Olwyn Enright (Laois-Offaly, Fine Gael)
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Question 97: To ask the Minister for Finance if he is satisfied that pricing of services provided by or regulated by Government is contributing adequately in containing price pressures in the Irish economy. [33173/06]

Brian Cowen (Laois-Offaly, Fianna Fail)
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The annual rate of Consumer Price Index (CPI) inflation was 4.0 per cent in September, down from 4.5 per cent 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 terms of coverage. The most notable difference relates to the exclusion of mortgage interest repayments from the HICP. Annual HICP inflation in Ireland was 2.2 per cent in September, down from 3.2 per cent in August.

I welcome the reduction in inflation in September and remain committed to further restraining inflation. When discussing inflation, it is important to first point out that the recent pick-up in inflation is largely due to external developments over which the Government has no control, namely higher oil prices and increased interest rates by the European Central Bank. Therefore when we focus on inflation we have to concentrate on areas that can be influenced domestically. Annual services sector inflation is currently running at 7.5 per cent and this is a cause for concern. This highlights the need for more competition in the economy as well as pay and profit restraint in all sectors in order to keep our cost base down.

Tackling the problem requires a response from all sections of society and not just the Government as many of the domestic driving forces of inflation are outside the control of Government.

The Government is taking actions in areas that it can influence. Thus there is no value added in bemoaning the need for fuel rises when these 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, the Government is taking action to contain inflation by implementing responsible fiscal policies — for example, excise duties have not been increased in the last 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 specifically requested that in order to support competitiveness in the economy and to protect the interests of communities, local authorities should exercise restraint in setting any 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 the services more efficient. This 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.