Warning over long-term economic growth

The heavy spending on houses and services will not guarantee economic growth in the long term, a think tank warned today.

The National Competitiveness Council (NCC) said the increased spending by households and Government had created high growth and employment in the economy.

But its chairman Dr Don Thornill said this debt-financed growth in consumption and construction would not last forever.

“In the long run, the further development of our dynamic and competitive export sector will be the platform on which the success of our economy is built,” he said.

The NCC was set up to report to Taoiseach Bertie Ahern on the key issues affecting Irish competitiveness.

In its eighth Competitiveness Challenge report, it said the economy had performed remarkably well with more than 1.9 million people in employment.

However, it warned that raising the level of corporation tax – currently 12.5% - would lead to higher unemployment and a fall in corporate tax revenues. It recommended that the tax base be broadened by introducing a property tax and giving local authorities more powers to raise revenue. Tax incentives for property investments such as hotels and nursing homes should be phased out.

Other recommendations include:

:: Making the 2002 National Spatial Strategy to drive economic development outside of Dublin.

:: Significant extra resources for the educational system and more private investment in third level colleges and universities.

Enterprise and Employment Minister Micheal Martin said the report identified a vision for the future of a dynamic and flexible Irish economy.

He said achieving higher productivity was now a real priority both for companies and government policies.

“Consistent productivity improvement allows us to be more competitive on the international market, to have higher standards of living and achieve more ambitious social objectives. If we don’t place a priority on higher productivity today we forego the opportunity of higher real incomes tomorrow.”