Ceisteanna—Questions. Oral Answers. - Problem of Inflation.


asked the Minister for Finance if his attention has been drawn to the statement of the President of Dublin Chamber of Commerce to the effect that the Government failed to give a lead in tackling seriously the inflation problem; and if the Government are now giving attention to this matter so as to avoid a recurrence of a serious economic problem.

I have seen the statement of the President of the Dublin Chamber of Commerce to which the Deputy refers. I do not agree that the Government have failed as suggested. On the incomes front, to which the statement referred at length, I would draw attention to a number of specific steps taken during this year. First, there was the detailed statement issued by the Government on 24 January about increases in pay and other incomes in 1969. Secondly, the Government made clear in March last the dangers of an extension of the maintenance settlement throughout the country. Thirdly, the Minister for Labour and myself took the initiative in May to secure a reasonable Public Service Agreement weighted in favour of low paid workers. Fourthly, we have recently resumed discussions on the current economic situation with the Federated Union of Employers and the Irish Congress of Trade Unions.

On the general question of measures to avoid inflationary developments I would refer the Deputy to my reply to his Parliamentary Question of 23 October.

Is the Minister not aware that the average rate of increase in incomes was of the order of 12 or 13 per cent last year and this year, whereas the average increase in prices was 6 or 7 per cent per annum? This is a more rapid rate of inflation, as far as I am aware than the rate of inflation in any other country in Western Europe. Is the Minister not aware also, that this has been due in large part to the Government's failure to take any practical action arising out of the many recommendations of the NIEC in November, 1965, on incomes policy and would he now take some urgent action to implement those recommendations before the situation becomes critical?

I do not deny that we have inflationary problems but at the same time I would point out to the Deputy that, as he knows quite well, the world at large is in the grip of one of the most widespread inflationary situations it has ever known. This problem, as I have already indicated, is exercising the minds of the governments of all the developed countries. Our inflationary trend is a worry but it is not altogether out of line with what is happening around the world generally. I do not agree that the Government have been inactive in this matter. I think that one of the most useful and constructive things that have happened in this sort of situation in this country for a long time is the cooperation which we were able to achieve between the Government, the Irish Congress of Trade Unions and the Federated Union of Employers earlier this year. The type of agreement which we were able to reach for the public services generally should have set a headline for everybody concerned and I am not unhopeful that we may be able to do more as a result of these meetings that we are having at the present time.

The Minister is saying that these moves were made but despite them incomes are rising this year by 13 per cent. This merely highlights the extraordinary state of inflation that we have reached. Is the Minister not showing some complacency in suggesting that this problem is worldwide when in fact our position here is worse than any other country and can he say why, under Fianna Fáil, this is the position?

The situation is not worse than that of any other country.

Would the Minister like to suggest which European countries have an increase in incomes similar to ours at the moment?

May I ask the Minister what was the disinflationary action that the Government took between November, 1965, when the NIEC reported, and the meetings of mid-1969 with the Irish Congress of Trade Unions in relation to public service pay claims? Surely a gap of four years cannot lightly be set aside on the basis of one meeting by the Minister for Finance and the Minister for Labour?

The Deputy is out of touch in this matter.

I am closely involved with the matter.

There was a situation in 1965 when Deputy FitzGerald, among others, demanded vociferously that the Government do something about the inflationary situation that was then developing. When the Government did something about it, Deputy FitzGerald became equally vociferous in saying that we overreacted to the situation. I have already said that the management of an economy is not a very easy business and it would be very misleading for the Deputies to suggest that some magic wand could be used to deal with all these problems. The only thing we can do is to keep an eye on the situation and take whatever corrective action that appears to us to be necessary and appropriate at any time. It is equally as bad to over-react to a situation as to do nothing about it.

Would the Minister tell us how he regards the 16 per cent increase each year in Government expenditure? Is that the action the Minister is talking about? I do not agree with Deputy FitzGerald regarding increased incomes of 12 per cent which are a result of these large increases in prices brought about by the huge Government expenditure. Surely the Minister is the man responsible for controlling Government expenditure but he has not done so in the past four years.

With two notable economists on the other side of the House violently disagreeing with each other, I will keep my own counsel in this matter.

It is all right for the Minister to talk like that but Government expenditure has gone up by 16 per cent while incomes have gone up by 12 per cent. Are the Government, then, not leading the van?

Question No. 41.

The Minister says he does not have a magic wand but would he like to tell us what happened to the one he had which banished the crisis of which he spoke on 15th March?

The Deputy does his own trade union colleagues less than justice in asking that question because one of the main factors in steadying that situation was the responsible mature reaction of congress to the dangers of that time and the formula that we were able to work out.

What happened to the crisis of 18th March? It was decided to have a general election.

We met congress and between us we were able to take corrective action to deal with the situation.

The Minister was——

I cannot allow any further supplementaries on this question.

It is a very important question.

There are other important questions on the Order Paper.

The Minister was unduly generous to me in suggesting that I foresaw the crisis in 1965 and called on the Government to take action. I wish to point out that I was as defective as the Department of Finance in foreseeing the situation. May I ask the Minister if we will have an opportunity of having a debate on this subject because it is quite clear that we are in a position at the moment where a debate is very necessary. The conflict of opinion that is emerging here shows the necessity for an early debate.

There was an opportunity for such a debate when I presented my Estimate here before the House rose.

Does the Minister realise a lot has happened since then?

I am calling Question No. 41.

We will probably have a mini-Budget soon.