Kieran O'Donnell (Limerick East, Fine Gael)
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Question 100: To ask the Tánaiste and Minister for Finance the measures he proposes to put in place to reduce inflation. [15909/08]

Brian Cowen (Laois-Offaly, Fianna Fail)
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Inflation, as measured by the Consumer Price Index (CPI), has risen by 5.0 per cent in the twelve months to March 2008. The main contributions to this increase, in order of importance were: housing, water, electricity, gas and other fuels (which includes mortgage repayments) contributing just over 2.0 per cent; food and non-alcoholic beverages contributing almost 1.1 per cent; and transport contributing 0.75 per cent. Therefore, out of the twelve categories comprising the basket of goods that make up the CPI, three contributed almost 80 per cent of the total inflation in the twelve months to March 2008.

In terms of the inflation impact from last year's interest rate increases, I addressed this in this year's Budget when I increased the ceiling on mortgage interest relief for first time buyers. This I believe is the appropriate targeted response to such specific cost pressures. To the extent that inflation is externally-driven — such as commodity prices — it is essential that such increases are not exacerbated by generating second-round effects through inflation-chasing pay settlements. To do so will only further adversely impact on Ireland's competitiveness. In the sectors that contribute to domestically-generated inflation, pay and profit margin restraint are essential, as well as increased competition so as to keep down price increases. Therefore it is essential that the upcoming pay talks under the Social Partnership agreement, Towards 2016, take account of the reality that we all face.