Dr. Conor O'Toole:

In general, I was going to make that point. We are talking about the cost-of-living crisis but the rental inflation difficulty has been there for some time. We already have a series of price controls in the market through the rent stabilisation measures. That is distinct from the international inflationary pressures we face through the energy and food price markets.

As both my colleagues have said, it is a fine balancing act between the type of instruments appropriate in different settings. If you were to put strict caps on food prices or energy markets, the issue is you can create distortion on the supply side. Firms will withdraw investment or may decide not to engage in those markets because they also face extreme price pressures. That is why in general we call for targeted, tailored measures which can insulate those households who are unable to carry the burden of the price increases but allow the general markets to function as best they can in such a high inflationary environment. The reason many economists do not like traditional price caps is that they have distortionary effects on the supply side of the market. In the current environment, when we hope many of these international factors are temporary in nature, it is better from an economic efficiency point of view to not distort the market and protect the households who require that affordability boost for the cost-of-living crisis in the short term.