The Economic and Social Research Institute has said there is little or no scope for cutting the overall tax burden in the next Budget.

The ESRI said this was due to the Government being heavily committed to increased spending through the National Development Plan.

With economists increasingly worried about the risk of overheating, the ESRI has modelled the effects of increasing spending under the National Development Plan or of cutting taxes.

Either policy would increase economic activity, but while tax cuts have an instant effect through increased consumption, investment spending has a longer term payoff by raising the productive capacity of the economy and its ability to keep growing.

ESRI sees little scope for cutting taxes in the Budgethttps://t.co/cNBNrJsOaz pic.twitter.com/77KlZx5KJ3 — RTÉ Business (@RTEbusiness) June 19, 2018

Trying to do both at a time of strong economic and employment growth would blow a hole in debt and deficit plans.

Given the commitments to spending the Government has made in the National Development Plan, the ESRI sees very little scope for any reduction in the overall tax burden in the next Budget.

Just how little scope may become clearer this afternoon, when the Government publishes the summer economic statement, which is expected to emphasise a cautious approach to the economy and the public finances.

Speaking on RTÉ's Morning Ireland, ESRI research professor Kieran McQuinn said there was a danger the economy may start to overheat, if taxes are cut.

He added that the overall tax package should be kept neutral in the Budget, and that any cuts in personal tax rates should be offset by increases in taxes elsewhere.

Mr McQuinn said the economy has grown very strongly over the last number of years and is nearly operating at "full tilt".

Investment in services is needed, he said, following many of the deficits that have arisen, as a result of under investment during the recession.

Mr McQuinn said that house prices should continue to rise and that the increases are justified given the strong rates of growth in the economy.

In addition, he said, house prices had fallen by 55% in recent years.

However, he said, there is a problem with supply and this is driving demand for housing.