Tuesday 25 October 2016

Young home-buyers a priority, Burton pledges

Howlin admits property tax will increase 'over time'

Colm Kelpie and Niall O'Connor

Published 16/09/2015 | 02:30

Labour Leader and Tanaiste Joan Burton TD
Labour Leader and Tanaiste Joan Burton TD
Brendan Howllin: taxes will increase ‘organically’

An international think-tank has urged the Government to avoid giving subsidies to first-time buyers, arguing it would push up property prices even further.

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In its latest assessment, the Organisation for Economic Cooperation and Development (OECD) warned that while recent property price hikes weren't being fuelled by a credit boom, the rises in both residential and commercial markets could be creating risks of "another damaging property cycle".

The Paris-based body backed the new Central Bank mortgage deposit rules as potentially keeping a lid on price spirals, and, with just weeks to go until the Budget, cautioned the Government against giving sweeteners to first-time buyers to help them get a foothold on the property ladder.

"The Government should avoid subsidies for first-time buyers, as these will be capitalised into prices, aggravating a potential price spiral and making it even harder for those with lower incomes to purchase homes," the assessment states.

"A more developed rental market would help moderate the property cycle, reduce household exposure to house price fluctuations, especially poorer ones that will be hardest hit if prices and rents continue to rise strongly."

However, Tánaiste Joan Burton yesterday differed with the OECD and insisted that incentives for first-time buyers must be considered.

While Ms Burton said no detailed discussion has taken place in relation to this Budget, she said that helping young people access finance to get onto the property ladder is a major priority for the Coalition.

"The issue of young people and others, who are in a position where traditionally they would have been able to afford to buy a house, clearly that's something that we want to see people who are in that position, being facilitated in terms of finance."

Meanwhile, Public Expenditure Minister Brendan Howlin said property taxes will "increase organically over time".

He was responding to a claim by the OECD that property taxes and water charges here remain low by international standards and suggested that as house prices rise, a moderate increase in the rate of the local property tax should be rolled out.

Mr Howlin said the focus in the budget is to ensure that the "pressure" of taxation is reduced on workers.

But he admitted increases in property taxes are on the cards in the future.

"Property taxes will increase organically over time, but there is a fair tax burden on people right now."

The biennial OECD report said that while strong economic growth has returned to Ireland and a robust and broad-based recovery is under way, the budget deficit remains too large and public spending pressures are rising.

And OECD secretary general Angel Gurria warned that much more needs to be done to reduce the crippling cost of childcare.

"Childcare costs are 40pc of the average wage - the highest in the OECD," he said. "And childcare is critically related to bringing more women on board into the labour market. Much more needs to be done to make childcare affordable, particularly for low income families."

Mr Gurria said the Government should make use of the rapid recovery to pay down debt faster.

"It's important to keep fixing the hole in the roof until the job is done," he said. "This is the best moment to fix the hole in the roof."

The OECD said the tax base must be broadened and more must be done to control health spending. It also said there needs to be a faster resolution through the courts of repossession cases, while skills shortages need to be addressed to help cut the numbers of long-term unemployed.

And it called for a slower withdrawal of housing assistance payments and Family Income Supplement as a way of overcoming welfare traps.

It also warned that productivity growth here has been falling for some time, with home-grown small and medium-sized businesses suffering in particular.

And it expressed concern that the recent deal on public sector wage increases could, in the "absence of appropriate structures for wage determination", lead to pressure for excessive wage increases.

Mr Gurria said Ireland is the "comeback kid" of Europe's crisis-hit economies and is likely to be the fastest growing economy in the OECD this year.

Budget Battlegrounds

Tax Cuts

The Coalition is expected to slash the Universal Social Charge by at least 1.5 percentage points next year which will cost about €400m. Tax reliefs available to the PAYE workers will be extended to the self-employed


The Government is planning to unveil a childcare package that includes various measures aimed at reducing the escalating costs for young families. It is suggested the package will cost in the region of €200m


Justice Minister Frances Fitzgerald is seeking €200m to overhaul An Garda Síochána’s IT system and buy state-of-theart vehicles to aid force’s crackdown on burglaries by roving crime gangs in rural Ireland

Tax Hikes

Finance Minister Michael Noonan has indicated his intention to increase excise duty on tobacco – a 50c increase would bring in €63m. The minister is also examining the possibility of increasing tax on alcohol


The HSE is demanding an additional €2bn to meet the needs of the health service but this has been deemed ‘unrealistic’ by Public Expenditure Minister Brendan Howlin


A tax credit for farmers worth around €150, and various agriculture tax reliefs due to end will be extended

Social Welfare

Tánaiste Joan Burton has committed to increasing the Christmas bonus for pensioners and social welfare recipients by 50c at cost of €120m

Capital Spending

Around €450m will be spent on nursing homes and €1bn on flood defence over 10 years

Public Sector Pay

Minister Howlin has already committed to spending around €300m on public sector pay increases

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