I ask everyone to turn off their mobile phones and devices or put them on silent. Before we begin, I wish to explain some limitations to parliamentary privilege and the practice of the House as regards references witnesses may make to other persons in their evidence. They are protected by absolute privilege in respect of the presentation they make to the committee. This means that they have absolute defence against any defamatory action for anything they say at the meeting. However, they are expected not to abuse the privilege and it is my duty as Chair to ensure that this privilege is not abused. Therefore, if their statements are potentially defamatory in relation to identifiable persons or entities, they will be directed to discontinue their remarks. It is imperative that they comply with any such direction.

I would like to advise members of the constitutional requirement that they must be physically present within the confines of the Leinster House complex in order to participate in public meetings. In this regard I would ask any members partaking via MS Teams that prior to making their contribution to the meeting they confirm that they are in the grounds of the Leinster House campus. Members are reminded of a long-standing parliamentary practice that they should not criticise or make charges against any persons or entity by name or in such a way as to make him or her identifiable or otherwise engage in speech that might be regarded as damaging to the good name of the persons or entity. Therefore, if their statements are potentially defamatory in relation to identifiable persons or entities, I will direct them to discontinue their remarks. It is imperative that they comply with any such direction.

This afternoon's engagement is on our medium-term fiscal and structural plan. From the Irish Fiscal Advisory Council, IFAC, I welcome: Mr. Seamus Coffey, chairperson and lecturer in the department of economics at University College Cork; Dr. Karina Doorley, member of IFAC and associate research professor in the ESRI and Mr. Niall Conroy, acting chief economist and head of secretariat of IFAC. The committee welcomes the opportunity to engage with you and I thank you for being here today. I now invite Mr. Coffey to make his opening statement.

The council is grateful to the Chair and members of the committee for inviting us to appear here again. We value highly our engagement with the Oireachtas and consider these opportunities an integral part of our work. As an official independent body established under the Fiscal Responsibility Act 2012, the council's mandate currently revolves around five elements, namely, endorsing and assessing the official macroeconomic forecasts; assessing official budgetary projections; monitoring compliance with fiscal rules; assessing the Government’s overall fiscal stance; and assessing if economic conditions have deteriorated. This assessment informs our recommendations to the Government as to whether contributions to the two savings funds should be reduced or paused.

Our mandate may be expanded in line with a 2024 EU directive, which assigns additional tasks to independent fiscal institutions, such as the fiscal council. This directive was due to be transposed into Irish law by the end of 2025, but that has not yet happened. The focus of the fiscal council is on the broader fiscal and macro perspective rather than any individual tax or spending measures.

The council is still assessing the medium-term plan. We gave our first impressions of the plan on 19 December 2025. This is what we will mainly speak on today. Under the reformed EU fiscal rules, in force since April 2024, member states must submit a medium-term plan. This forms the central part of the revised European fiscal rules. It encourages countries to move away from year-to-year budgeting and instead commit to a binding multi-annual path for spending, net of tax changes. The previous Government submitted a medium-term plan in October 2024, prior to the general election. This was submitted to comply with European requirements and the document was mainly technical in nature. After a general election, a new Government has the option to submit a revised medium-term plan. After several delays and missed deadlines, the Government submitted a revised medium-term fiscal plan late last year.

The council welcomes the publication of the plan. It sets annual limits on how quickly Government spending can grow. These limits are designed to keep public debt at safe levels. Faster spending growth is allowed if it is matched by higher taxes. The council has consistently stressed the importance of multi-annual budgeting. This medium-term plan could help Ireland move in that direction. The plan itself suggests spending in Ireland will grow at a fast pace in the coming years. Net spending is planned to grow at an average rate of 7.1% over the years from 2025 to 2030. Spending in 2030 is now forecast to be 50% higher than it was in 2024 and more than double the level of spending in 2019. The planned pace of spending growth is faster than Ireland has implemented historically. The pace of spending set out in the plan is much faster than in any other EU member state. The average net spending growth rate of all EU countries is 3.9% over the years 2025 to 2028. The growth rate of spending in Ireland is planned to be almost double the average of other EU countries. This follows a recent pattern. Since 2019, Government spending growth in Ireland has been among the highest in high-income European countries. Taking the plan at face value, net spending is expected to grow at a faster rate than the economy. The Government plans to run smaller surpluses in the coming years and this leaves Ireland in a more vulnerable position. Running surpluses is dependent on corporation tax receipts continuing to grow. The plan is based on corporation tax reaching €42 billion in 2030. The plan shows an alternative scenario where corporation tax remains at its 2025 level. In this scenario, the budget balance moves into deficit in 2028.

The revised plan suggests only €1 of every €8 in corporation tax will be saved between 2026 and 2030. Ongoing spending will increasingly rely on these receipts.

There have been repeated spending overruns in recent years. Even when looking only one year ahead, spending has gone significantly beyond what was budgeted for. Spending in 2025 was €3.9 billion higher than budgeted for. It remains to be seen if the Government will stick to this multi-year plan for spending. The European Commission is unlikely to take any action should Ireland breach its spending growth limits. As long as Ireland keeps its public debt below 60% of GDP and its deficit below 3% of GDP, it will face minimal EU scrutiny. Given how inflated GDP is in Ireland, this is highly likely to be the case.

The council assesses that the planned growth rates of net spending are above an appropriate level. Given that the economy is already performing well, it does not need support from fast increases in Government spending. This does not mean that the Government cannot commit more resources to resolving issues such as Ireland’s infrastructure. It means that the Government needs to make choices between increasing investment, increasing day-to-day spending or cutting taxes. If the Government ran bigger surpluses today and made larger contributions to its savings funds, Ireland would also be better prepared for future challenges. There are predictable costs coming from an ageing population and climate change. I thank the committee for its attention. We remain committed to assisting the Oireachtas in achieving fiscal responsibility and economic stability and we look forward to the committee's questions.

I thank Mr. Coffey.

I thank Mr. Coffey. He stated that expenditure is to increase by 50% between 2024 and 2030. That is fair enough. I presume that is not adjusted for inflation or population change.

Those figures are the total. They are what we call the nominal figures. Yes, there will be an inflation element to that. The forecast inflation over the period is around 2% and then the growth in population would be a factor as well. It is the growth in the overall nominal figure. You could look for a real figure but it will still get you above the long-term average.

Given that we have the fastest growing population in Europe and the fastest growing economy, we would be expected to have the fastest growing expenditure, albeit maybe not at the rate-----

I would not necessarily say it is true that the economy that is growing fastest should have the fastest growing expenditure. Typically, we might hope that fiscal policy would be countercyclical and that when the economy is performing well and does not necessarily need additional fiscal support, some resources would be kept aside for use when they are required if the economy was to perform more poorly, or that funds would be set aside to deal with more medium- and long-term issues coming down the track. Yes, Ireland is currently in a strong position if we look at the performance of the economy. We will have, in relative terms, a fast-growing population but it does not necessarily follow from that that spending growth will be at the highest level in the EU. In the case of this plan, it clearly is, by some distance.

Related to that, although it does not seem to be identified in the report, is the difference between current expenditure and capital expenditure, that is, infrastructure. We are constantly told that we have underinvested in infrastructure historically. Therefore, we are playing catch-up. That is clearly part of the spending increase and certainly in the last budget, the rate of increase in capital expenditure has exceeded the rate of increase in current expenditure. Attention should be drawn to that.

We would agree with that. There are infrastructure deficits there. Yes, capital spending is growing faster than current spending. Given their relative size, although capital spending is growing faster than current spending and given some of the infrastructure needs out there, that does seem appropriate. The overall spending growth is being driven by current spending, just because it makes up the bulk of the amount of spending. Capital spending is growing faster, but the key reason for that 7% rate over the coming years is current spending rather than capital.

Has Mr. Coffey identified any particular areas where he thinks current expenditure is particularly excessive, and what he would be recommending?

We would not necessarily look at particular areas where it is excessive. We might look at areas where it appears to be poorly planned. In recent years, we have seen ongoing overruns in areas like health, where a budget is set at the start of the year and is quickly exceeded as we progress through the year. In the case of 2025, while there were overruns in health, they were pretty modest. There was €4 billion of supplementary spending that went through. Some of those may have been overruns in areas we have not seen them in before, such as education, where there was €500 million or €600 million of an overrun. They did not seem to be linked to policy choices or changes. There just seemed to be poor budgeting there. In regard to specific areas, we would not necessarily view them as being excessive but we would like to see better planning and budgeting.

Mr. Coffey referred to corporation tax and the amount being saved. He estimated €1 out of every €8, or 12.5%. What would he suggest? I do not know what exactly the windfall is but it is certainly of the order of maybe 40% of the total corporation tax. It is impossible to estimate exactly. What proportion of corportation tax would Mr. Coffey suggest should be saved? Obviously, it should be a lot higher than 12.5%.

Estimating the excess is difficult. We can look at Department of Finance figures, which put it in that range of around 40% to 50%. We would be looking at, for example, the impact of this money on the economy. We know Ireland's corporation tax is unusual in many regards. It is unusual in that it is mainly paid by foreign companies, which are here to service international markets. When the Government collects this corporation tax and then subsequently spends it, it is like an injection or a boost into the economy. We are not in a position where the economy needs that type of fiscal support.

It is hard to come down with a hard-and-fast rule and say that 50% of the funds should be set aside. We are not as specific or explicit as that but we do feel that, at present, even with these bumper corporation tax receipts coming in, we see declining surpluses. For 2025, we are likely to see a surplus of around €10 billion. For 2026, the plan is to run a surplus of €5 billion. More and more of these corporation tax receipts are being spent. We have gone from, a number of years ago, spending in the region of 60% of it. We are now heading for close to 90% of those receipts being spent and baked into ongoing spending commitments. We do not have a hard-and-fast figure but we think we are building up vulnerabilities by having more and more of our spending dependent on this corporation tax and then injecting it into an economy that is performing well.

Maybe if a certain amount was put into infrastructure, that gives a totally different picture. I would emphasise that this distinction should be in all reports.

The economists will respond that money is fungible.

Mr. Coffey referred to spending in 2025 being €3.9 billion above the budget. Is there any way we should formulate our budget differently to make it more accurate? Ideally, you base a budget on the current year's expenditure or your most up-to-date information. That is always the best way to formulate a budget. We do the budget in October, so 2025 is not finished. In fact, I have been told that the final figures for 2025 will not appear until September 2026. Would Mr. Coffey suggest anything that could be done differently to give us a more accurate budget so that the likes of the €3.9 billion overrun will not recur?

On that, I suppose one of the key aspects when budgeting for the following year is what your spending level is in the current year. We have seen in previous years overruns from one year not being fully reflected in the budget for the following year, even when sometimes it can be quite apparent what the likely level of spending overruns are going to be, even come budget day.

It is based on the estimated outturn for the current year.

Exactly, yes. There are obvious budgetary pressures from an ageing population. We know prices are going up. We know all those factors are coming, so they can also be inputs into trying to forecast the following year's spending.

Cuirim fáilte roimh na finnéithe go léir chuig an coiste. At previous appearances before the committee, Mr. Coffey has indicated that IFAC's mandate may be expanded in line with the 2024 EU directive. There was an expectation that it was meant to be transposed into Irish law by the end of 2025 but that has not yet happened. Does Mr. Coffey have any more information on that or why it has not been transposed into Irish law? Has he heard anything else?

Not particularly, no. We understand there are some complications about existing legislation and possible linkages to EU treaties but we have not been informed of the precise nature of the difficulties.

Mr. Conroy has no further insight into the timelines on that or anything else. Is that correct?

I do not have a great sense of the timelines. I think one of the issues that is probably still being resolved is how this actually occurs. One way that Governments often transpose EU directives into Irish law is with statutory instruments. There is, I think, a question over whether that is the appropriate way to go for this particular piece of legislation, given that it is quite large. It could be something that ends up being done via primary legislation, for example, which would typically be a bit more involved and would take a little longer.

I thank Mr. Conroy for that further information. My own comment is that this was meant to be done by the end of 2025 for compliance with that EU directive, so it is overdue and it should have happened by now.

On the substantive points that he is making, Mr. Coffey is saying clearly that the spending outlined in the medium-term plan, in his view, is too high. He states clearly that the planned growth rates of net spending are above an appropriate level. What, in his view, would be an appropriate level and can he explain how he arrived at that rationale?

If we are looking at spending growing over a medium-term period, what the economy can sustain and what can be done given historical growth rates, expected growth rates and forecasts of inflation, and if we look at the plan itself and the growth out to 2030, we are looking at inflation, as has been mentioned, averaging around 2%, and real growth of around 3%, which continues to be a pretty strong performance. We are looking at sustainable growth of the economy in nominal terms being around 5%.

That would be in line with the historical average going back decades. In the case of Ireland, we can be very significantly above or below that average. What the economy can sustain over the medium to long term is around that average. A total of 3% growth is possibly at the upper end of some forecasts, with inflation forecasts of around 2%. At times, spending can be increased. We have done so by more than the sustainable growth rate but our history suggests such spending increases are not sustainable and have to be reversed. There were periods when our spending went above the average. These tend to be followed by periods of reining spending back in. Looking at the average over decades, in line with the sustainable growth rate of the economy, we see Government spending has grown at an average 5%.

Is it fair to summarise Mr. Coffey's core argument by saying a baseline of about 5% is sustainable and that the economy will not be able to continue to fund annual spending increases of 6%, 7% or 8% over a prolonged period?

Our history shows that.

That is the core point. Mr. Coffey is saying that it can be done on a once-off basis for a couple of years but that it cannot be done over a long period, and that if it is done over a long period, it will force us into situations where more drastic cuts have to be made.

Within the plan, we are seeing reducing circumstances over the coming years. The margin or gap in respect of what might happen in a downturn, or if revenue were not as strong, is getting smaller and smaller. We know that economies go through cycles. We are currently in a very strong position, a high point of the cycle, but growth is likely to be slower in future years. There is a speed bump and we have seen a number of them in recent years. There is one that might have a very negative effect on the economy. Therefore, the vulnerabilities are being built up. History suggests we cannot sustain spending above the sustainable or average level over the medium to long term because the economy does not generate the resources to do that. If the economy could grow at 5% or 6%, allowing us to grow spending at a rate of 7% or 8%, we would see that. Over recent decades, and based on long-term data, we have not been seeing it.

In Ireland, we have deficits that need to be filled. In infrastructure, for example, we have had underinvestment of about 30% by comparison with our European peer economies. It is generally recognised that the gap needs to be closed, which requires additional expenditure. IFAC is saying this can be done if it is not done in other areas. Much of our expenditure is on wages in the public service. People have to be paid to do very important work. Cost-of-living pressures, inflation and all the rest mean people expect and will need pay increases. The question is how deficits can be closed in areas like infrastructure while still running public services and adhere to the suggested growth rate of 5%.

We agree there is an infrastructure deficit that has to be addressed, and that this is going to take some spending. The point is that if the Government identifies that it needs to increase spending in a particular area, such as infrastructure, revenue has to be raised elsewhere. The Deputy mentioned the public sector. That costs a lot of money to run. If revenue has to be raised elsewhere, there are options. The Commission on Taxation and Welfare has recommended broadening the tax base and a number of revenue raising measures that are actually referenced in the medium-term plan. Those are ideas to consider. If we want to keep net spending at a sustainable level but definitely need to increase spending on infrastructure, revenue needs to come from somewhere else.

But not from jeopardising the economic future of the country with unsustainable increases that are not funded over a prolonged period.

Exactly. If you want to inject a significant-----

That would be irresponsible. Spending is responsible if done wisely but unfunded expenditure over a prolonged period is economically reckless.

If you want to inject a significant amount into the economy sustainably, you basically have to take money out elsewhere.

To follow on from what Deputy O'Callaghan was saying, and to tie in with what Deputy Timmins was saying, we are talking about circumstances in which we have extra money each year, saving it and putting it into a sovereign wealth fund, rainy day fund or whatever the fund is named. IFAC is basically saying we should increase taxes to obtain the additional funding. In this regard, the witnesses talked about the medium-level taxes, but we have increased the tax base to a degree. We have imposed property tax and carbon tax in recent years. Would IFAC recommend increasing existing taxes or introducing new ones? Are we missing something? Is there a recommendation to have different types of taxes, or are we talking about an increase in rates?

One of the biggest criticisms of this year's budget was that the Government was not flexible enough on taxes, especially income tax, and the bands. There was pushback that we did not give enough away on tax. I am curious about the views of the witnesses on that.

We would not have strong opinions on which specific tax should be introduced. If spending is to be increased, a range of options is available. If in trying to meet our climate targets, we manage to increase the number of electric vehicles on our roads and reduce fuel consumption, there will be a hole in the Exchequer from the loss of fuel tax revenue, for example. The question then is how that revenue will be raised elsewhere. These are the kinds of issues that need to be thought about. There are other options, including consumption taxes, income taxes, social insurance contributions and wealth taxes. There are many options to consider, and it is not for us to say which is best. That entails a policy decision. However, the point is that if expenditure were to be increased on areas such as infrastructure, which we would favour, and if that pushed spending above an appropriate level, money would need to be taken out of the economy elsewhere. There are a number of ways to do that.

Would IFAC differentiate between capital and current expenditure? Capital expenditure, by its nature, is so mixed from a government perspective. It is not like in a business in that it is not about bricks and mortar to the same degree. Capital investment is often current expenditure in its own way.

There is an understandable distinction between current spending and capital spending, but from a government perspective the distinction is not necessarily as important as it might be elsewhere. It is good to set out a framework and consider the distinction between current and capital expenditure. However, unlike household expenditure, in respect of which a home improvement or upgrade might be viewed as once-off capital expenditure, government capital expenditure is something we expect every year. It happens continuously in transport infrastructure, schools, hospitals, communications and other areas that need upgrading. While capital spending can be increased, it must be sustainable, as my colleague said.

If we were to put additional funds into an economy with unemployment at 4%, there would be concerns about the impact on demand, prices and value of money. There is a distinction to be made between current and capital expenditure, but from a government and public perspective, capital expenditure should happen all the time and should not just be dependent or reliant on receipts that could be transient or temporary. In this regard, I am thinking of significant sums coming in through corporation tax.

I want to tease that point out now because I am conscious of time. Once again, I would like to use a business analogy. From an accounting perspective, you capitalise costs on your balance sheet – you have your expenses. There is obviously a blurring of the lines from a government perspective. When putting up houses, it is not like it is treating things like a balance sheet. It is all current expenditure in its own way. If IFAC is talking about increasing at a rate of 5%, how does it differentiate between spending it is comfortable with and spending it is not comfortable with? This is similar to the point Deputy O'Callaghan made about wages. If we keep spending on wages alone, the well will run dry and we will have nothing to show for it. Is IFAC differentiating in its reports between different types of expenditure? I read a paper this morning warning about spending too much. However, if we are building hospitals, roads and facilities such as terminal 3, we are leaving a legacy. Is IFAC capturing this distinction? It would be very different if all the expenditure were on wages and we all partied. How does IFAC differentiate between types of expenditure in its warnings and analysis?

There is a distinction between current and capital spending. They result in different outcomes, as the Deputy says. When you look-----

Is there a distinction in how IFAC analyses them? Perhaps my question was long-winded and that was the question I was coming to without realising it. Does IFAC differentiate between the two in its overall analysis or is all the spending taken together?

In the main, the spending is taken together. The net spending plan is overall spending, net of any changes in tax. However, it is right to distinguish between current and capital spending because the outcomes are different. With capital spending, you get the increase to the capital stock and you can assess the capital stock and see where the shortcomings are and whether they should be addressed. They affect economic performance and other indicators we look at. In overall terms, it is about the totality of what is being done and the impact it has on the public finances and the economy. That is where our primary interest lies.

Capital spending for the Government is not like capital spending for a household or a firm, where it can be one-off spending for expansion or development. For the Government, such spending happens all the time. It does not meet the criteria of "current spending" but is ongoing spending because it happens all the time.

Dare I suggest that "capital spending" is a term that should not be used in application to the Government? By its nature, all spending is actually current, according to what Mr. Coffey has said.

It is all ongoing. There are technical differences.

It is almost confusing to use the term "capital spending" in this context when it is not capital in nature.

One thing we in Ireland have looked at historically-----

It is more like repairs and maintenance.

-----is which part of our spending is the most procyclical, and it does tend to be capital spending. In the good times, when the money is available, we ramp up capital spending. When we hit a downturn, though, which type of spending experiences the most severe cuts? It tends to be capital spending. We are now 15 or 17 years past the 2008 crash and are still dealing with the consequences of the huge cuts to capital spending that took place post 2008.

I have come to the firm conclusion in the course of this discussion that it is misleading to use the term "capital spending" in this way. It misleads people. It is all current spending in its own way. I fully agree with Mr. Coffey. The history of this country shows that we stop building when we need to keep building. It is a false economy in the long term.

When we talk about all spending, a term we sometimes use is "ongoing spending" for things that happen on a repeated basis. There is a distinction between current and capital, but both types of spending happen all the time.

What is IFAC's view on wages and salaries? When I think of public spending, I do not necessarily think of extra hospitals, schools or whatever else that may look like. My instinct is to think of salary increases and more staff. That might be an increase to the Civil Service or whatever else it might look like. It is tooling up and then tooling down. Is that the way IFAC would analyse it? From the point of view of public spending, is IFAC seeing too much of that? Is it happy enough with the level of spending on wages, salaries and expenses?

More generally, apart from wages and salaries, we did a piece of work last year to compare various parts of Government spending to that of other European countries to try to get a sense of whether we were closer to Boston or Berlin in our approach to public finances. In many areas, Ireland spends slightly less than other European countries. That is particularly the case for things that are related to ageing. We spend less on pensions because we have a much younger population. The one area where we do seem to spend a bit more than our European counterparts is on health. We seem to get better outcomes than a lot of other European countries, so we are getting good results for the spending that is occurring.

Is that in health?

Yes.

We should get Mr. Conroy to speak on behalf of the Government.

That is in terms of objective and measurable things, such as life expectancy and people's attitudes to health.

Mr. Conroy is right. That is the truth. I do not disagree. The one thing we do not have, compared with many of the other European countries, is military spending. I imagine that is the case.

Yes.

As a nation, we have absconded from that for the past 100 years.

The average high-income European country spends approximately 2% of national income on defence. In Ireland, it is less than 0.5%. It is a good deal less than in other European countries.

Less than 0.5%. That is a minimum of a quarter of other countries' spending.

Yes.

It is now my turn. I will ask about the delivery of infrastructure. Are the costs of delivering infrastructure in this country higher than those in other European countries? The delivery of any infrastructure in this country seems to be 40% to 50% more expensive than in other European countries. Why is that the case?

One part is simply that Ireland is a higher income economy than many European countries. Wages are at a higher level here, which is a major contributor to any labour-intensive project. Another thing to which many people would point is our planning and legal system, which adds costs and delays to delivering infrastructure. We often think about that in terms of how it inhibits the private sector from building housing or other infrastructure that we need, but it also inhibits the public sector from delivering things at a reasonable cost. Those are two of the key factors that are most apparent in the cost of delivering.

There is also the lack of tradespeople.

Yes.

There is the lack of infrastructure in other areas as well. It is like having all our eggs in one basket.

Yes.

We are now going to the highly populated areas that have the infrastructure and are piling it on top of them. There is no infrastructure going elsewhere in the country.

I will move on to other European countries, the spend in our Departments and the delivery by departmental staff in the running of our country. Let us consider spending in the Departments of Health and justice, the cost of running those Departments and their delivery. We can then consider the costs of legal challenges, such as arose last week. It was revealed that it took eight years for a Medical Council decision. After eight years, the medical professional concerned admitted he should not have undertaken the operation in the first place. There were eight years of legal fees and payments to staff. This weekend, we heard that the Department of justice had spent eight years taking a number of gardaí to court on charges for which they were found not guilty. How does a Department budget for such matters? How can a Department budget for that expenditure, going into the future? I was in Rome before Christmas and asked someone what the average cost of an insurance claim was. I was told it was €300. A €300 claim there would likely be a €300,000 claim here, with legal fees and all the rest. How do we budget for mishaps in the Departments of Health and justice, going forward?

The Cathaoirleach raises a significant issue, and one that is beyond our remit. From a personal perspective, our processes and procedures, looking in, do not seem to be optimal. The Cathaoirleach referred to some cases of medical malpractice. It would not be uncommon to see media stories reporting instances of issues that arise during childbirth and are not resolved until the child is 12, 13 or 14 years of age. It seems to take a legal approach and a protracted period of time. We would be better off dealing with such cases at the time when the needs arise. If there are additional needs because of medical malpractice, we must ensure those additional services are provided to the families that need them rather than forcing them to go through the courts to get the money to pay for the services they have been using for decades.

The legal sector in Ireland has been a topic of debate. Post 2008, we ended up in an EU-IMF bailout and had the troika here. Many of the troika's reports referenced reform of the legal sector as something that would be beneficial. Much of what was included in those troika reports was achieved, including bringing the public finances back on track and some of the structural reforms. However, close to no progress was made on the legal side. We had external scrutiny saying that things should change, but they have not changed. It makes budgeting difficult.

Many of these issues happen on an ongoing basis. When they take eight, ten or 12 years to resolve, though, I would not necessarily think that budgeting is the most significant part. It is the impact on the families and people who need the support in response to these issues.

That goes to my point.

I take this from the base of how much could have been put into the likes of the health system. If you have a learning hospital where somebody is a qualified physician to do what he or she has to do and a mistake is made, you should then admit to what happened, fix the mistake and move forward. In Ireland, however, it seems to be a case of saying we will hold on now and will look to see the legal challenges there will be on this, rather than saying that in eight years' or ten years' time, we will have to deal with the same legal challenges. However, you will have taken eight years' worth of expense within our areas where we could have had a learning process. If your own child does something wrong, you correct him. The problem within our sectors, whether in the Garda or elsewhere, is they have a tendency to legal up and it takes forever to fix the problem. Eventually, you could have two Governments gone through and you still might have the problem, the legal expense and all the rest of it, whereas we could have invested that funding, there and then, onto a fixing prospect and could have moved forward.

The same applies in infrastructure. Some of the infrastructure projects in Country Limerick have been on the cards in government for 46 years. On the one hand, we are looking at the farming industry and saying there is pollution and this, that and the other and yet on the other hand, we are putting raw sewage into the rivers. We are fining them for it but we are doing wrong ourselves. It is also about the investment of putting all your eggs in one basket.

I will even bring it into Mr. Coffey's own scenario. Look at sports and the investment in the different sports. I suppose Mr. Coffey will be very happy after your county's start in the league. At the weekend, they had a good old run. That is sport and I have the utmost respect for anyone who wears a jersey, no matter what county he or she is from, because such people do without so much themselves to deliver something to represent their county. However, they are investing in different sports. I can see when there is investment put into different sports in different areas, whether it is hurling, football, soccer or rugby, the professionals get there and the game gets there. Yet when we look at our Department sectors where we are looking at reinvesting and if I go to the likes of the children's hospital - where we went over by €1.2 billion - they never took into account in the design of the building what it will cost to maintain a building that is curved and that has specialised equipment inside in it. It is an issue of forward planning, how do we simplify it, how do we learn from our mistakes, move on and use the money that we could save in the Departments to make sure that it goes further, as well as how we further invest.

We are overspending at present. There have been three increases to the minimum wage in the last two years. Inflation is rising and rising. I am worried that regardless of what we have, we do not have the infrastructure to keep up with businesses coming in here. The cost of doing business here is going to become too high and another European country will step in and say to businesses that it can deal with them at 50% less of the cost and they should come to it instead. That is my worry. Does it worry the IFAC?

It is something that can happen. We have experience in Limerick. You can go back to Dell, where those sort of figures were quoted when it moved from Limerick to Poland. It certainly would be a concern.

There are lots of structural changes that can be made. My colleague mentioned the planning system and the legal system but they seem to be pretty slow in coming through.

It perhaps goes back to the pro-cyclical nature of our spending. When times are good, we try to do things and that might be a time when they are most expensive. Then when times are bad or there is a slowdown, when things might be more reasonable and a Government should be taking a longer-term view, we cut back hugely, particularly in areas of capital spending. You get projects pushed back and delayed. Sometimes they do not even happen at all. We are hoping with this new medium-term plan that we get a more multi-annual approach to thinking and that Departments know that they will have a budget in three, four or five years' time and will say, for instance, that they will start this project in 2027, this project in 2028 and this project in 2029 because they know the funding is there as it has been set out, whereas at present, for almost all areas we do it on a year-to-year basis. We have a big set-piece for budget day, Ministers go in arguing about what their spending should be for next year rather than taking that more medium-term approach. Hopefully, if you have that better planning and that better view, you can get a better handle on the costs, maybe get a better handle on the planning and the legal side of it, and have things work more effectively.

There are clear areas where it has failed. The Cathaoirleach mentioned the children's hospital. We have been here before, but we have some modest successes. We can compare the additional runway in Dublin Airport to what they are trying to achieve in other countries. The costs in Ireland were-----

I would have a pinpoint on that one.

We have been over that one before.

When you could have invested in Shannon and Cork. You already have capacity in those areas. Without investing a penny on road structures or anything to get to them, we decided that we wanted to extend Dublin Airport. I understand the point, but common sense would be that we would fill the airports, such as Cork, which can go to 7 million passengers without any further infrastructure, and Shannon, which can go to 5.2 million passengers without any further infrastructure. Both of them are within 2.5 million or 3 million of their targets but yet we increased Dublin, which you cannot get in or out of, by 10 million. If we invested in those areas, we would be able to get the same flights that you have to travel to Dublin for, connecting flights and the investment, and the airlines would come into those areas if we allowed that to happen and pulled some of them out of Dublin. The Dublin people would be delighted with us because they might be able to get around their own city.

Does Deputy Timmins want to come in again?

I totally agree with five years, and maybe even 50 years, but certainly the whole idea of looking further out. Mr. Coffey is right. It is too outmoded. There is not probably as much a big bang as there was 20 years ago. In any normal business, you are not going to get it right but you need to predict five or ten years ahead. When you put numbers into any spreadsheet, it starts telling you things. It starts to say, "Look at the health. Look at the pensions.", or whatever, and maybe we should be allowing people go part-time when they are after 65, etc. It starts you thinking. I would certainly agree 100%.

We got that five-year plan that was published in December but I would like to see it even in more detail, more like the existing 12-month budget that we have. I could not agree more. Look long term and start thinking long term. Is it not a no-brainer?

Sorry, that is just a commentary.

We have the long-term plan to 2040 or 2050.

Future Forty.

That is up to 2065.

Following on from that, has the IFAC looked at Future Forty? What is Mr. Conroy's view on it?

It seems like a detailed piece of work they have worked on for quite a while. I think the idea is to try to highlight some of the future fiscal pressures that Ireland is going to face.

We know we are going to have an ageing population. That is going to mean more spending on pensions and on healthcare and a smaller share of our population will be of working age to pay for that. That, along with climate change, is the big budgetary pressure that we are going to see.

It something that you do not see in any individual year. It is something that kind of creeps up on you, year by year. That is why it is important to look at that more long-term view where those demographic pressures show up.

There is a lot of modelling going different ways but at the same time, it is testing different scenarios. Would it be fair to say that the one scenario that hovers over all of this is the corporation tax take and whether we can keep this going for as long as possible? Essentially, is that the one overriding fear that is ultimately there? I want to be careful how I say it almost. It is like the revenue of the economy is predicated on something that is an uncontrollable. Would that be the big factor of a lot of what the IFAC's thought is?

It would be huge. The Deputy asked if it is something that we can keep going. The issue is, of course, it is not in our control at all.

Is that, in essence, outside our control?

There were no domestic changes that have seen this enormous surge in corporation tax in recent years.

Because it is so inherently difficult to predict, what can the Department do with its projections but merely expect that it will continue at current levels? By the time you get out to the 2030s, expect it to reach €42 billion a year. It an incredible amount of money.

It is great to be collecting it. The concern would be that the public finances become reliant on it, if, as we see, an increasing share of it is spent. Even though you have €42 billion of corporation tax, the plan is to run smaller surpluses so that more and more of our ongoing spending becomes dependent on this corporation tax.

It is paid by a very small group of companies. It is highly concentrated and, of course, the companies are concentrated, not only in industries such as pharmaceuticals and IT, but by country. They are all US companies. It is a high risk and it is highly concentrated. It is growing.

As problems go, it is a pretty good problem for a Minister for Finance, but it is a concern.

It is a First World problem, to coin a term. At the same time, is there any historical precedent?

I suppose from an Irish perspective, we can look back to pre-2008 and stamp duty and property-related tax.

No, that was about a certain tax. I am just saying even elsewhere where-----

Some of-----

It is almost like a certain amount of oil came gushing into the country for a number of years-----

Exactly, and that is going to draw-----

-----and then it dried up.

We have the ongoing, not issue, but the ongoing example of Norway, which has oil reserves from North Sea oil, and it is sending that into what is now a huge sovereign wealth fund. They have a similar operation to us. However, their sovereign wealth fund now exceeds €1 trillion. An example that is used historically is the Netherlands with their sourcing of gas revenues in the 1960s and 1970s, which they pumped out into their economy. They actually felt that it undermined productivity and the ability for other parts of the economy to function because there was this sort of additional demand coming from an external source, that is, these gas revenues that were boosting it. Indeed, the experience of the Netherlands with those gas revenues in the 1960s and 1970s led to the coining of the expression "Dutch disease" whereby their domestic economy struggles because of this external demand being pumped into it. Therefore, we have things we can compare it to. It is hard to imagine a country having a similar gain on the tax side. Typically, when we talk about taxes in textbooks, we talk about tax being a withdrawal from the economy. It is taking money out of households and businesses. Then, the Government spends it and that is the injection. When it comes to Irish corporation tax, it is not a withdrawal from the domestic economy. It is coming from foreign-owned companies that are here to service international markets, so it is not subtracting from domestic demand. When the Government spends that money in, it is a net injection into the economy. As the Deputy said, as problems go, it is pretty unique. In a sense, we could call it a positive problem that one tax source is generating such large amounts of revenue. The concern is that the public finance will become dependent on it. It has an impact on the broader economy and then there is the inherent uncertainty of it - can we keep it going? It is not something that we can control.

I will add one point to that. The witnesses are the guys doing the warnings or whatever, and they are dead right because I had an additional warning that it is not just corporation tax. It is income tax and VAT on those very same companies.

Property tax on a house and car tax on a car.

That brings the figure close to €50 billion.

The Revenue does work on the sources of corporate tax. It is not necessarily fully by country and by company, but it does give a pointer. In US companies, there are about 200,000 employees. Their aggregate pay bill is around €15 billion. That gives us an average per employee of €75,000. That is well above the average for the overall economy. Given the nature and structure of our tax system, which, as my colleague pointed out is a very narrow tax system-----

There is around €5 billion in taxes from that.

-----we will collect the bulk of our income tax from higher salaries because of tax credits and the way the system is designed.

There is probably around €5 billion in tax.

Yes, from those companies alone, so not only is the corporation tax significant for the public finances, we say other taxes are, and that money is then flowing around. The base for that income tax is a bit more solid. We do have issues with the likes of Dell maybe leaving at certain times, but there is a kind of pipeline there and we have seen that employment grow. That will be a more medium-term concern. Over the last 12 months, it has been choppy waters with trade policy and tariffs and the uncertainty that the US has been generating but, again, the concern was not necessarily about 2026. The concern was 2036. Will the current investment or current plans be replaced? That is a risk, therefore, but it is a more medium-term one. The issue with the corporation tax is that change could happen pretty quickly. It could be a change in legislation in the US, a change in the profitability of the companies, a change in the structure of the companies, or, outside of the employment and investment, just how they set up their operations. It is right that, yes, the public finances are more dependent on the US companies beyond corporation tax.

Deputy Timmins jumped in on my time so if the Cathaoirleach does not mind, I will jump back in.

Go for it.

We talked earlier, and Dr. Doorley referenced that because the spending is growing, we maybe need to increase tax. I get that. We are spending more and so on. Is Dr. Doorley in her head putting the corporation tax alongside of it or away from it because, ultimately, by bringing in extra revenue, all we are doing is inflating our spending? Are we essentially saying that we should not actually be using that corporation tax and that should just be put away to one side? In theory, I get it; it is a sovereign wealth fund, but it is just the juxtaposition. Are we saying we should increase tax but, actually, our problem is that our tax rate is too high and that is what is, theoretically, falsely inflating our public spending? It is obvious from her answer as well that we should increase some other taxes.

The windfall nature of the corporation tax means that is not going to be a sustainable way to finance expenditure in the economy. When we say we need to finance extra expenditure somehow, it is through sustainable means that are going to stick around, not windfall corporation taxes. Therefore, it is things like income taxes or VAT or whatever it is.

As I said, it is a complex-----

It is not very politically palatable, of course, so it is a difficult one.

It is more politically palatable than a negative situation. As we said, it is not ideal. All this extra money causes inflation, which causes increasing costs, which, obviously, increases the need for people to have more money. Then, as the Chair alluded to earlier, increasing the minimum wage increases everything else. I mean every wage. I do not-----

It affects productivity then.

I have been in business all my life and have been self-employed all my life. The biggest thing I see at the moment is that the increase in the tax on fuel has gone up 100% from the point of view of the cost. We might take into account that electric vehicles and everything else are coming on board. We must consider the trajectory of electric vehicles and the average vehicle age in this country. What is the average vehicle age of cars in this country? It is between 2008 and 2016. I am a car fanatic, so this is what I do. However, the reason we are talking about taking fossil fuel vehicles out of this country is that it will never be affordable for it to be able to happen. That is our problem.

If we look at it from the point of view of farming and investment in a new tractor, it is €1,000 per unit of horsepower plus VAT. That is the cost. To have that electrified vehicle here, it would be €2,000 per unit of horsepower. It is unsustainable. What will happen then with that tractor, with AdBlue and the cost of making the packaging and all the other stuff associated with it, is that it will add another cost. I have family members who are contractors. From an agricultural point of view of replacing vehicles, it is a massive cost because of replacement issues. The cost of getting people to work is all based on fuel taxes. I have a couple of vehicles on the road. My fuel cost in a 12-month period went up by 115%. On that cost, if we work the back end, on a euro basis, the Government takes 43 cent per litre in every euro when it comes to diesel and 49 cent in petrol. The person at the pump only gets 3 cent or 3.5 cent. The rest then is the manufacturer that manufactures the fuel. The Government takes roughly 50% on every litre of fuel that is put into a vehicle. Out of €100, at a cost of 4.54 litre per gallon, the person putting it into the tank only gets €3.40 or €3.50; the Government is getting €50. That is for every €100. Take that to somebody who is coming in from infrastructure or transport networks. Some 83% of our goods come into Dublin Port. They are brought down the country by truck at seven miles to the gallon. That is why we are paying so much for fuel in this country. It is our transport network in this country and the cost of running the vehicles. It is not only the cost of running the vehicles. It is now being able to get adequate drivers to drive these vehicles.

It does not only go on that. We might look at our bus network. People can drive up to 70 years of age on the bus network, that is, a Government body bus network. In the private sector, they are saying people have to retire at 70. A person cannot take children to school if he or she is 70 or over, but a private bus operator can have a person who is over 70 pick up the children from school and take them to Dublin for a day out. They cannot take them to school, however, at a time when we actually need people. We have an ageing population that can actually do the job if they have the help to do it. We do not have the replacement people to come in and do the work. There is a lack of infrastructure. For anyone we do have in business, such as construction and all the different trades across the board, the cost of doing business is huge. We are talking about insulating our houses.

It is oil-based. Insulations are oil-based, and the cost of the oil properties in the insulation has gone through the roof. An average house that cost €6,500 for insulation has now gone up to €16,000 for the same house. It is oil-based.

If our average vehicle is between 2008 and 2016, and those are fossil fuel vehicles, our replacement electric and hybrid vehicles are nowhere near making up the gap because people cannot afford them. That is why it is easier to buy a new car today than it is to buy a second-hand car. People cannot afford to buy the new car unless they are retired or have a job in the Department. On those bases, the ordinary person cannot survive. It is our fossil fuels which dictate everything in this country - on the shelves and everywhere else.

We need to fix our fossil fuel base, if we do not do something on the tax base. In other countries, they looked at transport. When fuel went over €1, governments stepped in and subsidised it from there on. This meant the market for transport in this country did not increase. They have only brought it in, however, under a certain sector of transport networks. I could be drawing stone my own quarry or materials from a hardware company and you do not get the subsidy. However, if you are a haulier, you do get a subsidy. If you come into my business and haul in something, you get a subsidy, but if I am the person who owns the business and transports it all around the country, you get nothing because of the basis they are doing it on.

We need to look at the basis and how we can bring down transport costs. For the agriculture sector, we also need to bring down the cost of producing goods in this country. The Government is getting double the tax on fuel now because of the cost of it, when you go within five years of a base. That is a massive thing.

The Government can keep raising wages all it likes but the person getting the wages is no better off in the sector or workforce.

There is no doubt there is an issue with fuel taxes and the amount they are. I would not necessarily say it is a factor for us to recommend whether they should change, but if behaviour changes and we eventually move to more electric vehicles, we have looked at the significant fiscal impact that will have. As the Chair said, the amount of tax being collected on fossil fuels runs to billions of euro. It is probably in the range of maybe €4 billion to €6 billion, depending on what fuels are included. If there is a move to electric vehicles, those taxes levied on the fossil fuels will not be collected.

The EU had an initiative to try to accelerate the switch from fossil fuel to electric vehicles by 2035 by eliminating the sale of combustion engines by 2035, but that seems to have been pushed back.

Is it 2050 now?

Yes. If the pricing changes, we could still see that switch happen.

The Government still needs revenue to provide the services to undertake the spending, whether it is on transport or other areas. If the revenue is lost from a switch from fossil fuel to electric-based vehicles, it will either present a hole in the public finances and spending, and our taxes will have to be increased elsewhere, or revenue will have to be raised from the transport sector. We could be dealing with a situation in several years' time where we are looking at road pricing and paying per mile travelled. Fossil fuel and fuel use is a form of that. The more you travel, the more fuel you purchase. If that fuel does not have those taxes on it, I am not sure we could specify-----

If we do not have the infrastructure to support what Mr. Coffey is talking about, we cannot make those implications. If we look at the UK currently, the highest number of vehicles for sale on the second-hand market that are not selling are electric vehicles. The second-hand vehicles are not being sold. You can sell a new one, and incentives are there for a new vehicle, but as the years go up, people do not want to buy a second-hand electric vehicle. They will buy a second-hand diesel or petrol vehicle. Why? Because they know they can fix it and it will not cost them a fortune. If the engine blows up, they can get another one, put it in and get back on the road. The reason they will not do it for electric vehicles is because the batteries are outdated after so many years. It costs €7,000 or €8,000 to replace a battery. The new battery is not compatible with the old car, so then you are back to a wiring problem which means the vehicle is worthless.

That is where we are going. In theory, it is lovely to look at and you can write all the theses you like on it but, practically, looking at what is in other countries, electric vehicles are not working. Hydrogen-powered vehicles might work in the future, or something else. If you look at the trajectory of what is there on the market at present in this country, and the number of new electric vehicles being sold as compared with hybrids, diesel and petrol, it is different. When you put that against what Mr. Coffey has said about a possible road tax, implementing something like that cannot be done unless you have the infrastructure to support it, which is a fast train network, a rail sector and all these other sectors which have to be put in place first. If all the eggs go into the one basket, that will never be achieved.

On paper, it looks beautiful. Sell it to the public and it looks beautiful, but putting it into practice is not as easy. That is what I am trying to say from the point of view of Ireland, if we do not broaden our infrastructure network. A person in Cork who needs to travel to Dublin should be able to get on a train to get there. The train station should have parking facilities to make it easy for people to travel there in their vehicle. I cannot do that. It takes 25 minutes to get to the train station and then there are no parking facilities. If I do get there, there is no returning train to get me back to the place I need to get to, so I am dropped at a different railway station.

All that needs to be taken into account if people want to make these things work, but that is in a perfect world. We do not have a perfect world. We are taxing people out of existence by raising taxes and taking too much from the taxpayer. We cannot allow them on the ladder. From €120 per square foot five years ago, we are now between €187 now and €200 per square foot in building costs. How do I know that? I have been building all my life. I see it coming in.

On 1 January, across all concrete products from one company which was the cause of the pyrite in this country so I will not name it because that would not be fair, there was an 8% increase across all the networks. It owns 60% of the concrete production companies in this country and it raised everything by 8%. That is a huge issue. If we are to meet the targets IFAC has set, our spending will keep going in that direction. We are in very choppy waters if other European countries can produce infrastructure at half the price we can. A big concern I have is that we will have companies leaving these shores to go somewhere else. They might spend €1 billion here investing in a company but the projections could say it could save €1 billion in five years if it moves to another European country where there is the infrastructure to support its needs.

Does anyone else have any questions?

I think we understand one another at this stage.

That concludes today's session. I thank everyone for their attendance here today.