From a politician's point of view, the ESRI might not be so bad after all, writes Marc Coleman, Economics Editor

From today, the ESRI is no longer called the Economic and Social Research Institute. From today, and by government edict, the organisation has been renamed Electorally Suicidal and Really Irritating.

With heroic regularity, the ESRI continues to tell us what we need to do to run the country properly, ie in the interests of long-term and sustainable economic growth, rather than in the interests of politicians.

The draft version of the ESRI's submission to government on the National Development Plan (NDP) - published today in this newspaper - is just the latest incident in this outrageous behaviour.

The ESRI isn't alone. State investment agency Forfas joined the awkward squad yesterday, warning in its latest annual report that Ireland's economic growth is too driven by debt, consumption and housing. But this is hurting exports and may hurt future business investment as ever higher house prices lead to higher wages.

"This growth has seen a rapid rise in Ireland's cost base as consumer prices and pay costs have risen more rapidly than the EU average," the Forfas report warns.

Singing from the same hymn sheet, the ESRI draft report states baldly that the construction sector is strained to the limit and not ready for the additional €100 billion of spending that the government wants to throw at it

"While the funding may theoretically be there to close the infrastructure gap rapidly, the economy does not have ability produce all the necessary infrastructure over the period 2013 without squeezing out other important economic activity".

Overall economic growth may be lower than some years ago, but some sectors are growing far more strongly than then, most obviously the construction sector. Inflation for mining, quarrying and other building-related products has soared over the past year.

There are two ways to cool things down, the ESRI says. The first would be to lower private sector demand for infrastructure before any increase in demand from public investment. "The best approach would be to use the tax system to reduce private sector demand," it suggests bravely.

Now even ESRI economists have some political savvy, although how much is open to question. The draft report admits that explicit tax increases are not a runner and identifies an alternative approach: reduce demand by making users pay for using infrastructure.

In a chapter entitled "Accompanying measures", the ESRI argues that the NDP itself is not enough - our behaviour must change. New roads will just be filled by new drivers unless road tolling is introduced, it says. And once incinerators are operational, the government should charge incineration levies. The report even suggests considering the introduction of metered water charges.

The ESRI's bravery is, as always, commendable. But you'd have to conclude after reading the draft report that it was not really created to engage in economic research as such but rather to ensure that economists with virtuous policy ideas are kept so busy writing large reports (the present runs to 340 pages) that they don't get involved in politics.

In one respect, though, the ESRI's suggestions are politically sound as well as economically sound. It also calls on the Government to lower the capital spend planned for 2007-2013, from around €9.5 billion a year to €8 billion. This, it says, can effectively be done by delaying the implementation of the next NDP.

With economic growth likely to remain strong for the next three years, it recommends that the NDP 2007-2013 be back-end loaded, so that most of the spending occurs between 2010 and 2013.

There is one further crumb of comfort. Even if overall growth in the economy doesn't slow, the construction sector is unlikely to sustain its job count of 250,000 forever. Taking the ESRI's advice would create a safety cushion in the event of a downturn some years from now.

From a politician's point of view, the ESRI mightn't be so bad after all.

ESRI recommendations

•Introduction of more road tolling.

•Incineration levies to be introduced when incinerators become operational.

•Investigate feasibility of introducing metered water charges.

•Greater environmental regulation of waste management sector

•Increase in supply of adequately zoned and serviced land for residential development to drive down the rate of house price inflation.

•Strengthening the powers of telecoms regulator ComReg to enforce greater competition.

•Introduction of resource allocation model to improve efficiency of spending on infrastructure projects.