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Government warned over risk of cutting taxes and boosting spending

Published 15/09/2015

The OECD urged Finance Minister Michael Noonan to put money and ideas into tackling unemployment
The OECD urged Finance Minister Michael Noonan to put money and ideas into tackling unemployment

A leading international think tank has warned the Government about the risk of cutting taxes and increasing spending .

With the budget looming and electioneering under way, the Organisation for Economic Co-operation and Development (OECD) urged Ireland to use the revival in economic fortunes - the fastest growth in Europe - to solve the legacies of the country's bankruptcy.

The Paris-based agency urged Finance Minister Michael Noonan to put money and ideas into tackling unemployment and fix weaknesses in the banking system.

It also raised concerns about the rapid rise in property prices, both commercial and residential, and warned that subsidies for first-time home buyers would cause a further spike in prices and make it even harder for lower earners to get on the property ladder.

Ahead of next month's budget, the OECD c autioned over growing pressure in political circles to give back to a hard-pressed public through tax and spending after years of austerity.

It said the Government should be looking at developing a better housing rental market while also accelerating the repossession of homes and properties which banks are losing money on.

The OECD also warned about welfare traps and urged a gradual reduction in cuts to housing assistance and family income support as people return to work and see wages coming in.

Other recommendations include improving access and affordability of quality childcare, particularly for low-income families, more investment to improve water quality and reduce leakages, and the development of modern, agile, relevant and gender-inclusive apprenticeships.

The think tank said: "Determined policy efforts have boosted confidence and underpinned the robust, broad-based recovery now under way in Ireland. Unemployment is falling steadily, the budget deficit is declining, public debt has peaked and continues to fall and international credibility has been strengthened.

"These propitious circumstances are the opportunity to resolve the legacies of the crisis, including remaining unemployment and banking system weaknesses.

"There is also a chance to carry out structural reforms to ensure the recovery is sustained. Real estate prices, especially in commercial and residential property in Dublin, are rising rapidly once again, and pressures to narrow the tax base and increase spending are growing."

The OECD also said other priorities in the domestic economy could be to strengthen competition in the legal sector and ports.

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