Bertie Ahern is a busy man. An Taoiseach has been caught up in the Northern Ireland peace summit, which finished two weeks ago at Leeds Castle, Kent, not to mention running his country.
But there are issues closer to home that agents want the Republic of Ireland’s prime minister to address. Chief among the gripes is his government’s hike in stamp duty. But agents would also like to know where he hopes to take the economy over the next five years, his thinking about the National Spatial Strategy, and whether he will support the spread of broadband to regional areas to accelerate decentralisation (see panels).
On the economy, Ahern is upbeat. But he also gently warns that the roaring 1990s, when it was all talk of the “Celtic Tiger”, will be hard to repeat.
But then the country may escape the worst of the recent international downturn, he says: “The Irish economy has been highly resilient and will continue to perform well and benefit from the global recovery.” He hopes to fulfil predictions that the country will see GDP growth of 4.7% this year – well above the Euro area average of 1.6%.
However, the days of double-digit growth are over, and interest rates are set to rise. “Ireland is now on a path to a more sustainable level of medium-term growth of around 5% pa.” He adds: “Interest rates are unlikely to remain at their current low levels.” Interest rates currently stand at 2%.
Likely rate increases is ominous news for a commercial property sector still smarting from the massive hike in stamp duty. In the 2003 Budget, it jumped from 6% to 9%. But if anyone was hoping the Taoiseach would reverse the move, they are in for disappointment.
Ahern quickly points out that the commercial property industry had enjoyed the 6% level since 1990, and that the new 9% level matches that of residential.
“It should be borne in mind that these rates will be met by businesses which have a very competitive corporation tax and income tax regime,” says Ahern. He adds that deductions on property can still be allowed via capital gains tax on transactions, which has a single reduced rate of 20%.
“The most recent indications are that the yield from non-residential property continues to increase,” he adds.
There is also no assurance that the government would consider abolishing stamp duty on secondhand houses for first-time buyers. Agents, a lot of whom have a toe in the residential market, say this is the only way to take the heat out of the housing market and curb urban sprawl.
Tax revenue
Ahern disagrees: “There’s no guarantee that any tax revenue forgone would accrue to the purchaser, as there would most likely be a consequent increase in house prices. It may well be that the effect would be an increase in the price of secondhand houses, given supply and demand factors.”
Stamp duty aside, Ahern says the government is taking steps to try and fill the capital’s empty offices. Figures from Hamilton Osborne King show an average in-town vacancy rate of 12% rising to as high as 38% out of town.
Ahern says the Industrial Development Agency’s strategy for Dublin is to expand major direct foreign investment projects and to move up the value chain.
He sees more companies being attracted to the capital thanks to the efforts of the IDA, Enterprise Ireland and the Dublin Enterprise Boards.
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Just how much support the government will be giving to the spread of broadband is a matter of keen interest to agents, as it will affect office markets outside Dublin. An Taoiseach says broadband expansion to the regions is a responsibility “for the fully liberalised private sector”, but admits that “it has been clear for some time that investment levels by the sector have not kept pace with the demand for broadband”. And the solution? Ahern says the government “is addressing the infrastructure deficit with a number of targeted interventions”. He adds that by the end of 2003, the government had spent around €60m on broadband projects, including the creation of metropolitan fibre trunks in 19 cities and towns. But he promises that a further €140m will be spent on regional broadband projects between now and 2007 that will boost cyberlinks to more than 90 towns across the country. |
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The objective of the National Spatial Strategy – launched in November 2002 – is to achieve a more balanced regional development through a better spread of economic activity, population and employment growth. One agent says it is “a dead duck without serious government action”. Agents want the NSS to succeed because it would mean better support for schemes outside the capital, but they believe the government is not moving fast enough. An Taoiseach, Bertie Ahern, begs to differ. He says a wide range of measures have been put in place nationally, regionally and locally. Ahern says pressure for change is mounting from the Department of Environment, Heritage & Local Government, which is co-ordinating the process of getting the NSS adopted by government departments and agencies. “An interdepartmental steering group has been established to facilitate this process,” says Ahern, adding that, at regional level, planning guidelines to support the roll-out of the NSS have been prepared. He adds: “Substantial progress is now being made on many major capital investment programmes supporting more balanced regional development.” He points in particular to the provision of key regional linkages under the roads programmes. In addition, there are “measures supporting the development of gateways, hubs and other large urban centres under the public transport and environmental services investment programmes”. |
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Leader of Fine Gael – the Republic of Ireland’s main opposition party – Enda Kenny has his own strong views of where Bertie Ahern’s Fianna Fail government is going wrong. And in some instances, he agrees with the country’s agents. While overall, Kenny is optimistic about the country’s economy, he cautions: “As leader of the opposition, I have to flag a warning about the pressure on our competitiveness, both in terms of our consumer prices and business costs. “There is a lot of evidence that we are now out of line with other advanced economies, and that our relative cost position is posing a threat to future economic success. Action across a range of areas – including fiscal policy, competition and regulation – is necessary if we are to restore Ireland’s international cost competitiveness.” Kenny also questions government pledges on decentralisation and the National Spatial Strategy. Although a supporter of decentralisation, Kenny says that the government’s announcement last December of a major decentralisation programme “was frankly more inspired by impending elections in June than by any rationalwell-thought-out plan.” Kenny adds: “There is great scope in Ireland for decentralisation, particularly of standalone executive functions, and I would prefer to see any government focusing on these types of service for decentralisation.” As for the NSS, Kenny says that, although the government launched it with a great deal of fanfare, “there has been precious little evidence that it will press ahead with the strategy”. He adds: “The decentralisation programme directly contradicts the spatial strategy and was a significant failure by the government to live up to its own promises in this area. “We need a greater integration of the NSS with industrial development policy, housing and planning strategy and the National Development Plan for roads, water and rail.” |
