Ahern says supply-side constraints to blame for inflation

The Government is to meet the Irish Congress of Trade Unions soon to discuss the inflation figures, the Taoiseach said, and issues relating to the Programme for Prosperity and Fairness would be discussed.

"As I have continually said, price stability must remain an important part of policy. We should not panic on the basis of one month's figures, but there are important issues involved."

Responding on the Order of Business to Opposition criticism of the latest inflation figures, Mr Ahern said a Finance Bill might be introduced. "As regards other issues, we must continue to monitor those. It is our intention to ensure that people on social welfare do not lose out over the year."

The Fine Gael leader, Mr John Bruton, said forecasters advising the Government about inflation trends this year had got it badly wrong and their competence should be seriously questioned.

The fundamental problem concerned the supply side of the economy - there was an inadequate supply of housing and outlets for petrol, drink and other price-sensitive products. There was a need to review the supply side of the economy if inflation was to be reduced, he added.

Labour's deputy leader, Mr Brendan Howlin, asked if the Government intended to ensure that social welfare recipients were cushioned against the new inflation rate. "Will he guarantee the House that people will not be worse off this year than they were last year as a result of tripling inflation?"

He urged the Taoiseach to address the "botched job" the Minister for Finance had made in forecasting economic developments this year. He said halving capital gains tax was a "dramatic mistake" and should be reversed.

"Does the Taoiseach accept that the bulk of commentators who forecast the disaster were not creeping Jesuses, as the Taoiseach described them, or left-wing pinkos, as the Minister for Finance described them, but were clued in to what was happening in the economy?"

Mr Ahern said he had already cited examples of how the Government was trying to deal with the matter. "Deputy Bruton asked about supply-side constraints, and clearly they exist. There have been price and wage increases in the service industry in the order of 15 per cent in return for productivity of one per cent. That does not match."

Mr Ahern said the Government had correctly maintained the argument, and most people would agree with it, that wage increases should be kept at the relatively low level of 5.5 per cent, so the mistake of getting caught in the spiral of trying to follow prices increases with wage increases was not made.

Mr Joe Higgins (Socialist Party, Dublin West) said national partnership had been exposed as nothing but a ploy to keep wages down, while allowing speculative profits, rent and profits generally to go through the roof. This was being done, he said, at the expense of ordinary working people. Earlier, Mr Howlin and Mr Trevor Sargent (Green Party, Dublin North) were ruled out of order when they sought the suspension of standing orders for an emergency debate on the inflation figures.