Mr. Sebastian Barnes:

The Deputy asked a couple of questions. I will start at the beginning. We do not have an updated figure for inflation. That is one of the reasons we will make a fuller assessment in September. The pick-up in inflation in recent months has been really strong, and far greater than anyone had anticipated. Some of that relates to major uncertainties about energy prices, wheat prices and other food prices. We have seen movements in different directions there. Coming into the winter, we might be much clearer about energy prices. Some of these prices might fall. We have seen a fall in wheat prices in recent weeks, but there are different pressures in other areas.

The euro is also weakening against the dollar. Many of these things are priced in dollars, which will also add to inflation. There are other sources of inflation with tightness in the labour market and other issues in the economy. It is very difficult to know. The most useful thing may not be to look at the year-on-year inflation but, rather, to try to work out the underlying dynamics. It is very unclear as to whether there will be new shocks to inflation. It will also take time for the shocks we have seen to work through the economy and in particular the effect on wages. These things are very uncertain and we should have a bit more information in September.

In our models of the standstill, we index welfare payments, including pensions. When we do it to prices, we do it to the economy-wide measure of prices. The Deputy is right that in order to strictly speaking maintain the real living standards of people on welfare or pensions, we would need to use the inflation rate relevant to them. This is likely to be significantly higher than the overall rate of inflation because we know they spend much more on things that have increased such as food and energy. Partly because I do not have a clear view on inflation and much less for those groups, I do not know what is appropriate. How that compensation should be made is really a choice for the political system. It clearly makes sense to protect groups and sectors that are far more exposed than others.