Limerick economist: Help to Buy scheme is 'bananas'

Budget 2017: Breakfast briefing

Nick Rabbitts

Reporter:

Nick Rabbitts

Limerick economist: Help to Buy scheme is 'bananas'

At the Budget 2017 breakfast were Stephen Keogh, Shannon Chamber, Billy McMahon, Grant Thornton, keynote speaker Dr Stephen Kinsella, Damien Gleeson, Grant Thornton and Ian Barrett, Shannon Chamber

A LEADING Limerick economist has described the government’s flagship budgetary measure, the Help To Buy scheme, as “bananas”.

Finance Minister Michael Noonan this week revealed a new income tax rebate of up to five per cent for first time buyers of homes values of up to €400,000.

In effect, this means the maximum break which can be gained on this is €20,000.

Addressing a Shannon Chamber/Grant Thornton business breakfast at the Radisson Blu Hotel this Wednesday, Dr Stephen Kinsella described the measure as “bananas. The government have employed a poor measure to increase demand.

“We don’t even know the details of this thing yet. What it has really done is infect everyone with positive expectations. People will just increase their prices,” he added.

Dr Kinsella, who is based at University of Limerick’s Kemmy Business School, also warned at the government’s current approach on capital expenditure.

Minister Paschal Donohoe pledged €4.5bn in terms of capital spending, including €319m on roads, 47,000 new social houses.

“We don’t know how to do capital expenditure. But we are putting €5bn into it. We think if we deliver €5bn to five different areas, we can solve problems. But in this country, we cannot take one thing and fix it, because every single competing interest has to have their stake in first,” he said.

To illustrate this, he said the biggest problem the country is facing is homelessness.

“Yet who did we give money to in this budget? Everyone,” he said, “With a country of 4.68m people, you’re not going to generate enough capital expenditure to change things unless you prioritise and do one thing after another. Unfortunately we have a system that does not allow it.”

Dr Kinsella said the €497m increase in spend in the health budget will not solve any problems, adding: “We have the most expensive health system in the OECD with the worst outcomes in the OECD and we just gave it more money. If you think that €1bn on top of €13bn is going to fix the health system, you’re wrong. It’s not the money which is the problem, it’s the structures, and no-one is addressing this at all.”

He described Mr Noonan’s sixth budget as a “cautious, dribbly dribbly budget.”

“Politics has trumped economics. The system we have provides for centrist, non-controversial outcomes like an extra €5 on benefits. These cautious things answer the question of what little bit do I get, but it never answers the question of where we want to be,” Dr Kinsella concluded.

Dr Kinsella was joined in speaking by Shannon Chamber directors Stephen Keogh and Ian Barrett, plus Grant Thornton directors Damien Gleeson and Billy McMahon, who gave a comprehensive overview of Budget 2017.

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