Thursday 23 January 2020

Balance must be struck on Budget dig-out for builders

NEWS that the Government may next week unveil a Budget stimulus package for the building industry is welcome. But we must also strike a note of caution here. There is no doubt that the health of the building sector is an indicator of the health of the entire economy. By that yardstick we have to say that the Irish construction statistics are not encouraging.

One-in-four people currently unemployed is a building worker; there are about 75pc fewer people working in the construction sector than there were six years ago; and the industry is worth about half what it should be in a healthy economy. In summary, the Irish building industry is on the floor and valuable building worker skills risk being lost if this situation continues.

Added to that, we have a scarcity of housing in the greater Dublin area. Last month we saw housing year-on-year prices decline by about 2.6pc nationally – but by contrast there was a 10.6pc housing price increase in Dublin. Analysts put this down to a shortage of suitable houses and some even suggested that a return of the 'property price bubble' was a real prospect. This has also made rents dearer in Dublin, increasing pressure on young people in particular.

So, we broadly welcome the report today that government consideration is being given to a stimulus package for builders. Among the measures under consideration is a cut in builders' VAT from the current 13.5pc to as low as 9pc; an easing of the 2010 re-zoning tax; and perhaps other national infrastructure projects financed from the pensions' reserve fund.

There is also consideration of continuing with retro-fitting of insulation to homes and other energy-saving initiatives. Such measures would be accompanied by incentives and controls to increase builders' and their customers' tax compliance.

There are compelling arguments in favour of many or perhaps all the items being cited. But we must also sound a warning note for it was the rampant build-at-all-costs approach which played a huge part in setting this country on the road to economic ruin from 2007 onwards.

Yes, the building sector needs a boost. But a fine balance needs to be struck. Just as we see hopeful signs of economic recovery, we must not risk heading straight back to the bad old days powered by a false building boom.

Irish Independent

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