Joan Burton (Dublin West, Labour)
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Question 47: To ask the Tánaiste and Minister for Finance the way the most recent reported increase in inflation compares with the forecast he gave in his budget 2007 speech; the measures he will take to deal with the issue; the way he proposes to protect people on social welfare and lower incomes; and if he will make a statement on the matter. [29583/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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On 6 December 2006, when I presented budget 2007, inflation, as measured by the consumer price index, was forecast to average 4.1% this year. This forecast was based on the normal technical assumption of unchanged interest rates. The budget day forecast for the harmonised index of consumer prices inflation — the EU inflation measure — was 2.6% this year.

The most recent inflation figures released by the Cental Statistics Office are those for October 2007. These show consumer price index inflation running at an annual rate of 4.8% and harmonised index of consumer prices inflation running at 3%. My Department published updated inflation forecasts in the pre-budget outlook in October. At that stage inflation as measured by the consumer price index for the year as a whole was forecast at 4.9% and on the same basis the harmonised index of consumer prices inflation was forecast at 2.8%.

Since budget day there have been three quarter-point interest rate increases. Mortgage interest currently accounts for a significant proportion of the current rate of consumer price index inflation so that if mortgage interest is excluded, the year-on-year consumer price index average in the 12 months to October 2007 would be 2.8%. On the normal assumption of no further interest rate increases, the rate of inflation is expected to moderate next year and this is reflected in the pre-budget outlook forecast for consumer price index inflation, which is forecast to average 2.2% over the period 2008 to 2010.

Based on census 2006 figures, it is estimated that only approximately 40% of households hold mortgages. That 40% can avail of mortgage interest relief, which currently applies at 20% and to a ceiling of €8,000 single or €16,000 married for first-time buyers for the initial seven years of their mortgage, and €3,000 and €6,000, respectively, for all others. The current level of mortgage interest relief for married first-time buyers is sufficient to cover the interest arising on a mortgage of up to approximately €321,500 over 33 years at an interest rate of 5.0%, which is well above the average mortgage.

Joan Burton (Dublin West, Labour)
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Given his busy schedule, I do not know if the Taoiseach has had the opportunity to go shopping in a supermarket recently. The price of bread has increased by 7%, flour by 11% and milk by 8.2%. There has been a significant increase in the price of weekly shopping for an average family. One has little change from €150 for a family of three or from €200 for a family of four. What does the Tánaiste propose to do to take account of inflation? As the Tánaiste is fond of pointing out, there are more than 600,000 people on the lowest level of PAYE, who are effectively outside that net because incomes are so low. Does the Tánaiste have measures in mind for these people, social welfare recipients or pensioners on budget day given that we are close to the top of the euro inflation league?

Brian Cowen (Laois-Offaly, Fianna Fail)
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Record social welfare packages were introduced in the past three budgets, in view of the revenue available and the growth rates achieved. Growth rates are changing and inflation must be monitored. We intend to assist those on social welfare and, in my time as Minister for Finance, which added to the successful efforts of my predecessor, we have met national anti-poverty targets by increasing the basic rates up to those targets. Significant funds were required to achieve this and we provided them. I do not wish to comment on the budget. However, continuing to try to maintain the living standards of those on social welfare payments is obviously a matter that we will continue to prioritise.

Joan Burton (Dublin West, Labour)
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I am sure the Minister is aware that, even when one includes free schemes, a single pensioner's income does not amount to much more than €12,500. That is half of what Ministers each accepted in their recent salary increase of €25,000. How does the Minister expect to compensate people for the extraordinary increase in food costs? Poorer people spend more of their income on food. The Minister said nothing about the 600,000 plus on wages so low that they do not pay tax. Will he enlighten us as to what his approach will be on budget day? Does he propose to raise the tax on cigarettes?

An issue arises in respect of food costs. Pig farmers feed their animals cereal which is continually rising in price. They are being badly affected and not doing particularly well in terms of the price they pay versus their output. This is a complex matter. As the budget approaches, how does the Minister propose to address it?

Brian Cowen (Laois-Offaly, Fianna Fail)
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The Deputy is aware that two weeks prior to the budget I cannot discuss issues of that nature in any level of detail. I can only provide a general indication of the Government's success up to now and refer to its and the previous Administration's intention to protect living standards of those in receipt of social welfare payments. We have been extremely successful in removing hundreds of thousands from the tax net. Some of the individuals concerned paid tax under previous Administrations, of which the Deputy was a member.

I take the point regarding the need to ensure the living standards of those on social welfare payments are protected. The price of food and non-alcoholic beverages rose by 4.4% in October's CPI. However, as this sector only accounts for less than 12% of the total weighting in the index, its impact would only have contributed approximately 0.5% to October's overall CPI increase. Food price inflation has largely been driven by increases in raw material prices in global markets. This matter is not within our control but, in the light of global developments, we must pay close attention to it.