asked the Minister for Finance the steps that he has taken in order to prevent an increase in excess of 10 per cent in the consumer price index between May 1980 and February 1981 in view of the escalator clause in the national understanding.
23.
Ceisteanna—Questions. Oral Answers. - Inflation Rate.
22.
asked the Minister for Finance the proportions of the most recent 12 month figure for inflation which is attributable to budgetary decisions taken by the Government in 1980 and 1981; and whether the contribution of the 1981 budget to inflation was greater than that of the 1980 budget; and, if so, by how much.
24.
asked the Minister for Finance whether he anticipates any lessening in the rate of inflation this year; and whether he will make a statement on the matter.
25.
asked the Minister for Finance whether following the decision of Agriculture Ministers in Brussels any assessment has been made of its effect on the price of foodstuffs; whether the effect of higher prices for milk, butter, cheese and meat products will result in a further increase on our rate of inflation; and if he will make a statement on the matter.
26.
asked the Minister for Finance the plans the Government have to combat inflation.
I propose, with the permission of the Ceann Comhairle, to take Questions Nos. 22 to 26, inclusive, together.
The increase in consumer prices between May 1980 and February 1981 has been largely the result, directly or indirectly, of external developments outside our control, notably increased oil prices and the appreciation of certain major trading currencies.
Because the 1980 budget was later than usual, the increase in the consumer price index in the 12 month period to mid-February 1981 was artificially inflated by the effects of indirect taxation increases in that budget as well as in the 1981 budget. This distortion will not be reflected in the year-on-year increases in subsequent quarters. It is estimated that the 1980 and 1981 budgets added 3.8 per cent and 2.3 per cent respectively to the consumer price index. As the figures indicate, the contribution of the 1981 budget was 1.5 per cent less than that of the 1980 budget.
I anticipate that the rate of inflation will lessen later in the year, despite the likely effect on food prices of the recent decision of the Agriculture Ministers in Brussels. The decision is expected to add 1¼ percentage points to the CPI over a 12 month period.
It will be appreciated that the imposition of the increased indirect taxes was necessary to pay for the substantial improvements in direct tax allowances, social welfare benefits and other concessions introduced in both the 1980 and 1981 budgets, and which the Government felt should not be met by increased borrowing. Furthermore, I should point out that the indirect taxes bore mainly on discretionary and less essential items of consumer expenditure.
The Government continue to adhere to a firm anti-inflationary policy. Price control has been used to ensure that the impact of these developments on prices is no more than is warranted. Government appeals for pay moderation have been designed to avoid an inflationary spiral in which earnings rise in response to unavoidable externally generated price increases leading in turn to further rises in prices here. We have also supported the anti-inflationary stance of EEC economic policy while of course stressing the need to sustain output and employment. The reduction of inflation is one of the central aims of the Government's medium-term plans now in preparation.
Would the Minister agree that increases in basic foodstuffs such as butter, eggs, cheese and milk arising out of the recent decisions by Agriculture Ministers will have a very great impact on the living standards of the medium to underpaid sections of our community? Does the Minister agree that the case should be examined in relation to subsidising a selection of foodstuffs? While one applauds the possibility of an increase in farmers' incomes does the Minister agree that the living standards of people on low incomes should be protected?
Obviously the Government will consider any situation as it arises. The Deputy will appreciate——
There is no conjecture about it, the situation will arise.
We do not know when. It will add 1¼ per cent over the whole year.
That is the Minister's estimate. The Minister will agree that there are higher estimates.
Any estimate which I give to the House will be reasonably accurate——
Except for foreign borrowing.
Except for the Minister's Budget Statement.
We will come to that later.
Would the Minister consider introducing subsidies on some foods?
This is a matter which the Government will have to consider at the appropriate time. The Deputy is now entering the fray which we have had for weeks from the Fine Gael benches. On the economic debate, the Deputy called for subsidies, reduction in taxation and borrowings. Which is the Deputy's priority——
The Minister should make up his own speeches.
I know the Minister is limbering up for the exercise at the weekend but could I ask him in relation to this important subject what percentage figure he would foresee on the introduction of subsidies? If these food prices, which he calculates at 1¼ per cent exceed two per cent, would that be an opportune time for the Government to introduce subsidies?
That is a hypothetical question. I have given the House the best possible estimate of what they will be. Obviously the Government will have to consider the situation if and when the time comes.
Would I be correct in interpreting the Minister's answer as claiming that the exceptional increase in the CPI in the last year is primarily due to factors external to our economy? Could I further ask if he is aware that the two items in the CPI showing the largest increase were tobacco and alcoholic drinks, both of which bore substantial tax by the Government in the budget, whereas the increase in fuel, for instance, shows a lesser rate of increase? Would the Minister agree that the actual breakdown in the CPI tends completely to invalidate his contention and, in turn, validate the contention that it is the Government's budgetary strategy, in particular with regard to indirect taxation which has led to the large increase in the CPI?
No, I do not agree with the Deputy that what he has said about the percentage increase is correct. I have said already that in this particular year ended mid-February there was the unusual situation of two budgets during that period. Both budgets added to indirect taxation. I explained very clearly during my budget statement and in the past two days in the economic debate that as a Government we believed that in the interests of social welfare recipients this was the area where we should get increased taxation in order to meet the needs of that important sector in our society. Is the Deputy suggesting we should have opted for direct taxation? As a Government we did not believe we should do that.
I am suggesting the Minister was incorrect in blaming external factors when it was the Government's own increases that were the factor. Those increases may or may not be justifiable but the Minister should not misinterpret the situation.
The Deputy is making a statement.
Arising out of the Minister's answer to five questions taken together in which he laid stress on the importance of wage moderation in the context of controlling inflation, will the Minister not agree that his own Government have given a very poor example in this matter? On the one hand, they conceded increases in the public sector that were beyond even what an arbitration board had recommended while, on the other hand, they are led by a man who twisted the arms of employers into accepting a grossly extravagant national understanding and which was recognised as such by the independent commentators the Minister was talking about recently.
This is another area on which I have asked the Deputy some questions. He is talking about an over-extravagant national understanding——
That is what it was called by the independent commentators the Minister was talking about——
I have asked the Deputy to suggest a different formula but he has not done so.
Is it not the case that in the settlements over which the Government have direct control, in other words in the public sector, and in the conclusion of the national understanding which the employers resented and about which they complained, the Government themselves have given the worst possible example with regard to wage moderation. We do not want any more of this hogwash——
I shall inform the Deputy of the situation because it appears he does not know as much as he pretends. The settlement of the pay element of the national understanding is for the Employer-Labour Conference, directly between the employers and trade unions, with the Government involved as employers only. The Government are directly involved with regard to the other aspects of the national understanding but the pay element is settled within the Employer-Labour Conference.
Is it not the case that the reputable independent commentators— although they could not be found yesterday—and the employers regarded, and still regard, the figure at which they were arm-twisted into settling the national understanding as excessive?
I have already answered the Deputy's question. The pay element of the national understanding is a matter for the employers and trade unions and the Government as an employer.
The Government are the biggest employers——
I am calling on the Minister to answer Question No. 27.