Brian Cowen (Laois-Offaly, Fianna Fail)

The annual rate of consumer price index, CPI, inflation was 4% in September, down from 4.5% in August.

However, a better measure of underlying inflation is the EU-comparable measure of inflation, the harmonised index of consumer prices, HICP. The HICP differs from the CPI in coverage. The most notable difference relates to the exclusion of mortgage interest repayments from the EU-related measure. Annual HICP inflation in Ireland was 2.2% in September, down from 3.2% in August. I welcome the reduction in inflation in September and remain committed to further restraining inflation.

When discussing inflation, it is important first to point out that the recent pick-up was largely owing to external developments over which the Government has no direct control, namely, higher oil prices and increased interest rates by the European Central Bank. Therefore, when we focus on inflation, we must concentrate on areas that can be influenced domestically. Annual services sector inflation is currently running at 7.5% and that is a cause for concern. That highlights the need for more competition in the economy as well as pay and profit restraint in all sectors to keep our cost base down.

Tackling the problem requires a response from all sections of society, not just the Government, as many of the domestic driving forces of inflation are outside its control. The Government is taking action in areas that it can influence. Thus, there is no value in bemoaning the need for fuel rises when those reflect changes in the world price at which commodities are bought or contracted for, such as the price of energy in the case of gas and electricity.

Where we can, we should take action to contain inflation by implementing responsible fiscal policies. For example, excise duties have not been increased in the past two years and the Government has removed the groceries order, which should in time lead to greater price competition. I understand that my colleague, the Minister for the Environment, Heritage and Local Government, Deputy Roche, specifically requested that, to support competitiveness in the economy and to protect the interests of communities, local authorities exercise restraint in setting increases in commercial rates and local charges for the year. The Government is also investing in public infrastructure, which will enhance our ability to produce more goods and services more efficiently and therefore help keep inflation down on a continuing basis.

To the extent that the prices of Government services reflect increased wage cost factors, the effort must be to make the provision of services more efficient. That is what we are seeking to do in modernising the public service. I am confident that over the course of next year inflation will moderate as the impact of higher oil prices falls out of the annual comparison.

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