Eamon Gilmore (Dún Laoghaire, Labour)
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Question 42: To ask the Minister for Enterprise, Trade and Employment his Department's view on the recent increases in the NCB purchasing managers index, which rose to 66.2% in May 2006, and the consequent pressures that are being put on small enterprises due to rising costs; if his attention has been drawn to the fact that costs for small businesses in the service sector are rising at their fastest rate since 2002; the action he intends to take to bring costs under control; and if he will make a statement on the matter. [23488/06]

Micheál Martin (Cork South Central, Fianna Fail)
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The figure referred to by the Deputy relates to the NCB purchasing managers services index. It indicates impressive growth in the services sector and healthy demand. The May data from this report signalled the sharpest expansion of new business placed at Irish services firms since September 2000. This report provides further evidence that expansion in the services sector continues to be an important driver of economic and employment growth. Some of the higher costs mentioned in the index are attributable to the very strong growth being experienced in the sector as almost 50% of firms recorded an increase in activity over the previous month.

Recent CSO data show that employment in the financial and other business services sectors increased by 16,300 or 6.4% in the first quarter of 2006. We are now the world's 14th largest exporter of services, a remarkable achievement for a country of just 4 million people. This underlines the competitive strength of our services sector in winning business against strong international competition.

Being one of the world's most open economies has allowed Ireland to prosper for over a decade but also leaves us prone to the pressures of rising external costs. The inflationary impact of escalating energy costs, for example, is a factor every economy is facing.

The Government is playing its part in influencing inflationary trends by implementing responsible fiscal policies, promoting stronger competition and strengthening consumer protection.

I draw the Deputy's attention to the recently concluded social partnership negotiations where, pending formal ratification by the parties involved, it has been decided to reconstitute the anti-inflation group established under Sustaining Progress with the same membership and mandate as before. The parties are also agreed on the critical importance of bringing inflation down as quickly as possible towards levels comparable with our trading partners' performance and towards the eurozone average to secure jobs.

Public policy, both at central and local government level, and the actions of employers and trade unions will be framed with this inflation target in mind and its progressive achievement over the period of this agreement. It has been agreed in this context that trade unions and employers will respect the terms of the pay agreement, having particular regard to the common objectives of improving competitiveness and living standards by bringing inflation under control. The Government, for its part, will seek to minimise the effect of the public service pay agreement on inflation by actively pursuing the agreed modernisation programme to achieve better value for money in public service delivery.

Ruairi Quinn (Dublin South East, Labour)
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I thank the Minister for that reply. I am happy to share his optimism about the underlying strength of the economy. Will he agree, however, that focusing on inflation per se is not enough and that we must isolate the factors over which we have some control, such as domestic pushers of inflation as distinct from international pushers like energy, over which we have no control? In that context, what specific steps does the Minister propose to take in his Department to identify the domestic causes of inflation over which we have some control and the steps he will take to try to reduce or contain those costs because inflation costs are rising faster now than at any time since 2002?

Micheál Martin (Cork South Central, Fianna Fail)
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It is important to point out, as the Deputy has indicated, that the recent increases in inflation are largely due to external factors, namely, higher oil prices and higher interest rates. If we excluded higher interest rates and oil prices, the CPI would have gone up by approximately 2.25% to 2.5%, but I accept we cannot do that.

In terms of our position on inflation, the rationale behind our recent decision on the groceries order was to create a more competitive environment in the retail sector. That arose from strong advice from a number of sources and followed on a serious analysis undertaken by my officials in a comprehensive report on that. That is an example of the type of active intervention we took to remove a barrier to competition and thereby create a better environment for prices in that sector. We met with much opposition from within and outside the House. Competition policy is a key area to try to tackle inflationary pressures with a view to creating greater competition and keenness in respect of prices. In that regard, this year I allocated significant additional resources to the cartel division of the Competition Authority to break up cartels in the economy and have greater enforcement.

Richard Bruton (Dublin North Central, Fine Gael)
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I do not share the Minister's complacency that our inflation is predominantly internationally generated. If he considers what happened in Ireland compared to the rest of the eurozone, last December inflation was below the European average. We have now surged well ahead of the European average, which suggests we have internal rather than external problems, as referred to by Deputy Quinn. On that aspect, will the Minister put in place some monitoring of cost pressures specifically in the building and oil pricing industries, which are two critical factors for small businesses and businesses exporting? It alarms me that the Minster does not appear to track what is happening in these critical markets despite the evidence on both fronts that Ireland is poorly priced compared to competitors. There appears to be issues that need to be addressed. Will the Minister undertake to regularly monitor and assess the pressures in those sectors?

Micheál Martin (Cork South Central, Fianna Fail)
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We constantly do everything we possibly can not just to monitor but to determine the steps we can take to ease the conditions that give rise to higher prices and higher pressures.

Richard Bruton (Dublin North Central, Fine Gael)
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Does the Minister monitor them?

Micheál Martin (Cork South Central, Fianna Fail)
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Of course we monitor them. There is a range of monitors.

Richard Bruton (Dublin North Central, Fine Gael)
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Will the Minister permit me to make one point?

Micheál Martin (Cork South Central, Fianna Fail)
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No.

Richard Bruton (Dublin North Central, Fine Gael)
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In the past I asked the Minister to give me figures to show he is monitoring them but he could not do so. That is what concerns me.

Séamus Pattison (Carlow-Kilkenny, Labour)
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The Minister, without interruption.

Micheál Martin (Cork South Central, Fianna Fail)
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The Deputy has a habit of interjecting. I was hardly out of the traps and he was in straight away.

Richard Bruton (Dublin North Central, Fine Gael)
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The Minister answers questions that are not asked.

Micheál Martin (Cork South Central, Fianna Fail)
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I reject the Deputy's first point which uniquely tried to side-step the issue. The cause of most recent inflation is external. That is not my spin or that of the Government. Those are the facts from the CPI index——

Richard Bruton (Dublin North Central, Fine Gael)
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Has the Minister looked at the CSO figures to which I drew his attention?

Micheál Martin (Cork South Central, Fianna Fail)
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——which indicate oil and interest rates as the causes.

Richard Bruton (Dublin North Central, Fine Gael)
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Prices are rising here faster than in the rest of Europe.

Micheál Martin (Cork South Central, Fianna Fail)
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The future challenges will be in respect of those two areas. Domestically, it is about creating greater competition within the economy.

Ruairi Quinn (Dublin South East, Labour)
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That is the point of my question.

Micheál Martin (Cork South Central, Fianna Fail)
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That is very important. The one time I decided to do something about it, the Deputy's party took an ambivalent approach to it——

Eamon Ryan (Dublin South, Green Party)
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It did not work.

Micheál Martin (Cork South Central, Fianna Fail)
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——and played both sides of the House on the groceries order. I know he would have had a different view from that of the party's spokesman on enterprise because he always favoured the abolition of the groceries order, yet Fine Gael tried to undermine that for political reasons. Every time we try to move on the domestic economy the vested interests come out of the traps and politicians from all sides try to protect them. That is one of the biggest challenges politically if we are serious about opening up the professions and so on. It is time for everybody to get on board and see these issues through because on any analysis, productivity on the domestic side is not as strong as it is on the foreign direct investment side. The absence of competition in a number of the sectors the Deputy mentioned — construction, professional services and others — is responsible for that and is leading——

Richard Bruton (Dublin North Central, Fine Gael)
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If the Minister produces the information and illustrates the problem we will have some chance of movement.