You have identified the key parameters of the budgetary arithmetic that need to be convincingly planned and committed to over the next five or six years. There was a good discussion of these medium-term budgetary issues, with only the exact quantities slightly overtaken by events, at the Foundation for Fiscal Studies/ESRI Pre-budget conference in October.

For me the questions are: what are the medium-term targets for non-interest spending and taxation as a share of GDP, and over what time period can these be achieved without deepening the recession.

My tentative answer is that we should aim to get back to where we were in the mid-1990s (say the average of 1994-98). That means more spending than in the early 2000s, but less than we have got to now. It means about the same tax revenues as in 2007, but that requires higher income and expenditure taxes given the collapse of stamp duties, capital gains and corporation tax. Convergence can probably not be safely achieved in less than 5 years. So we will carry an appreciably higher debt burden than today — but easily manageable. (The higher debt servicing needs to be factored in).

Colm McCarthy will soon be announcing a half-day event scheduled for Jan 12 at which I am sure this debate will be carried forward.

Patrick