Vol. 521 No. 5
11 Mr. Quinn asked the Taoiseach when the next quarterly meeting of the four pillars, under the auspices of his Department, to review and monitor the operation of the Programme for Prosperity and Fairness will be held; the matters likely to be on the agenda; and if he will make a statement on the matter. [16485/00]
12 Mr. Sargent asked the Taoiseach if the NESC will be asked to prepare a report on inflationary risks to the economy. [17301/00]
13 Mr. J. Bruton asked the Taoiseach if he has responded to the request from ICTU for an urgent meeting to discuss inflation; and if he will make a statement on the matter. [17302/00]
14 Mr. J. Bruton asked the Taoiseach if he will report on his recent meeting with ICTU; and if he will make a statement on the matter. [17303/00]
15 Mr. J. Bruton asked the Taoiseach if he will report on his recent meeting with IBEC; and if he will make a statement on the matter. [17304/00]
16 Mr. J. Bruton asked the Taoiseach if a date has been set for the next quarterly meeting to review the operation of the Programme for Prosperity and Fairness; and if he will make a statement on the matter. [17595/00]
17 Mr. Sargent asked the Taoiseach to report on any recent meetings he has had with the social partners to discuss current developments affecting the Programme for Prosperity and Fairness. [17608/00]
I propose to take Questions Nos. 11 to 17, inclusive, together.
Following on from a meeting between Government officials and representatives of ICTU on 13 June, the Tánaiste, the Minister for Finance and I will be meeting with ICTU this afternoon to discuss further steps to reduce inflationary pressures. With regard to IBEC, I addressed its biennial conference on Thursday last, in the course of which I set out Government policy on inflation and other issues affecting competitiveness. I will be meeting with representatives of IBEC, hopefully, on Friday to discuss the inflation issue.
The Government fully shares the concern of ICTU, IBEC and the other social partners at the implications of continuing high inflation for achieving the objectives set out in the Programme for Prosperity and Fairness. Working closely with the social partners, we are determined to overcome this challenge. Last Thursday, the Government announced a package of measures on housing. These measures will help to ease pressures in housing which is contributing significantly to the current inflation figures. They will also stimulate further increases in supply while at the same time giving full recognition to the needs of the first time buyer.
There are, of course, many other factors which are contributing to inflation. Some of these, such as oil prices and the relative weakness of the euro, are outside our direct control. Other factors, however, can be tackled domestically. For example, there are indications of excessive profit taking with regard to prices in certain services, including the food and drink sectors. The Government, therefore, has made clear that we will vigorously implement competition policy and, to that end, new resources have been committed to the Competition Authority.
The Government is also considering options for further measures to reduce the rate of inflation and, in this regard, careful consideration is being given to the proposals put forward by the Congress of Trade Unions and to the views expressed by other social partners.
The next plenary meeting on monitoring implementation of the Programme for Prosperity and Fairness will take place on 27 July. The main purpose of the meeting, which I will attend together with the Tánaiste and the Minister for Finance, will be to review progress across the operational frameworks in the PPF.
I understand that the National Economic and Social Council finalised its work programme at its meeting on 16 June. As I outlined in the Dáil last week, the work programme involves two broad research categories. The first will address the provision of "Information for Policy" and the second will examine medium-term strategic policy options in key policy areas. I have no plans to commission any further specific reports from the council.
I have three questions to ask the Taoiseach. In light of what has transpired, does he now think that the last budget was inflationary? Does he now accept that the criticism that emanated at that time, both at home and abroad, was validly based, and that his response to it and that of his Minister for Finance was over the top and prejudiced? Can he confirm that the Government intends to introduce a price control order that would have the effect of reducing the price of a pint of beer by 40p?
As regards the Deputy's last question concerning price control, we are examining some of those issues and will be discussing them today. We are examining the legal implications and the best way of proceeding. All those matters have been under discussion in recent days. The one area in the last budget where there was an increase was in relation to the health package, including the cancer package. That added approximately 0.88% to the latest calculation of the inflation rate. Most of the other issues had no bearing.
The breakdown done by analysts, including independent analysts, shows that the price of crude oil increased from $11 to $30. This produced an enormous increase in inflation. The increase with regard to housing was approximately 2% while the increase in the drinks area was approximately 1.3%. The increase in the food area was approximately 1.1% or 1.2%. Most of those areas come within the grocery order ambit so they cannot be related. The overall position is due to the weakness of the euro and the fact that there is a higher level of exports to countries outside the 11 states – soon to be 12 states – involved in the euro. This also has a bearing on inflation.
These matters must be challenged and addressed. All the indications are that if some of those matters are no longer issues at the end of the year, the rate of inflation will fall, although not sufficiently. This is why there is a need for more competition and increased controls. More support must be given to the competitiveness council, as the Government has done, and some of the measures it is considering in terms of how inflation can be driven down. This is what the Government is determined to do.
Regarding Question No. 12, does the Taoiseach agree, since the NESC was appointed by the Government and published its recent document on 16 June, that it is probably a good time to ask it to take note of current inflationary risks to the economy? Does he agree it would be a good idea for the Government to make such a request? Will he reconsider his response on that issue?
In relation to Question No. 17, in which I ask about recent meetings and current developments with regard to the social partners, does the Taoiseach accept that areas outside the immediate remit of the Programme for Prosperity and Fairness are also seriously affected by the current inflation figures in terms of business plans? It also has an impact with regard to farm goods, services and machinery and the size of the gap in society between rich and poor. This is part of the impact of inflation. Has this aspect been discussed in the talks with the social partners in addition to their particular needs?
As I said the NESC already has a full work programme. The NESC comprises representatives of the social partners. There are other mechanisms through which the inflation figures can be considered so we are not losing out on that front. Many accounts of independent economists, reports and indications are available to facilitate the examination of the inflation figures. There is no mystery about it. We know the position and we know what must happen.
I agree with the Deputy regarding the agriculture area. Inflation affects every area. Inflation in any economy is never good. It is always correct to try to bring price stability down to its lowest level. The economy is growing at a rate of 10%, but it is not entirely surprising that there are difficulties in some areas. The challenge facing the Government is to try to control those as much as possible and to ensure competition. This is identified throughout the world as the best way of dealing with this area. However, it is not always simple to do it in some areas of the economy. More can be done in certain areas and that has been highlighted independently. Change is usually resisted but it can be done in some areas.
However, it is clear in some areas that people are increasing prices because there are no complaints from the public. In the main, the vast majority of the public has more disposable income. When they are not complaining too much, there is less identification of the issues involved. There could be efforts with regard to an active campaign of highlighting price increases through the Competition Authority, which was done successfully in the past. However, some areas of the economy have not listened and continue to increase prices although no extra taxation has been imposed. There must be specific action in some of those areas and that is what we intend to do.
What about the position in relation to rented accommodation?
The Taoiseach appeared to blame the increase in inflation on the price of crude oil and the fall in the value of the euro.
And the fact that people are not complaining.
How does that explain the fact that crude oil is used by every other country involved in the euro zone and that they are using the same currency as Ireland, but their inflation is only approximately 1.7% while the rate in Ireland is over 5%?
Exactly.
Can the Taoiseach explain it?
The Deputy probably does not know that Ireland exports approximately 90% of what it produces. Some of those countries export approximately 15% of what they produce. This has an effect.
Exports do not affect domestic prices.
It has an effect when a country is importing crude oil and exporting its products. The Deputy knows that is the case.
There is no oil producer in the euro zone.
It has a proportionate effect.
Norway is not an oil producer. I respectfully suggest that the Taoiseach is talking nonsense by suggesting there is a difference—
Exports do not affect the situation.
—regarding the import costs of crude oil between Ireland and the rest of the euro zone.
Bertie-nomics.
Will the Taoiseach explain why there is a higher rate of inflation of over 5% in Ireland given that we have the same crude oil import costs as other countries in the euro zone? They suffer the same inflationary effect of a currency falling relative to the dollar as Ireland. Why does Ireland have a much higher rate of inflation?
Is it the case that the Government has been stoking inflation to gain cheap political popularity and that this was celebrated recently by the Minister for Finance, Deputy "Champagne Charlie" McCreevy? Two months ago he celebrated the precise factors that are contributing to the high rate of inflation. The Taoiseach is now trying to blame everybody else, as is usual in other areas, for things that are created by him and his Minister for Finance, as Deputy Quinn pointed out on Eamon Dunphy's show yesterday.
The time for questions to the Taoiseach has expired but Deputy Rabbitte indicated that he wished to ask a supplementary question.
There have been reports in the tabloids over the past number of days that the Taoiseach has decided to introduce a prices order on drink, thus reducing the price of the pint by 40p. Is that true? I nearly fell out of my chair on Monday night before "Questions and Answers"—
The Deputy could now fall back into his chair.
Did he hear the Minister say on Monday night on "Questions and Answers" that he agreed with the order I introduced in 1996, but that I had refused to police it?
The Deputy did not police it.
If we are now dealing with a matter of policing, which is a load of codswallop—
The Deputy did not follow it up.
—will the Taoiseach introduce a prices order? This is against the background of his statement a couple of weeks ago that he would do the opposite.
Does the Taoiseach accept that Ireland's reliance on imported fuel makes it vulnerable? Deputy Bruton mentioned Norway. It depends on renewable energy in the form of hydropower for most of its energy needs. Ireland should move away from its reliance on imported fuel if it is to regain any control, given that we gave away control of our currency.
My first question was not adequately answered. Does the Taoiseach consider, with the exception of the increase in tax on cigarettes, that the rest of the budget introduced by his Government was highly inflationary? Does he have any proposals to change it?
Deputy Quinn will have noted in the recent OECD report that it urged the Government to continue reducing taxes. It believes that this is correct for an economy that has so many young people and a growing labour market; the labour market grew by 6% last year. I am glad our labour market growth is also linked to our employment growth. It indicates that we should look at employment taxes and at reducing them—
Employment taxes?
—and at reducing taxes generally.
As regards price orders, we are looking at how to do it or how not to do it and at how to police it or not to police it.
That clears it up.
A last minute decision on the deathbed.
Perhaps it would be better if it was policed.
Any word from Kerry South?
There are some price increases in items outside the grocery order, such as meat and potatoes, which have been high. The weakness of the euro relative to sterling and the dollar and the significant rise in oil prices had a direct bearing on inflation figures. The price of tobacco, which I mentioned, was a once-off factor. It has also been clearly identified in other areas, such as professional services. Prices have decreased in areas where there is competition, such as clothing and footwear. An aggressive policy targeted at certain areas can make an enormous difference.
I listened to my colleagues at the European Council in recent days who are looking at similar issues. They would gladly transfer inflationary pressures for a 9% growth rate, a 6% labour market rate, buoyancy in the economy, good employment, immigration, investments, such as the £2 billion investment in Intel which was announced recently, good cattle prices and the other things which make a good economy. There is one downside to inflation but we will handle that.
