Professor Alan Barrett:

I shall respond to a couple of the points made about pensions, while my colleague Dr. McQuinn will address some of the housing related issues.

The Deputy made reference to the headline on pensions and the fact that costs were increasing over time. I will speak about the cost of the contributory and non-contributory old age pension. It is going to rise over time. It is absolutely critical, therefore, that we protect the system and discuss the funding pressures to make sure things will be in place. We in Ireland are very critical of many of the measures in place in Ireland, but the actual public social welfare pension system is one of the great success stories of Irish social policy. If one looks at poverty rates among elderly people going back 20 or 30 years, they were quite shocking. Nowadays the numbers are really small. It is important, therefore, that we protect the system by having conversations about the funding mechanisms. In particular, it is very hard to get away from the fact that we are going to have to increase contributions, reduce payment benefits or delay the point of payment. Mathematically, there is only so much one can do, but it is important to discuss these issues and come up with some blend. It is critically important that we protect a system that is working really well.

With regard to the suggestion that there be an enhanced pension or earnings related component in the public system rather than just in the private system, I shall give a small piece of the history. Dr. Shane Whelan produced a paper that was published by the institute in its 2007 quarterly economic commentary. In the same issue Professor Morgan Kelly of UCD produced a paper on house prices. Needless to say, the paper on house prices received a little more attention, not just on the day but for eight or nine years afterwards. I must get back to Dr. Whelan to tell him his time has finally come for his paper that should never have been ignored.

There were two key points made by Dr. Whelan, the first of which referred to the fees that applied to pension systems. We are talking about lower and middle income earners and it touches on the reason people have a problem in this respect. Deputy Joan Burton knows about this because the Department in which she was Minister commissioned work on the issue. The fees paid to private agencies make a significant dent in the final payment, whereas the Department of Social Protection administrates and runs a massive pensions system at relatively little cost. I am in a positive mood today in talking about successes. It is phenomenal when one considers the number of cheques issued each week and how well the Department does this. There is a sense of why not build on something that is working.

The other big point about doing it publicly concerns asking people in this day and age to hand over lots of money to private financial institutions to hold it safely for 30 years. It just does not work terribly well and a lot of people have a resistance to it. The State is in a much better position to give guarantees and smooth the risk. The issues, therefore, are related to fees and risk. These are not my ideas but the ten-year-old ideas of Dr. Whelan and it is important to put them back on the agenda. The possible link-up of USC and PRSI has opened that discussion.

My colleague Dr. McQuinn will address some of the housing related issues.