Dáil debates
Thursday, 30 March 2006
Priority Questions.
Fiscal Policy.
3:00 pm
Joan Burton (Dublin West, Labour)
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Question 4: To ask the Minister for Finance the estimate for inflation used in his budget 2006 speech; if he intends to review this figure in view of the most recent figures from the Central Statistics Office showing that inflation had increased to 3.3%; his views on the recent increase in the consumer price index; if his Department has done an assessment of the likely implications for the economy of the increase in inflation; and if he will make a statement on the matter. [12649/06]
4:00 pm
Brian Cowen (Laois-Offaly, Fianna Fail)
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On budget day, inflation as measured by the consumer price index was forecast to average 2.7% in 2006. Part of the pick-up in the annual inflation rate in February reflects the rise in interest rates by the European Central Bank. In addition, the price of oil rose throughout most of last year, which had an impact on the annual rate of inflation in February. We have no control over these external factors. My Department will publish updated forecasts in the autumn.
On an EU basis, Ireland's harmonised index of consumer prices was 2.7% in February compared to 2.3% in the euro area. Ensuring that our inflation rate moves back towards the euro area rate will be important for remaining competitive. I made no changes to indirect taxes in the budget, which will contribute to meeting this objective.
Joan Burton (Dublin West, Labour)
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Does the Minister acknowledge that the Government is a major driver of inflation due to cost increases and stealth charges? I refer in particular to the increases in health charges, VHI, the cost of beds etc. announced in the budget. Fuel and gas prices have gone through the roof. Many people, including many older people, have had a €200 increase in their gas bills over the winter. The increase in mortgage repayments will cost many families potentially an extra €200 a month. To cap it all, we were told today there will be a further 4% increase in electricity and fuel costs due to the Government's failure to provide for Kyoto agreement arrangements. Under this Government, electricity prices have risen 61%——
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Has the Deputy a question?
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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The Deputy may not make a speech.
Joan Burton (Dublin West, Labour)
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May I have parity of esteem with Deputy Ó Caoláin for once?
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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The Chair will not accept that.
Joan Burton (Dublin West, Labour)
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Deputy Ó Caoláin was allowed to talk for a long time. I would like parity of esteem with Deputy Ó Caoláin on the bases of gender and party.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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This is Question Time and as the Deputy is well aware——
Joan Burton (Dublin West, Labour)
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I would like in all sincerity to ask the Ceann Comhairle for parity of esteem with Deputy Ó Caoláin.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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The Deputy will obey Standing Orders the same as Deputy Ó Caoláin. The Deputy is entitled to ask questions to elicit information, she is not entitled to make a statement.
Joan Burton (Dublin West, Labour)
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Deputy Ó Caoláin is but I am not.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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Deputy Ó Caoláin asked questions, although he may have asked more than the Chair would have liked.
Joan Burton (Dublin West, Labour)
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Deputy Ó Caoláin made a lengthy statement which the Chair listened to with great interest, maybe the Chair should listen to what I have to say as well.
Rory O'Hanlon (Cavan-Monaghan, Ceann Comhairle)
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I ask the Deputy to obey the Standing Order.
Brian Cowen (Laois-Offaly, Fianna Fail)
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Deputy Ó Caoláin is unique.
Caoimhghín Ó Caoláin (Cavan-Monaghan, Sinn Fein)
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I am getting it from both sides.
Joan Burton (Dublin West, Labour)
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I ask the Minister does the Government acknowledge that it is the major driver of inflation that is impacting on young families buying houses, pensioners trying to struggle to meet increasing refuse costs and gas bills which for many people increased by €200 over the winter period, the increase in the cost of a bed in a public hospital and the swindling increases in VHI? What does the Minister propose to do? There has been a 61% increase in electricity costs under the Government and today a further 4% increase in such costs has been announced. Does the Minister intend to do anything for people?
Brian Cowen (Laois-Offaly, Fianna Fail)
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First, it should be noted regarding inflation in health and education that these sectors have relatively small weights in the basket of consumer goods and services and, hence, their impact on overall inflation is relatively low. Second, inflation in health partly reflects increases in GP and dentist fees which are outside the control of Government.
Regarding the increases in gas and electricity prices, prices in these sectors are determined by regulators. However, I point out that increases in recent years partly reflect the global increase in oil prices, something over which we have no control.
The Central Bank is forecasting CPI inflation to average 2.75% this year while the ESRI is forecasting 2.6%. The most up to date private sector forecasts are typically in the range of 2.5% to 3.2%. It is clear, therefore, that my Department's forecasts are not out of line with those of other commentators.
Regarding the factors to explain the rise in inflation in February, by raising the level of consumer prices, the rise in interest rates in December had an impact on the annual rate of inflation in February. The same applies to the rise in the level of oil prices during the past year.
Services sector inflation rose to 4.4% in February, which partly reflects the level of demand in the economy. Lowering the inflation rate to that prevailing in our major trading partners is in all our interests and that is the reason I made no changes to indirect taxes in the past two budgets.
The Government, therefore, was doing its bit to reduce inflation. Others have to do their bit also. National wage agreements are important in this regard. We must ensure that wages evolve in line with productivity gains while at the same time facilitating a sustainable evolution of profits. A greater role for competition in the economy is also important. It is the best way to protect competitiveness and safeguard employment.
I caution against reading too much into data for one single month. My Department will update the inflation forecasts in the autumn and account will be taken of all published data and other available information when framing those forecasts.
Séamus Pattison (Carlow-Kilkenny, Labour)
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That completes Priority Questions.
Richard Bruton (Dublin North Central, Fine Gael)
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On a point of order, I wish to raise the matter of the refusal and transfer of a priority question and a substitute question that I submitted. One question sought the Minister's view on trends in the housing market on which the Central Bank has commented widely, but that question was transferred to the Department of the Environment, Heritage and Local government, which is not acceptable. The Minister has a legitimate point of view to express in this House.
The second question related to the changes needed in the way in which we consider the Financial Bill, given that his year we succeeded in examining in committee only two thirds of the amendments or the original sectors. That was deemed not to be a matter for the Minister. We need to be a bit more reasonable if we want reform and if we want Ministers to play a role in dealing with important issues in the housing sector and in the way in which we deal with taxation. These questions should not have been disallowed in one case or switched by the Minister in the other.
Séamus Pattison (Carlow-Kilkenny, Labour)
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The Chair has no function in the matter. If a question is transferred it is a matter for members of the Government.
Richard Bruton (Dublin North Central, Fine Gael)
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The Chair has a function in disallowing a question. The disallowing of my question was incorrect because the Government has a crucial role in deciding how——
Séamus Pattison (Carlow-Kilkenny, Labour)
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Perhaps the Deputy will raise the matter with the Ceann Comhairle's office.