The Forfás consumer pricing report and the National Competitiveness Council's statement on inflation, which were published last week, are matters of importance on which the Government has been working. We will continue to look at the recommendations and will continue our work on them. Inflation is falling – that is what the Minister stated at the start of the year. Our policies are designed to try to curb inflation in every way we can. The fall was in line with what the Minister said in the House last December about the strengthening of the euro, the fall in oil prices, the cuts in the ECB rates and hopefully the continuation of those cuts. There has been a cut of 0.75% since last December and the ease in services sector inflation, which was down by 2.5% in the last quarter, is helping.
It is true, as Deputy Kenny says, that the indirect tax changes and increased administrative charges have impacted on inflation but not to the extent that he has said. These charges were necessary to fund the cost of providing services, which Members of the House every day seek, the extra €1 billion that we are spending on health and the large amounts of money that we are spending on education, the significant increases that we are spending across the board. Many people in the House would like us to spend more but they cannot have it both ways. At budget time it was estimated that indirect tax changes would add about 0.85% to the inflation rate but the estimate did not take account of subsequent administrative charges.
To answer Deputy Kenny's last question on whether the Government is committed to trying to bring down inflation, I stated in a major address to the IMI conference a few months ago that over a period we hope to get inflation back to about 2% or 2.5%, that is, the euro average. That is the target the Government wants to achieve but it will not be done in a short time. However, we are committed to doing that and to doing as much as we can to drive down prices where there are large increases.
Deputy Kenny mentioned drink and other sectors that show 30% of the rate outlined in the Forfás report, but as the House is aware this is always a dilemma. We tried to get agreement that items like cigarettes and drink are taken out of the CPI because we do not consider them to be essential household expenditure, but we were not able to get that agreement in the partnership talks. Even when we do not raise excise tax – we have followed that policy for the past six years – unfortunately prices are increased anyway and that creates the inflationary impact. It also has an effect on health and that is a dilemma with which we are continuing to deal, as has been discussed recently, but it is not an easy one to resolve. The Government is committed to trying to deal with the inflationary position as effectively and as fast as it can.
