratulate them on their efforts to date and the economic performance which is satisfactory. There are always pitfalls that have to be identified and avoided, if possible, and provided for in order to ensure the smooth movement of the economy in the future.

On the commentary on foreign direct investment, the Apple tax and so on, we need to be cautious in the international arena. There is a danger in that we are moving from what was the Single Market into a series of national supports. That is lethal for this country and for all small countries. I have had countless arguments and rows with officials from Europe and so on. It comes back again and again to the fact that they want to respond to the issues that threaten individual countries, etc., but they have vast resources in comparison with the resources available to this country. There is a need to urge our European colleagues to get back to the European concept of the Single Market and rediscover Europe for the benefit of all. The person or business on main street Berlin or Paris has to be treated equally with the person on main street Belmullet, Drogheda or wherever. That is the Single Market. Europe as a single entity benefits all and each. Movement away from that, even by stealth, will lead to consequences that we would not wish to deal with.

People are asking about what we will do with all the billions. I fully recognise the advice that we do not spend it on day-to-day expenditure. That is an artificial subsidy which will do two things. It will give the public, the country, the banking system and the business system the feeling that this will go on forever and we can rely on it. We cannot rely on anything ever. Furthermore, we need to make absolutely certain that we are in a position to at least use it for emergencies, rainy day funds, national reserves or whatever the case may be. We know from experience that our national reserves did not last very long when they really came under pressure. It was not in years but hours that the attack had to be measured. The good advice is well noted.

However, it is a time when there appears to be something we did not expect. It was not meant to help us out. These new rules, which were introduced, and the fine on Apple were not meant to help this country. That was meant to dissuade, first, because there were other ways of doing that. It was not necessary to fine the alleged offender to that extent. They have done other things in Europe. They have warned people in Europe who have been asked to readjust and so on and it worked more easily and had less impact. Here we have to deal with it as it is.

The housing situation deserves a visit. I have mentioned this umpteen times. I have spoken to the Minister for housing too, and I know he is listening carefully. By the way, I want to congratulate the Government on achieving what it has done on housing. It is strange to think that during the lifetime of the Governments, it has provided more housing – or more housing has been built – than the Opposition has promised. That is an extraordinary situation altogether. I have never seen anything like that before. Oppositions are not normally slow in making promises. Even governments are sometimes not slow making promises. That is to be encouraged.

Funds are now funding the construction sector to a huge extent. They are impairing the fair trade of the system. For example, they intervene by buying up large and small blocks of apartments and reletting them, penalising the people who have to pay the high rents – and they are massive, appallingly high rents. The State needs to move in and authorise a system whereby we use some of our resources to identify the local authority areas where the housing situation is most severely felt at the moment and try to address it. The houses are already built. They are being built by the private sector. They are all ready to go but the people moving in on them now are the funds which will, in turn, rent them out to the tenants and the tenants will remain tenants forever. I would ask that be looked at. This is essential and will give an impetus to the housing construction sector that will be appreciated by the sector and the people looking for affordable housing, local authority-type houses or whatever the case. It is there and it is possible to deal with it.

On the national development plan, there is increasing evidence that bureaucracy and red tap is holding up various contracts and proposals. I ask that a special effort be made to accelerate the speed with which contracts can be realised and put in place and that the preparatory work be done in a much faster way than has been the case. It has a huge impact on our economy. We need to stabilise it and give the community confidence that the system is alert to what works.

Health and education, which have already been mentioned, continue to require careful monitoring. The population is increasing all the time. Health is an area that deals with the public directly and education is increasingly important in the context of population trends. I ask that the Ministers continue to take that into account.

Infrastructure has been mentioned at several meetings during the day. It goes without saying that we must provide this. There is no use providing part of what is required to develop the economy in the future.

We have to provide all the elements evenly across the board. Even the smallest intervention can have a massive impact on the speed with which we achieve our objectives. We need to make it happen. We are doing so already. The Government, the people, the business sector and the workers have the practice. They are willing to respond, so we need to do more.

Pro rata pensions are an issue I had an interest in years ago when I was in the relevant Department. In the course of our dealings, we all meet people who do not have sufficient contributions to obtain a full pension. We know the way it was; we changed it somewhat but there are still glitches and bumps in the road. I ask that we at least review the extent to which a person who has half the necessary contributions, three quarters or whatever the case may be, is favourably considered for a pension that is somehow commensurate with their contributions. Heretofore, contributions have been made and have been a subsidy for the State. There is no reason for that at all. I ask that this be considered. I am not going to tell anybody how to do the budget; you guys know well how to do that yourselves. I am of the view that it should be considered, however.

My next point is very minor, and I do not know what the Ministers can do about it. There is an increasing tendency on the part of public and private offices everywhere, that if a citizen makes a phone call, the phone is allowed to ring forever. If it is answered eventually, the call is automatically kicked on to somebody else. If you press button 1 or do X, Y or Z, you might be lucky in about an hour's time. Time is money. People do not have time to play around with machines and all that kind of nonsense. Please, can somebody press a button somewhere that would electrify the people who should answer the phone? Things are not so bad in their respective areas that they cannot pay somebody to do that. I will not comment on the banking system in that area because others have spoken about it already.

There is hidden inflation that I cannot work out. We have all had discussions with the catering sector in hotels, restaurants and so on. They are under pressure, there is no doubt about that, for whatever reason. I have heard mention over the years of a forensic examination of the cost factors involved, identifying where the threats are coming from. Some of the issues are real and threatening. Because those industries are important from the point of view of tourism and the economy, we need to do something about it and find out the situation. Some small businesses are closing. Strictly speaking, that should not be happening.

The other issue is how they recruit staff. They have to import staff, obviously, in that area on a regular basis. We have to smooth access to the necessary staff in hotels and restaurants to ensure that customers want to frequent such places. If we do not do that, they will not. I am sorry for going on too long.

I will kick off very quickly. On Deputy Durkan's point about the importance of looking after the Single Market, I think we all agree with that on this side of the table.

On the national development plan, trying to ensure that the money available leads to homes and improvements in our capital and economy and all of that happening quicker, we are making efforts to do that. I fully accept that we always need to do better.

On the issue the Deputy raised about inflation and the difficulties within the food service sector, the Government is well aware of the challenges that sector is facing at the moment. It is looking at what steps, if any, can be taken to support business that are dealing with high inflation. I think that is all I can say for now in response to several different matters that were raised by Deputy Durkan.

I thank the Ministers for the presentations. So many of the economic indicators are very strong, with full employment, interest rates facing south and strong tax returns. Many of the various bodies such as IFAC, the ESRI and others are pointing towards an attitude of "steady now" and putting aside funds towards a day when the figures are not as strong as they are today. The last budget saw the establishment of two significant funds, the Future Ireland Fund and the Infrastructure, Climate and Nature Fund. I would like to get a handle on the rate of putting funds into those at this stage. Are there any plans to change the rate or increase those funds, having them in a position for the day when things are not as strong as the economic indicators suggest they are today?

On the Apple money, I am conscious it is not part of the budget but many people are very conscious of it and of setting out different plans. It is probably spent a hundred times over at this stage with the various plans. I very much feel that we should be looking towards key infrastructure such as in housing, roads and water schemes. I am conscious that it is not in the current budget, but would like to get a handle on the timeframe for when that funding will become available to the Government.

While we can see that the economic indicators are all very strong, we live in a society and not in an economy. There are so many other indicators that should be influencing the budget. The well-being framework sets out quality of housing, biodiversity, access to education and many other key indicators that are important to society. Is there any way of saying how that well-being framework will influence the forthcoming budget?

I thank Deputy Moynihan very much. On his first question about the Future Ireland Fund and the Infrastructure, Climate and Nature Fund, there will be €10 billion between the two funds by the year end, with €6 billion there at present and €4 billion which will be allocated in quarter 4. Next year, the plan is to have a further €6 billion split, with €4 billion to the Future Ireland Fund and €2 billion to the Infrastructure, Climate and Nature Fund. Obviously, the intention is to continue that over the coming years.

The NTMA and the Revenue Commissioners are working through the deed and the determination in respect of the escrow fund and how that will move from its present position to the Exchequer. We expect that to take a number of months. Obviously we have to then get a final determination on what the actual amount is. Work is ongoing to do that but we expect it to take a number of months.

As the Deputy will be aware, we published the well-being analysis as part of the wider quality of life assessment which is conducted as part of each budget. That will be included again in budget 2025.

Different line Ministers are cognisant of that as they shape their priorities in their wider engagements with both myself and the Minister, Deputy Donohoe. It is something we have advanced in different budgets, included equality budgeting and green budgeting analysis as well. That is part of our wider publication which we make as part of the budget day announcement.

In the annex to the summer economic statement, there is a section regarding our well-being performance dealing with the performance of things that really matter within our society. That information is sourced from the CSO well-being information hub. It compares Ireland's performance across 35 well-being indicators and compares our performance to other countries. Very briefly, progress was shown in 19 of the 28 indicators, in five of the 28 we are moving backwards, in 15 of the 24 we are ahead of the EU or OECD average, and we are behind the EU average in seven. A lot of information is available there and will be available on budget day on the kind of societal performance levels to which the Deputy refers in his question.

I thank the Ministers. We are talking about all the money we have. It is dangerous times because it is about how we can spend it wisely rather than just throwing it around the place. I said it last year and I agree with the fact that we need to be putting some of this money into a future fund and a climate fund. We also have an opportunity to do something with some of this money to address a number of issues we have with regard to our infrastructure and housing. It is not to throw the book or more money at it; it is the way in which we are doing our business in delivering houses. I believe the local authorities have now scaled up, have developed the skill set to deliver housing schemes, and they are doing it. Deputy Durkan spoke about funds buying houses but at the moment a private builder building houses will not start them unless he has a contract to buy them all and usually it is the local authority. That is a bit counterproductive. We all know that the private housing market as such, as we knew it, where a developer built houses and young people would get a mortgage and buy them, is not happening because the houses are too expensive. It is not viable. What we need to do is to make sure the affordable housing scheme that we are putting in place will work not just in cities but in towns as well. In my case, the affordable housing scheme in place in Tuam is not working right. The numbers do not add up. The houses are not affordable yet. There needs to be tweaking of that.

If we take this morning's Central Bank's report on housing, it referred to developing and having serviced lands. When we do our county development and our local area plans, there is a core planning strategy by which we can only zone so much land. What happens is we are making it a scarce commodity before we start, so we are driving up the price of the house. We should be zoning a lot more land and then we should be servicing that land as quickly as possible. Some of the money that is coming at the moment should be used to deliver the services to sites so that they are available to be built on. Irish Water needs to have a huge change in the way it is doing its business because it is just not happening quickly enough. Then we have a situation where we have taken all of the wastewater treatment plants away from local authorities, which were operating them 20 years ago. In towns and villages in Galway, and right across the country, there are places where there are no wastewater treatment plants and therefore no houses can be built. We will not allow a private developer put in his own wastewater treatment plant even to the guidelines of Irish Water and under its supervision. Irish Water has to do it but it will never happen because it will not get around to everything.

My pet subject is transport. We have an opportunity now to deliver on the western rail corridor and on other rail projects that will add benefit to the regions in Ireland. It will also balance the fact that west and the north-west region is an area in decline. According to the EU, it is a lagging region because our investment per capita is not the same as the rest of Europe or the rest of Ireland. We have a huge opportunity.

There is a lot of controversy about Dublin Airport and how it is congested and this, that and the other. We have fine airports in Knock, Shannon and Cork and we should be making sure we build the public transport infrastructure so that these airports can grow and become economic drivers in their areas.

I hope the Minister will look at the western rail corridor, for instance. It is a project that could begin and be delivered within two years. It is not a project; it is a refurbishment as opposed to a complete new job. We have to take opportunities. I spoke about it earlier. With the processes we have in place - if we take flood relief schemes, for instance - it takes years to deliver a project. Infrastructural projects are taking years and every year we delay is costing more money. We have a situation at the moment where Irish Water is cancelling contracts. It is not going ahead with them. We have TII cancelling projects. Its budget for this year has been spent. It is not getting as many of the projects it was expecting to do done. We need to look at that without fuelling inflation. At the end of the day, investment in water, serviced sites, wastewater and affordable housing projects will give us a payback very quickly. It will be an investment, not an expense, and it will not be just throwing money away. We have to measure it in a way that we do not inflate the whole thing and drive it all out of bounds entirely. However, planning is definitely a big thing in terms of how we zone lands and get away from the culture of being very conservative and not giving us a chance to build these houses we so desire.

Coming to current spending and things like that, I have come from a disability matters committee meeting and its members were talking about transport. I hope that in this budget the Ministers will look at the primary medical certificate and the criteria set out for that because it is so important. People are being refused a medical certificate basically because the criteria are so narrow. It has been under review for a long time. This is going back to long before I was in the Dáil when transport supports were suspended. We do not have supports now for people with disabilities. That is something we should do. The other thing we should do regarding disabilities and older people is to make sure the review done on housing adaptations and housing aid for older people will be implemented or costed into the budget so that we can see more money being made available to meet the demands to try to keep people in their homes for as long as possible.

I will kick off there. I thank Deputy Canney. I entirely agree with his point that with so much funding being available through the Apple decision, it is imperative we make a decision regarding how we spend that money wisely. When Ireland experienced a gain such as this before, for example, the money that was made available for us in regional cohesion funding through our membership of the European Union, that money was spent very wisely for the long term and delivered benefits way ahead of what we could have hoped for or expected.

That is what I believe we need to do again in decision regarding the use of this money.

I agree with what the Minister, Deputy Chambers, said earlier, that the priorities we should have are in those areas of infrastructure that will really help with either building more homes and the long-term performance of Ireland. That is going to be a lot easier said than done because any State agency or Department that spends money already believes they should have access to this money and they should be spending it, and multiples of it. Making a decision to spend that money on a few, smaller number of priorities that can make a long-term difference is the right thing to do. If we do that and reduce the number of decisions, it gives us a better chance of being able to get good value for money overall because we will be making a smaller number of decisions on bigger projects.

The point was made that, by doing this, it will allow us to improve, for example, the use of zoned land. That is exactly what we could do. If we are making improvements in the area of water or the availability of energy, that in turn will allow us to make better use of zoned land and build more homes. The Government will be able to give an indication on this but we have an awful lot of work to do on this in the coming months.

I know western rail corridor is a long-standing interest of Deputy Canney and that there is a lot of support for it, but it is just an example of the kind of projects, of which there are many others, for which the case will be made to go ahead and build them. We need to make a wise decision on a particular number of things within our country. That is what the Government will aim to do in broad terms, and then we will have to make decisions to bring that to life in the years ahead.

On the point about aviation and Cork and Galway airports, all I would say is that while airports can win routes, ultimately it is the airlines that decide where they put the routes. In my experience of dealing with these matters a number of years ago, airlines want to go to an airport that is a hub with the rest of the world and is near a capital city, and that is a big factor. That being said, I know Shannon and Cork have been very successful at winning routes. They need to be supported to do that again.

I am happy to come back into my old brief. I know the wider ambition and focus within different regions on transport infrastructure and through the capital plans, which the Minister, Deputy Donohoe, has already agreed. Obviously, we are keen to advance some of them. We know there is further ambition to do more. The Minister, Deputy Ryan, published the all-island rail review, which is subject to further consideration. We have a process around the national development plan which underpins current investment in transport, but I understand the pressures in terms of transport infrastructure when it comes to other areas and priorities,. We are cognisant of that but we have a published NDP and projects that we are keen to advance. As I said, we are always engaging with communities on the further ambition that exists in the context of transport infrastructure.

I mostly want to ask about the future, the budget and all the rest but, given the debate we had in the Dáil today and the Apple tax issue, I just want to ask a question. My question is for the Minister, Deputy Donohoe, in particular, because he was around then. Does he and the Government regret the fact it did not take on the views of some of us in the Opposition back in 2013 when we asked the Government to bring representatives of Apple before the finance committee to question them about the company's tax affairs? The context, to remind the Minister, was the revelations that occurred over the Atlantic and the allegations that were made against Apple that it was using Ireland as a tax haven - Irish-registered companies - to siphon away loads of profits to companies that did not exist. In July of that year, I and Pearse Doherty both put down motions in the finance committee asking that representatives of Apple would be brought in here just to answer questions about those allegations. Those allegations led directly, as the Minister knows, to the Commission starting to investigate the issue that year and, three years later, starting the case, the legal action. The Minister, Simon Harris and Fianna Fáil TDs who were on that committee at the time, and Labour Party TDs, I have to say - sorry to rake up the past - all voted against even asking them in to answer questions. Does the Minister think in retrospect, given the decisions that have now been made, that he and the Government should not have done that-----

Absolutely not. A taxpayer is not accountable to the Deputy or to the Parliament for their tax affairs. They are accountable to the Revenue Commissioners and there is a clear line that we should not cross here. A taxpayer is accountable to the Revenue Commissioners, an independent non-political body, for their tax affairs. They are not accountable to Parliament for it.

It is a taxpayer and it is an employer. I strongly believe that if we get to a point that a taxpayer believes they are going to be accountable for the conduct of their tax affairs to a Parliament in public as opposed to the Revenue Commissioners, which is independent and private, that is a line and a division of powers we should not break. The short answer to the Deputy's question is that I do not regret that. I believe that it continues to be the right approach. I believe, furthermore, that if we were ever to step over that division of powers, we would see companies that are large employers and investors face highly political questioning about their private tax affairs that I do not believe is appropriate.

I think most ordinary people in this country would say that if they were accused of taking money from the people that the people should have had, they would be chased down by the State for doing that. In some cases they might even end up in prison for doing it, such as for TV licences and so on. I think most people would find that pretty difficult to stomach.

At the time, some of us said the company was guilty of aggressive tax avoidance and that it should be questioned about it. That is what the European Court of Justice has now said. I put it on record that I believe that is still happening. I believe new mechanisms have been found and that the tax expenditure figures, which I highlight every year, are just new channels through which the same companies are doing exactly the same things. I will keep saying it and I am sure the Government will keep defending the status quo, but the Apple case has confirmed that the concerns of some of us were well founded.

If the Deputy wants to reduce it to the understandable paradigm of the average person on the street, I think that if the average person on the street had a difficulty or their tax affairs were not in order, they would have a reasonable expectation they would be answering to the Revenue Commissioners about it and not to the Deputy. They would be dealing with it in private with the Revenue Commissioners. There is a real and important division of power and responsibility here that it is worth making the case for. Whether you are a large company, a small company or an individual taxpayer, your tax affairs have a degree of confidentiality, it is the tax collector that you are accountable to for them, and most of that happens in private. We will have to agree to disagree-----

The Minister has answered it. I am amazed that the Government does not regret what has happened. If we had had that money, it might have made a difference. We could now possibly do with that money but it seems to me that it would have made a dramatic difference to the current housing crisis that we are facing had we had access to that money then and had the Government pursued it instead of defending Apple.

To move to the current position, the Central Bank and the commission are essentially saying that we need to double the housing targets and they strongly emphasise social and affordable housing in particular, which in rough terms means we are going to have to double the social and affordable housing output. What is the Government going to do? Is it going to provide the funds necessary and use the Apple money to deliver the doubling of the housing we need to meet those targets, particularly in the area of social and affordable housing?

It is the same Central Bank that is also telling us not to overheat the economy. It is the same Central Bank that is telling us there are not enough workers in the economy to build the projects that we need and warning of capacity constraints. It is the same bank saying all of this. We have to listen to the other part of what it is saying, which is in addition to the part the Deputy is quoting. Are we going to use the money that is available to us from Apple to indirectly support building more homes in the future? The Government has not made any decision on that but I am sure-----

Let me finish. That is what we are aiming to do by decisions that we may make in relation to infrastructure. Leaving aside the money that comes from the Apple judgment, the Government is already running surpluses and we have the ability to invest, but the Central Bank warns us in the same voice about not overheating the economy and we have to listen to that as well.

Yes, I know. Nonetheless, that is a very worrying admission on the Minister’s part. Nobody is disputing that we need 50,000, 60,000 or maybe 70,000 houses a year but what the Minister seems to be saying is that it might be overheating the economy to try to deliver that. The Central Bank is talking about a timeline. Does the Minister accept that we are, therefore, facing a deficit in housing for at least a decade? The housing crisis is going to go on for at least ten years or more if the Central Bank is right.

When I say that I have to listen to all of what the Central Bank has to say, the Deputy finds that a worrying admission. Any construction company that I meet, or any engineering company I go to, tells me that it cannot find the people it needs to do the work that is needed. That is just the reality we are facing as an economy at full employment. What the Government will do, and what we have done over the last number of years, is use the additional money that is available to us to build as many homes as we can afford without creating further issues within our economy. We also need to build more schools. We need to invest in electricity, water and transport, which Deputy Canney raised earlier. We have to do all of that in a measured way.

The people will have to make a call on that because a decade is a long time. I believe there is the prospect that if future governments can maintain the momentum that this Government has started, we will make progress on the delivery of more homes in a way that will make a big impact on the needs of our country and society. I am confident that we can do that.

I have a question on another area. There was an announcement in July of this year that the recruitment embargo had been lifted in the health service. I did not know at the time but have been informed by workers in my local hospital, St. Michael’s, and subsequently by the National Rehabilitation Hospital people when I went to the opening of the new wing there, and it has been confirmed to me today by the INMO, that while the public announcement of the lifting of the embargo was made, something else had been introduced in June - the pay and numbers strategy. I understand the Department of Public Expenditure, National Development Plan Delivery and Reform was central to the introduction of what is an embargo by a different name on recruitment to the health service. I would like the Minister to tell us if that is the case and what it means. What I am being told in my local hospital and local health services is that people on maternity leave and sick leave are not being covered and posts that had not been filled back in December 2023 are now gone, which includes a public health nurse in our area telling me that 11 public health nurse posts disappeared because of this strategy. The workers in my hospital are completely demoralised. There are not enough physios, people working in catering or nurses. They are saying that whole areas of the hospital are not safe and that is also what the INMO is now saying, but nothing can be done because of this pay and numbers strategy, which is an embargo by another name. Is that the case and what role has the Department had in this?

First, I acknowledge that working in our hospitals, particularly hospitals that are very busy, is demanding work and our public servants who do this do great work on our behalf in demanding circumstances. I acknowledge and thank them for the contribution they make in looking after those who are sick in our country.

The agreement the Deputy is talking about is the agreement whereby we made an additional €1.5 billion available to the health service. It is the same agreement that made a separate additional €1.2 billion available to the health service. Therefore, the agreement that he is referring to made more than €2 billion of additional money available to the health service for this year and next because of the commitment of the Minister, Deputy Chambers, and I, given that both of us had to make the decision in the summer economic statement to put additional funding in place for the health service. That is the agreement the Deputy is referring to. We are in a place where there has been an additional allocation of over €2 billion to our health service yet the Deputy is trying to make the case to me that it is an embargo.

It is like any other part of our public service. The pay and numbers strategy is the same approach that we have for any other part of our public service, which is simply that given the availability of the money that you have, how many people do you expect you will be able to hire during the year and how many do you currently have recruited.

I thank the Ministers and their backup team. As always, we very much appreciate them attending meetings like this because it is very important and gives us an opportunity to engage with them. We appreciate their time.

I know the two Ministers are worn out from the pitches being made in advance of the budget but it would be neglectful of me not to do the same. Every one of us feels that the ground is slipping away from underneath us when it comes to the hospitality sector and that both Ministers have their minds made up, and the Government has its mind made up, not to change or even have a partial differential in the VAT rate.

I am not going to be so cheeky as to assume what the Ministers will do, but that seems to be the message they are giving out.

One thing neither of the two Ministers can be accused of is not knowing what is happening out there. I appreciate very much that they are working politicians in every aspect of what that means. They are aware that 50 restaurants every week are closing in the hospitality sector. They can imagine the massive knock-on that is having. I have heard people in government make the argument that it is a correction that is going to happen and that those businesses were not viable. However, the killing thing about it is that many of those were long-established businesses. They were families, couples working together, sons and daughters and all types of people coming together to work. They may not have been making fabulous amounts of money, but they were able to keep the door open and the light on as we say. Unfortunately, that has been taken away from them. I was really hopeful that the Ministers would do something because I come from the tourism capital of the western world, namely, County Kerry and, of course, Killarney, which no one here will dispute is the crowning jewel. We do hospitality better than anyone else in any other part of the world, and we are not boastful about it either. However, I have to say this on behalf of the people around the Ring of Kerry and all those lovely businesses that want to stay open. I make a plea to the Government not to put them out of business. I should not even say it that way because I know that is not what the Government wants to do. However, I am pleading with the Ministers to try to do something even at this late stage.

There are other basic things I have to get off my chest. Irish Water is in serious trouble because it does not have any money. The whole model seems to be breaking down. We never wanted more projects to be carried out than we do now, but we have never had as little money to do so. That is a very important issue. It would be very neglectful not to say that to the Ministers today.

With regard to the Apple tax case, my position on this all along was the same as that of the Government, in that no one wants to say no to money but, at the same time, we had to look at the bigger picture. We had to be so grateful to those companies, including Apple, which came here and gave us much-needed jobs. We were happy with the deal they had when they came here, and we were not looking to change that. In a way, and I said this earlier this evening, we won twice because we backed the companies. We were not looking for this from Apple but now it has been found by the courts that the State is entitled to it. Please God, if we get it, we will spend it all right. I have a couple of ideas for how we could spend it, but I believe, like everything, we should be prudent, and we should first of all ensure that any money we spend on capital projects is money well spent. I will give the Ministers the example, and I know both of them travelled on it over the last number of months, of the Baile Bhuirne to Macroom bypass and what that is going to mean. That was brought in at or under budget. It was massive value for money and it will be there forever. It will be there when none of us are here. We need more of that. We need the Adare bypass to be completed. We need a bypass for the tourism capital of the world, which I told the Ministers about earlier, the great town of Killarney. We are a victim of our own success and we need a bypass. We have a relief road but we need a bypass for the town and we need the funding for that. We are very disappointed in Kerry at present in that we had Transport Infrastructure Ireland, TII, projects going ahead. That Minister and his Department have cut that budget. In places like Bunane, from Kenmare down through Tahilla and Sneem and around the Ring of Kerry road, there were projects that were shovel ready. Our excellent people in Kerry County Council under the stewardship of our director of services, Mr. Frank Hartnett, were all ready to go to work. The tenders were out. We had our side of the house done but the rug was pulled out from underneath us. We need those types of situations to be addressed.

Coming back to what should be done with the Apple money, we should do things that are imaginative. One thing I always had in my head is that there is no reason in the world we should not have a bullet train in Ireland. They have bullet trains in every other part of Europe. Why do we not have a bullet train? If we want to connect it - I know it is a bit ambitious when we consider we do not have a rail track going out to Dublin Airport at present - we should actually connect Shannon with Dublin Airport. If that was connected by means of a bullet train, it would be a game-changer for this country. Could we afford it? Of course we could. Could we engineer it? Of course we could. Did we not do it everywhere else around the world? Why could we not do it at home?

When it comes to the spending of the Apple money, I would like every one of us who is elected, if we are still here and have not been given the chop by the electorate, to have a say and work together to ensure we give the people what they deserve, that is, value-for-money, common-sense projects. For example, every one of us knows what an LIS road is - it is a local improvement scheme road. People are going to be waiting for 20 or 30 years for those roads to be completed. We have more than 600 of them in County Kerry alone. At the same time, however, and I am just using Kerry as an example, if we were to get something in the order of maybe €20 or €30 million, we would wipe out that list and our local authority could do it in a very short length of time. All we need is the funding. It is the same throughout the rest of the country. Those roads are very important because they are the last road that takes a person to his or her home. Wherever you are going to, you have to leave your house and travel on that road. These are taxpayers, people who have worked hard all their lives. Would it not be great to see them get a boost from that Apple fund? There are common-sense things we should be doing and looking at. I would like to think the Ministers will take some of these things on board. I know they have the little matter of the budget to get out of the way before they start looking at the Apple money. However, we definitely have to be shrewd about how we spend it and what we do with it because it is not every day we get a lump of money like that in one go. Of course, I am relying on the Ministers' prudence when it comes to the money the Government has in this budget.

Recently I met with parents and people involved in dealing with people with intellectual and physical disabilities in County Kerry. We met in St. Mary of the Angels in Beaufort. An 80-year-old parent told me she found it easier to get respite services for her special son 30 years ago than she does now. I thought that was very telling. Why do I want to tell that to two Ministers with responsibility for finance this evening? It is quite simply because hearing a story like that hit me, so I know it will hit them. This woman found it easier to get respite and help to give her a break 30 years ago than she does today. That is a bad reflection on all of us, myself included. It is wrong. We should have services. We should have respite services readily available for special people. We should be able to ensure that people who are getting older do not have to be worried about their children. Even though many of the children we are talking about are now 40 or 50 years old, they are their children, and they are special children. They are people every one of us should be concerned about. They are the people we should be minding more than anyone else because they need our help and they need us to fight for them. I said at the meeting that when I had a forum at which to tell that story, I would do so at the first opportunity. I promised that lady I would do it and I am keeping my promise. It is important. It is a very important message. It is something we should all learn from because that should not be the case.

Chairman, I am sorry if I have gone on for too long; I apologise.

I thank Deputy Healy-Rae. I will respond to some of the remarks on VAT in particular. I know the importance of hospitality and tourism, in particular for County Kerry and for many businesses across the country.

We absolutely understand the pressure on businesses and small and medium enterprises in the hospitality sector in particular. We have a package of €1.4 billion available and we have said the predominant focus will be on ensuring that, as we have wage growth in the economy, we are not excessively levying workers in the context of what is available around the €1.4 billion. We acknowledge the concerns the Deputy has raised about the hospitality and tourism sector and, as he will know, we reduced the VAT rate from November 2020 to August 2023. The cost of that was €1.3 billion and it was an important and substantial support to a sector that went through a difficult period during Covid. A full-year cost of doing this would be €868 million, and that is challenging in the context of a tax package of €1.4 billion. We are engaging across Government on the wider pressures for businesses and the cost difficulties they are facing.

I will ask the Minister, Deputy Donohoe, to come back on the wider points around public services. We acknowledge the issues and some of the deficits in water infrastructure. That is why one of the priority areas for the AIB share sale will be focused on water infrastructure, housing and energy. I acknowledge some of the wider matters the Deputy has raised in the context of a very difficult case relating to disability services and other areas of infrastructural priority which the Minister, Deputy Donohoe, leads on in a context of the national development plan. Perhaps he could come back to the Deputy on the bullet train proposal as well.

I will, but just before I do that I want to join the Minister for Finance, Deputy Chambers, in what he said about the Deputy's point about children with intellectual disabilities. We are all aware of how difficult this is for families and the challenges they have in accessing services despite our best efforts. We certainly acknowledge the importance of the point the Deputy made.

On the NDP, when the Deputy began to talk about bullet trains, my heart began to beat a little quicker. At one point, I thought he was going to suggest the bullet train go to Farranfore Airport, but when I realised he was only suggesting Shannon Airport, that is a far more realistic proposal for us to consider. Things like the bullet train are only really possible in Japan because of the population densities they have and the way they do planning. This train in Japan travels at over 300 mph, but what we are aware of is how we can improve our rail network and how we can make it more fit for purpose and faster. While I am not sure we are going to get to the bullet speed the Deputy makes the case for, I am sure that in the decisions we will make in the next few years, it will lead to an improvement in our rail network. It will be better, cleaner, faster and more sustainable. While I fear we may let the Deputy down in his argument for the bullet train to come to Ireland, I hope he will see improvements in the years ahead due to the money I believe the Government will be able to invest in transport.

On the topic of trains, the all-island rail review and the western rail corridor, we have the opportunity to do what needs to be done there. You only have to look at the map to see the absolute lack of rail services from that area up to Sligo and Donegal, and the Minister, Deputy Chambers, will know this. There is an opportunity now and there is no excuse whatsoever not to do it. Cork Airport was mentioned and Galway, and we have Knock international airport, where much needs to be done to the development zone around the airport. I do not want to get into a shopping list but to Deputy Healy-Rae I would say we have lots of LIS roads in Mayo as well. We have hundreds of them. If he ever took a trip on some of them, which are not even LIS roads but regional roads, he would see the infrastructural deficits we have.

When it was mentioned that there would be a small number of decisions on investment, while that can be a good thing, it is very important to have those investment decisions regionally balanced and not purely population driven. That is what we have been doing. The weighting in terms of population is something that has to be looked at if we are ever going to make up for the legacy of the lack of expenditure in the regions.

The SPU projected a net revenue increase of €4 billion in 2024 but the fiscal monitor states that tax receipts of €59.8 billion were collected until the end of August. That was 12.6% ahead of the same period last year. Do we expect the surplus to be much in excess of €6 billion. Is there a figure for that?

To the Deputy's earlier point, I am always ambitious for Mayo, as I know she is, in terms of infrastructure. None of us forget our roots, I can assure her. On a serious point, what we have published in August is in line with profile except for corporation tax receipts, which are obviously significantly above profile. We will set that out with the White Paper we will publish on the Friday before budget day.

There is a deed of determination which was worked out when the escrow fund was established. The work has commenced on that by the NTMA and the Revenue Commissioners. I have been told it will take a number of months. There has to be a final figure settled on what it will amount to, but it certainly will not be before budget day, obviously. As we get that information, I will provide it to the Oireachtas and, indeed, to the public domain, and we will be clear on that. I have been told it will take a number of months.

It will be up to the people. We had some good presentations before the Minister came in. One of them was from NERI. Its representatives said in their statement, which really struck me, that we have an economy of winners and losers. Net household wealth is at record levels on one hand while material deprivation is rising on the other. Will the Minister speak to that. Are they right?

If we take the measures we have made from a tax perspective, for example, and the progressive nature of our decisions on tax over the last four years, a single person earning €40,000, for example, had an effective tax rate of 21% in 2020 and has an effective tax rate of 17% now. There has been a progressive nature to all of the decisions we have taken from a tax policy perspective. Obviously, when it comes to the social protection side, the Minister, Deputy Donohoe, can speak to the decisions that have been taken on spending, but we have been very much focused on low- and middle-income earners in particular and addressing issues of poverty. The Minister, Deputy Donohoe, will have some of the figures from the decisions we have taken in terms of cost-of-living and permanent measures.

I am not familiar with what measure of material deprivation NERI are using so I cannot comment on the point the Deputy made, but I definitely am aware of the challenges of inequality within our society. That is the main reason we have ensured each of the budgets we have done has been progressive.

As we have laid out each year in the budget, if we combine the core welfare rate changes that have been made, in particular the changes made to the working family payment and the qualified child increase, with the additional one-off payments that have been made, the budgets have been very progressive. Those who have the least have been protected most.

No. Deputy Conway-Walsh is correct that if the one-off payments were removed, the progressive impact would be less because a fixed payment of a large amount has a bigger impact for somebody on a low income, but they have been made available. These were happening at a point at which core welfare rate increases were below the rate of inflation. If we get to a point that core welfare rates are ahead of the rate of inflation, and the type of cumulative inflation we have had in recent years, then the one-off payments would not be necessary but we are not in that place at present.

Because inflation rates have decreased, there is definitely a strong argument, which I make, that the scale of the cost-of-living measures should reflect the fact that inflation has fallen so much. Just because inflation has decreased does not mean prices have done so. Prices have increased. We are all aware in all of our budget deliberations that even though on a macro level our economy is going well, people on fixed incomes have seen prices increase by one fifth in a couple of years. This is having a big impact on their lives. We are well aware of that.

I will reiterate what the ESRI said regarding material deprivation and the inability of households to afford essentials increasing markedly between 2022 and 2023, especially for children. While we congratulate ourselves on budget decisions, the figures relating to child poverty and deprivation speak for themselves.

Reference was made to inheritance tax. NERI has stated that inheritance tax is one of the most growth-friendly and progressive of all taxes, that it should be increased and not reduced, and that cutting it simply worsens intergenerational inequities. What does the Minister for Finance have to say regarding inheritance tax?

The current threshold has not moved for many years. Property prices have risen significantly. It is an issue for many families in communities throughout our country. Capital acquisitions tax is important. There is a separate campaign calling for its removal completely. It is important that it is there to have equity in our society. There is a necessity to examine the context we are in, the property prices that have changed and the feedback we all get in communities throughout the country where this is a serious pressure for certain people who are subjected to it in the context of the circumstances they face. We are considering this in the context of the budget.

The Minister would favour that over addressing the worsening intergenerational inequity. While he is here, I want to ask him about an issue that came up earlier today with regard to the Central Bank. The Central Bank has renewed the agreement to facilitate the sale of Israeli sovereign bonds. ISIF said earlier this year that it would divest from six Israeli companies active in the occupied territories. What is the opinion of the Minister on this?

As Deputy Conway-Walsh is aware, Michael McGrath was advised by the NTMA that it had decided to divest from several ISIF global portfolio investments in companies that have certain activities in the occupied Palestinian territories. This decision relates to shareholdings with a value of €2.95 million in six companies. It determined that the risk profile of these investments is no longer within its parameters. This is in the context of what-----

I know it is, but one would seem to contradict the other in terms of the Central Bank agreeing to facilitate Israeli sovereign bonds. Obviously, the money from this is used in the context of genocide. More than 40,000 people have been slaughtered in Gaza. It is of great concern for many people that this would happen. Can this be prevented from happening?

I can revert to the committee on this. Deputy Conway-Walsh is asking about the Central Bank, which is independent of me and the Department. What I will share with the Deputy is that the Government's position on what is happening in Gaza is that it is shocking and we have been clear on that in our statements in the Oireachtas and at EU and international level. On the matter relating to the Central Bank, it is independent of me in its functions and I will try to provide further information on the Deputy's specific question.

If the Minister could because it seems to be a contradiction. The Taoiseach says he tries to think every day of ways we can stop this genocide. We have to use every instrument available to us. This is why it is quite shocking when we see this. We are still waiting for the money message to come back on the divestment Bill. It is absolutely crazy for it to take this long. I know the Minister knows that the finance committee made a decision today not to progress any legislation until we have an answer from the Attorney General on the Bill. This was proposed by Deputy Doherty earlier today. There could not be a more serious global matter than that right here.

We are working within the Government. We have had constructive discussions in recent days. There is absolute agreement in Government and throughout the Oireachtas on ensuring the tax addresses hoarders in our country. This is important to everybody. There is also consensus on excluding active farmers who are now an unintended consequence of the tax as it exists today. The majority of active farmers with serviced land who sought to remove a residential zoning have not been able to do so. We are trying to construct a mechanism for active farmers who wants to continue farming so they are not subject to the tax. To answer the question, we have had good discussions on it. We are developing a mechanism and we hope to conclude it in the next week or so.

The most recent figure I have is a percentage because information is still coming back from local authorities. The latest information as of a week or two ago is that more than 90% of farmers who sought to exclude themselves could not do so in the process that existed in previous months. This is why it is a serious issue being raised by most political parties.

I do not mean to be obtuse, and I certainly would not be obtuse with the Minister, but it seems that something is missing from this discussion. I go back to my experience on local authorities many years ago when developing master plans for rapidly developing areas. It is open to landowners to have their land dezoned.

As far as the Minister is aware and his officials can establish, of farmers caught in what I would describe as a trap, has anybody asked for their land to be dezoned because they are so concerned about the imposition of-----

The process they entered into was an application to change the zoning from residential to the respective use they presently have. In a majority of those instances, based on the data we have received, that has been refused by local authorities. That is why we have this challenge and why we are trying to develop a mechanism that resolves it in a context of ensuring we have a tax, which this Government obviously advanced. However, the unintended consequence which has crystallised this year is addressed in the context of what we have seen happen in the past number of weeks and months in our wider engagement with farmers and communities in every county in the country.

As well as that, there is no single panacea for addressing the housing shortage we have. We are well aware of the labour shortages we have in this country in terms of even meeting the Government's own modest targets in housing delivery. This is certainly key to unlocking Ireland's potential to house those who need homes and enabling us to reach our economic potential. I hope there are no more delays on the introduction of this tax. I think it was introduced for good reason. It was a sound policy rationale, and there is a sound policy rationale for it.

Deputy Conway-Walsh referenced the question of inheritance tax. Rarely have so many column inches been dedicated to a question that is, in my view, a micro-issue. It is very much a minority sport, if we can describe it as such, that affects a small number of people. From an equity point of view, the principle of inheritance tax is important. I said to the Minister in the Chamber, on his appointment, that his generation especially is made up of those who are going without housing. There is a question of social equity and of solidarity between generations. Although I was not here to hear Deputy Conway-Walsh's remarks to the Nevin institute earlier, they did say that we have an economy of winners and losers, and it is socially destructive. The social fabric of our country is being undermined by the lack of availability of affordable housing for young workers. It is a real issue that I know the Minister accepts and understands. It seems to me that he is intending to introduce changes in the budget to income tax thresholds in the context of capital acquisitions tax. The ground has been well trailed. It seems we also have plans to amend the standard fund threshold when it comes to pensions. I understand the logic for that, and it has been set out in terms of it keeping pace with wage growth, inflation and so on. There are also other aspects of public policy where we could apply the same logic. If there were to be consistency, we would do that. The Minister responded to me recently through a written parliamentary question, where he and the Department do not appear to be considering, for example, adjustments to the tax threshold of redundancy payments. There has not been any change to that in years. The Minister for enterprise responded to me recently stating that the cap on statutory redundancy is €600 per week, based on what the average wage was 20 years ago. That was the last time it was reviewed. The average wage is now much closer to €1,000 and the statutory cap has not been changed. There is room for adjustments there for it to be consistent. If the logic is accepted that inheritance tax thresholds need to be changed because of the increase in property values, then to apply the same logic consistently adjustments would be made in other areas of public policy as well. We are, for example, set fair to continue to adjust income tax rates, bands, credits, the USC and so on, to take into account wage growth. I absolutely understand that principle and I accept it to a large degree. However, we are nowhere near the indexation of social welfare rates. If we were to have one on the basis of social equity, the argument would be that we should move towards the minimum accepted standard of living metrics that civil society groups would generally accept as being the right thing to do. It seems we are nowhere close to that. There are a lot of questions and observations there, but in terms of consistency, is the Minister actively considering adjusting the thresholds for inheritance tax? Would he then accept the logic of my argument that if he were to do that, and, for example, change thresholds in terms of the standard fund threshold, other areas of public policy should follow?

I appreciate the points raised by Deputy Nash. On the wider matters we will set out the total tax package and expenditure package on budget day, which up to now with this Government has been highly progressive in the context of changes to taxation and public expenditure considerations. On inheritance tax, we are considering that issue. I said to Deputy Conway-Walsh there is a campaign to remove it, which I do not think would be equitable.

I do not write the headlines. I would say that it has not been adjusted for many years, and there is considerable feedback on it and it is part of the overall consideration. The predominant focus of our tax package will be making sure there is a progressivity at its core and equity in the context of the other issues identified by the Deputy around housing. I want to make further progress in areas to support renters, for example. We want to do more when it comes to capital expenditure on housing and ensuring we drive affordability of housing in our economy. I agree with everyone who has said that it is the central issue and that doing more to advance housing supply and affordability in housing is the key issue of today. That sets the wider context of how decision points were taken on budget day. The Deputy raised other public policy considerations, and for the Government there are obviously choices just as there are choices in any given budget. For this budget, which is my first and this Government’s last, it is to ensure there is progressivity at its core. I think that will be reflected in the tax package we set out. I know it is similar with the Minister, Deputy Donohoe, and has been demonstrated to date when it comes to policy considerations and public expenditure and the core growth in areas like health, social protection and other areas. That is the context in which we are making decisions.

I have a couple of further questions. It was reported in an interview the Minister did with the political editor of The Irish Times at the weekend that an additional €3 billion in capital expenditure will be made available next year. That will involve the proceeds of the sale of part of the State's shares in AIB. Has a formal Government decision been made on the use of that money from the AIB shares?

I also have a question for the Minister, Deputy Donohoe. Additional resources have been made available to health for the remainder of this year. This is strictly speaking not a matter for him, but for the Minister for Health. When does he expect the Supplementary Estimate for the Department of Health to be brought forward and presented to the Dáil?

That was set out. Every Minister for Finance writes to the finance committee to set out the draft schedule of what is intended in the context of the finance Bill.

We communicated that to the finance committee so it can bring in preparations around scheduling the required meetings.

I thank the Ministers and appreciate their engagement this evening. I wish them well over the next couple of weeks. That concludes our public session. I thank the Ministers and their officials for attending; it is appreciated.

I ask the remaining members to remain behind. We are due to have a brief private meeting when we exit public session.