Oireachtas Joint and Select Committees
Wednesday, 22 September 2021
Committee on Budgetary Oversight
Pre-Budget 2022 Scrutiny: Irish Fiscal Advisory Council
Mr. Sebastian Barnes:
I would like to make three points in response. First, as well as housing, health and education, climate is a major issue. The investment needs that might be associated with that are potentially massive. That is something that we do not have much of handle on at the moment. That is where the climate action plan will be important. However, climate will require much more deployment of funds than health and education in the times come. This is not to say that health and education are not important.
The Deputy’s second point, which is important, is the various things may be driving housing, including the Government's investment plans and,as Professor McMahon said, private savings. One of the things that will do is that it will give a cyclical boost to the economy in the years ahead. That will partly feed back to the Government in terms of revenue. This would be a good thing. However, that is not necessarily sustainable as a source of revenue, if there is to be a temporary boom in housing. It would be nothing on the scale of what we saw in the early 2000s. However, it is one thing that will flatter the public finances in the years ahead. If one look at our projections for deficit, which is around 1.5% in 2025, the underlying position is much worse than that. It is a structural deficit, at 2% or 3%. We need, therefore, to be careful that we do not get confused by putting money into the economy, which would make public finances look better than they really are in an underlying sense.
The impact of house prices is always difficult to assess. We have private savings acting and we also have Government policy. One of the things we are calling for is more economic analysis around Housing for All. While there is a lot of information about what the Government is planning to do, there is not much of an economic assessment of what it expects the outcomes to be or on how it expects it to work. This information would be important in assessing whether that money will have a positive impact on the economy. We need to see a much better economic assessment from the Government on what it is planning to with Housing for All. That will helpfully tell us something about what Government thinks will happen to rents and house prices as a result of its own policies.