THE ESRI report contains policy proposals which will prove controversial with home owners and car users, including the abolition of mortgage interest relief and new charges on road users.

While taxpayers can now only claim mortgage interest relief at the standard income tax rate, the ESRI believes this relief should be phased out entirely. Mr John FitzGerald of the ESRI, one of the report's authors, described the relief as a "waste of money" yesterday. The report says that, if the relief was phased out, the funds can be used in social housing projects instead. The report also calls for developers to pay for the costs of servicing land "up front".

The report states that, in relation to urban roads, there is a need for greater charges of car drivers. It says charges are needed "in the context of attempting to achieve improved balance between demand and supply for urban road usage".

In conjunction with road charges, the ESRI favours parking charges, which, if fully developed, could replace road levies after a certain period.

It says "the zero charge on parking which applies to many motorists at their place of work and in large shopping centres" has to be addressed. It says that £200 million a year could be raised by charging for road usage and parking.

The report says motor taxes should more closely reflect the environmental damage done by cars. "This would involve raising the tax on diesel for instance," it says. Heavy goods vehicles because of the "damage they do to roads throughout the country" should pay heavier taxes, the report suggests.

The report says VAT on international air travel should be considered, although "it appears that unilateral action in this area is not feasible". It adds that investment in air and sea ports is no longer needed. The taxi services should be completely liberalised "as quickly as possible in order to increase supply".

Even the provision of cycle lanes is questioned in the report. It says the take-up of cycle lanes has been "very low" and no further investment should go into this area until a proper evaluation is undertaken.

The ESRI also calls for charges for water supply and waste water collection and treatment services. It says, while the issue of domestic water charges has often "become ensnared by local political considerations", the scope for introducing such charges "appears to be considerable". It says if domestic water charges are introduced across the State, demand for water will be reduced significantly.

The report says the abolition of third level fees was "undesirable" and says instead that those "who benefit from third level education should pay some of the cost through fees". In relation to training, the report suggests that in certain cases, trainees who directly benefit from courses should bear some of the cost.

In relation to agriculture it says the sector is too reliant on direct payments and income supports. "A reliance on income supports will only bring short-term relief and will not enhance the long run competitiveness of the sector," it says.

"In fact, income supports may frustrate structural adjustment either by slowing down the rate of exist from the sector or the take up of off-farm employment opportunities," it adds.

The report strongly signals that electricity prices will have to be increased. It says that energy should be provided on a "full cost recovery basis (including environmental costs)".

What this suggests is that the environmental damage caused by carbon dioxide emissions from the energy sector should be included in the cost of electricity to the consumer. This is not currently how the system operates.

On tourism it calls for the phasing out of undefined "passive subsidies" to the industry.