Housing Minister Simon Coveney’s plan to help first-time buyers secure homes has been criticised by European authorities as it will simply push prices higher.
A number of key proposals in Mr Coveney’s ambitious housing plan have drawn the ire of the European Commission which described them as “costly and counterproductive” to sound management of the economy.
The latest European Commission report on Ireland’s progress since exiting the troika programme in late 2013 has also criticised the Government’s plan to cut the Universal Social Charge and suspension of water charges.
The Government has suspended water charges as part of its deal with Fianna Fáil and has committed to abolish the USC — a move which the EC said is contrary to a commitment to broaden its tax base.
The commission said such moves would represent a backward step from the progress made under the troika programme.
At his party’s think-in in Carlow, Fianna Fáil leader Micheál Martin said pensioners must be prioritised, leading to speculation that he will insist on a €5 increase to the weekly pension.
The EC said such calls to increase government spending will have a “negative impact” on the public finances, questioning whether increases in tax revenues will continue in the years ahead.
However, in respect of the Action Plan for Housing, the report found that Mr Coveney’s plan to introduce a tax- based help-to-buy scheme for first-time buyers is “costly and counterproductive” when the supply of houses is constrained.
“Demand-side measures could contribute to further upward pressure on prices,” said the commission.
The report is also critical of the changes to Irish Water on foot of the suspension of water charges.
“Changes to the structure of Irish Water could be costly and might negatively affect the utility’s operation,” it added.
The report said Ireland’s economic adjustment had been “remarkable” but warned of a potential deviation from the prudential management of the economy in recent years.
The commission said the result of the Brexit vote represented an adverse shock, saying that consumer confidence could decline due to increased uncertainty.
Such uncertainty has pushed back the Government’s planned divestment of its stake in the bailed-out banks until 2017 at least, the report stated.
A spokesman for Mr Coveney said: “It is the minister’s intention to introduce a targeted supply-side measure for first-time buyers of new affordable homes. He is acutely conscious of the possible implications on the demand-side and for house prices. With this in mind he will be discussing this matter closely with the minister for finance.”
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