Tommy Broughan (Dublin North East, Labour)
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Question 78: To ask the Tánaiste and Minister for Finance the impact on inflation, growth construction industry output and competitiveness of each of the last eight quarter percent increases in Euro interest rates; the forecasts on the above indices for the feared next quarter point rise in early autumn 2007. [19206/07]

Brian Cowen (Laois-Offaly, Fianna Fail)
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On Budget day, 6th December 2006, my Department forecast that Consumer Price Index (CPI) inflation would be 4.1 per cent 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 (HICP) inflation — the EU inflation measure — was 2.6 per cent this year.

Since budget day there have been three quarter point interest rate increases — the latest one earlier this month. Each quarter point interest rate increase will add between 0.3 to 0.4 per cent to the CPI in a full year but has no impact on the HICP. As is the norm, my Department will be publishing updated inflation forecasts in the Pre-Budget Outlook due in the autumn.

Due to increasing interest rates the last Government acted to sustain the affordability of housing by increasing mortgage interest rate relief. In Budget 2007 the ceiling on mortgage interest relief for first-time buyers was increased from €4,000 per year in the case of a single person and €8,000 per year in the case of married or widowed persons to €8,000 and €16,000. This increased support is available to all those currently in receipt of 'first-time buyers' relief who are in the first seven years of their mortgage.

The Programme for Government contains a commitment to increase in Budget 2008 the ceiling on mortgage interest relief for first-time buyers and those who bought a house in the past seven years, from €8,000 to €10,000 for single people and from €16,000 to €20,000 for couples or widowed persons. The Programme also contains the commitment that, as income taxes are reduced, the rate of mortgage interest relief will be kept at 20% for all home owners.

I would draw the Deputy's attention to the fact that the tax measures in the Government Programme will be implemented subject to the controlling economic and fiscal framework and that the Government are committed to operating a responsible fiscal policy characterised by broad budget balance and a declining debt burden.

The last two Governments have developed policies which are designed to protect and strengthen Ireland's competitiveness and this Government intends to continue these policies. Important policy issues in the medium-term include: developing our innovation potential, improving the regulatory environment, enhancing the human capital of our country and developing our economic and technological infrastructure. By bolstering Ireland's competitiveness these, in turn, should raise living standards, improve the quality of life and lay the foundations for future growth.