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Dáil Éireann díospóireacht -
Tuesday, 30 Sep 2003

Vol. 571 No. 1

Ceisteanna – Questions (Resumed). Priority Questions. - Price Inflation.

Paul McGrath

Ceist:

141 Mr. P. McGrath asked the Minister for Finance the action he plans to take as part of the Government's anti-inflation initiative. [21054/03]

The rate of inflation in Ireland has eased significantly over the past few months, falling from 5.1% in February to just over 3% in July and August. However, we cannot afford to be complacent. Bringing the rate of inflation down further towards that of our EU partners remains a priority for the Government. This is essential in order to safeguard our competitiveness and prevent job losses. The anti-inflation initiative, which brings together key participants in the partnership process to tackle the issue of domestic inflationary pressures, has an important role to play in this regard. The anti-inflation initiative group is expected to submit its first formal report to the Government shortly and I look forward to seeing its conclusions.

Strict adherence to the pay arrangements in Sustaining Progress is also vital to the continued easing of inflation as so much of our inflation rate is affected by wage developments.

Another important factor, if our inflation rate is to moderate further, is the control of public expenditure. My Department will continue to utilise the management and control mechanisms that are in place to ensure that this is achieved. The Government is determined that public expenditure will come in on target this year.

I still fail to see what the Government's anti-inflation initiative consists of. Is it correct that the CSO has confirmed that 85% of the inflation published in August for the previous 12 months comes directly or indirectly from the Minister and his Ministers, either through indirect taxes of 1.4% of the portion, with the various charges on services and stealth tax making up the balance? As stated in Sustaining Progress, is the Minister's budgetary and public policy over the lifetime of the agreement having regard to the inflation target or is it correct to say that he has abandoned the inflation target when setting charges and stealth taxes? Will he accept that many householders and businesses are finding it extremely difficult to cope with the charges being imposed? Is the Minister aware, for example, that Irish businesses have witnessed a 10% cut in their prices over the past 12 months while the services under his remit are seeking 15%, 18% and 25% increases in their charges? Is it not the case the inflation problem is being generated by his ministerial colleagues and administration?

The anti-inflationary initiative group comprises representatives of the Departments of the Taoiseach, Enterprise, Trade and Employment and Finance together with representatives of ICTU and IBEC. The forecast rate of inflation has dropped from my budget day figure of 4.8% and this year's average is expected to be approximately 3.6%. The moderation in inflation since the beginning of the year is the result of a number of factors. There has been a considerable moderation in service sector inflation, which has reduced from 6.1% in January to 4.5% in August. I am not aware of the CSO figure referred to by the Deputy but he may be confusing it with a figure in a survey conducted by Forfás in this regard.

Either way, the Deputy is making the same point that the bulk of inflation is caused by Government action rather than anything else. That is not correct. The budget day measures I introduced last December contributed 0.9% to the 2003 inflation figure. I estimated on budget day the figure would be 0.85% and it currently stands at 0.9%. It is correct that changes in services supplied by public bodies have also contributed to the inflation figure but as far as the budget day exercise is concerned, it has contributed 0.9% to the overall inflation figure.

The Deputy referred to a number of matters relating to the increase in inflation, on which he produced a number of documents. However, for example, the increase in the price of electricity is not directly controlled by the relevant Minister.

The thrust of Government policy is to get our inflation rate down to the European average. The EU inflation rate, to which the ECB works, is approximately 2%. We were considerably behind the rest of Europe in terms of the general harmonised inflation rate used throughout Europe but that gap has narrowed. The HICP figure for Europe to the end of August was 2.1% while Ireland's HICP rate was 3.9%. The gap was considerably wider earlier in the year.

Does the Minister agree many of the figures he is quoting bear little relationship to the reality facing people? For example, his figures claim the cost of housing has fallen by 14% in the past 12 months. House prices are soaring and people trying to buy houses are having a difficult time. Does he accept he undertook to introduce anti-inflationary initiatives? One thing all Ministers have in common is they are always one more report away from doing anything about these problems. The Minister promised the report would be published earlier in the summer, yet now, towards the end of autumn, he still has not produced it. No action has been taken by the Government and the Minister has not given a commitment to avoid service charges, stealth taxes or indirect taxes as a way of resolving the funding problems he has created for himself.

I will correct the Deputy on one point. If anybody else made it, I would know it was a mistake but he knows it is not correct. He knows better than anybody else that asking prices are not included in the CPI.

But they are relevant to the true cost of living of the people whom the Minister says he is protecting.

The Deputy knows better than anybody in the Opposition that the figure quoted for housing relates to rental charges.

That is the Minister's choice.

The Deputy knows that asking prices are not included and the figure relates to rental charges.

The Minister should tell that to the people who are trying to buy a house and trying to cope.

I wish to correct the record in respect of a man as esteemed as the Deputy who has thrown in such an obvious error that is not keeping with his normal form.

This is not an error. This is a fact. A young couple trying to pay a mortgage or buy a house is under severe pressure because of the Minister's inflation figures. The Minister is ignoring the pressures on young couples.

An Leas-Cheann Comhairle

I call on the Minister to take Question No. 142.

If that is the Deputy's point, that is all right, but it is not correct to link the CPI to the allegation he made earlier.

With regard to service charges and other changes that must be made, I must pay nurses, doctors, gardaí, teachers and Members' salaries. We must collect revenue from some sources and indirect taxes bring in a high proportion of the total revenue collected by the State to pay for all those services.

The anti-inflationary report may as well be torn up.

Like benchmarking.

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