Bertie Ahern (Dublin Central, Fianna Fail)

There are a number of questions and I will try to go through them all. It is the Government's view that a wage inflationary spiral is in no one's interest. It takes the view that wage increases to chase the inflation figure never work and never have. This happened two or three times in the past decade. It always has been better for us to devote all our efforts to trying to deal with the inflation issue and we managed to so do a number of times. I refer, in particular, to dealing with those factors that we can bring under control to effect a reduction, rather than trying to change it with pay rounds. I have made this argument strongly and will do so again tomorrow. If one simply spirals pay increases after rising inflation, everyone loses out. The low paid and vulnerable workers, in particular, will definitely lose out. As all Members are aware, wage moderation is a powerful counter-inflationary tool, while excessive wage growth can be a strong driver of rising prices. I made that case last week and the Government has provided facts and statistics to demonstrate this. Above all, we must bed inflation more deeply and avoid pricing ourselves out of jobs and growth with an unworkable formula of wage increases. The Deputy has stated correctly we should not go down this road and I have no intention of so doing.

We must consider the areas in which there are problems. As the Deputy is aware, practically every other country uses the HICP and omits interest increases from their inflation rate calculation. More than half of our inflation rate — 56% — arises from energy price and interest rate increases. While I do not suggest leaving them out, this must be taken into account when comparing our figures with European ones. Were other countries to include interest rate increases, it would increase the HICP in such countries also.

When one considers the comments issued by the European Central Bank, another one or two increases are likely. Certainly the market is not discounting another 0.25% increase in the autumn. While I am always trying to read between the lines of what is said by central bankers, Jean-Claude Trichet, president of the European Central Bank, seemed to indicate there would be another increase in the spring also. Consequently, there is a figure of at least another 0.5% in this regard, which means that we must consider issues arising in the energy sector. According to the Central Statistics Office, CSO, energy prices in respect of electricity, natural gas, bottled gas, liquid fuels and solid fuels all registered zero or almost zero movements in price in the last few months. In the case of natural gas, the average price has fallen by 10% since the spring. I hope these are areas in which we can look forward to some reductions.

I refer to those areas in which we have a problem. As I said, with the CSO's help and that of the all the aforementioned agencies, the Government is engaged in identifying how it can deal with such sectors. It is clear there is a problem with services inflation, on which everyone is focusing. It is running at 9.1%, as opposed to 0.3% in goods inflation. Therein lies the problem about which it is most within our power to do something. We have introduced all the aforementioned groups to try to focus on what can be done and find out precisely where are the problems.

There are levels of competition. The Deputy asked whether there were competition issues in this regard. There are because while many such areas are very profitable and doing very well, they are fuelling inflation at a very high rate, which is running at more than 9% in the year to date. Clearly, we must do more in this respect. Already there have been meetings involving the Competition Authority, the National Consumer Agency, the Commission for Energy Regulation and similar agencies to try to focus our efforts on these issues.

Have I covered all the Deputy's queries?

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