Mr. Sebastian Barnes:

I will address the issue in terms of the structural balance and unemployment. The specific point we make in the report is that when one looks at the official estimates of potential output, they seem to understate how deep the cyclical problems are now. The main component of that, at least in what the European Commission does, seems to relate to unemployment, where it interprets all the unemployment that exists today as being structural. It seems to us that is implausible. There is clearly a cyclical effect there. It does point to the fact, once again - we always say there is a lot of uncertainty around this - that structural unemployment is likely to be higher than it was in the past, particularly because of job losses, for example in the construction sector where there is a category of people and skills that are unlikely to be required in the same numbers in the future. In terms of public policy, that points to an important conclusion that labour market policies should work effectively and that a solution should be found for this group of people, whom it will be difficult to reintegrate into other jobs. It points to an area of some public policy effort or spending that should be prioritised because it is very important that unemployment does not become hard-wired. We must ensure that at some point those people start paying taxes again and stop relying on benefits. There is a policy conclusion from that.

I know the property tax is a very sensitive issue in Ireland. From the perspective of the OECD, which is my day job, property taxes are seen as a form of taxation that has a number of benefits. Most countries apply property taxes. In some sense it can be expected to have a relatively low impact on long-term growth prospects compared to taxing labour directly.