asked the Minister for Finance if he will make a statement on the latest estimate of future inflation and its estimated impact on employment.
61.
Written Answers. - Inflation Impact on Employment.
60.
asked the Minister for Finance the expected level of inflation for 1989; the steps the Government intend to take to keep inflation under control; if, as the level of inflation exceeds the level of increases received by most workers under the terms of the Programme for National Recovery, it is intended to review the increases; and if he will make a statement on the matter.
I propose to take Questions Nos. 60 and 61 together.
The average annual rate of inflation for 1989 as a whole is expected to be about 4 per cent. Thus, for the second successive year, our inflation rate will be below that of the UK, our biggest single trading partner and, indeed, below the average of the EC. Current indications are that the annual rate of price increase will fall from the turn of the year to not much more than 3 per cent in the second half of next year. This situation implies a favourable climate for employment.
While the gross pay of workers receiving the standard increases under the Programme for National Recovery has not fully kept pace with the rate of inflation over the past two years, inflation to date has been closely in line with expectations. The modest shortfall has been more than made up by the income tax reliefs introduced in both the 1988 and 1989 budgets. As a result, there has been a real increase in take-home pay of workers in the period that the programme has been in operation. Furthermore, when account is taken of the fact that the actual increase in average earnings is estimated to be greater than the basic increase provided for, it is obvious that the living standards of workers have been more than protected to date under the Programme for National Recovery. In such circumstances, the question of reviewing the pay provisions of the programme should not arise. As I said recently, renegotiation of the programme pay terms would jeopardise the underlying progress currently being made on the competitiveness and employment fronts. Moreover, for workers to seek higher pay increases at this stage would only add further to inflationary pressures and quickly erode the apparent value of the newly won concession.