Dr. Kieran McQuinn:

I will deal with the overheating, the reduced VAT proposal and maybe the corporation tax forecasting. I will try to be as brief as possible because some of these issues were dealt with earlier. With regard to the overheating, we share the concerns of others such as the Fiscal Council and, more recently, the Governor of the Central Bank. Going back to the practice of building relatively large numbers of houses, up to 40,000 units per annum, for example, will certainly add a lot of economic activity and it has to be recognised that the economy, at present, is growing very strongly. We believe that it is growing at a rate of about 5% this year, which is on top of very strong growth rates both last year and in the previous years. It will certainly have that effect.

With regard to our own comments, there is renewed focus on investment at present. Many are talking about investment and the capital plan will be coming out shortly. What we in the ESRI have said is that we need to be careful about investment because of the economy's current position. We also need to prioritise the areas in which we need to invest. Over the past number of years we have argued strongly for the need for greater social housing. About three years ago or so, when I first started working on the commentary, we were struck by the lack of social housing activity. A sustained lack of social housing activity over time will clearly have huge implications, not just economically but also socially. We certainly think that investment should be prioritised in this area. Looking at where the fiscal space could go, for instance, particularly with regard to balancing the pressures of the clear need for more housing with the need to ensure that we do not cause the economy to overheat, social housing is the area we would target.

Our stance on housing policy overall could be summarised as wanting more social housing and more commitment to social housing. With regard to the measures that work or that appear to work, our research across other countries suggests that a site tax would be particularly appropriate, particularly in the Irish context. The chairman of NAMA has commented on the possibility of land hoarding. The cost of building houses is also frequently commented upon, and people such as Lorcan Sirr have identified factors such as development costs as an integral part of that. An adequately and accurately priced site tax could tackle that because there is a speculative element to much of the development land cost in that people can simply sit on the land and watch its value increase year on year without incurring any cost on themselves. The introduction of a cost such as a site tax would tackle this speculative element. A site tax, then, is certainly worthy of consideration. There is evidence of this from other jurisdictions such as Denmark.