Plan for tax hikes to cool down economy: ESRI

House prices will continue to climb strongly over the next three years bringing closer the time when the Government may have to consider raising taxes to cool a potentially overheating economy, the country’s leading think tank has warned.

In its latest quarterly outlook, the Economic and Social Research Institute (ESRI) said the economy was not yet overheating but that the Government may have to start planning as soon as this time next year to take money out of the economy by raising taxes.

The ESRI said the budget next week needed to be “broadly neutral”, which may allow for small increases in spending and modest tax decreases in line with EU fiscal rules.