asked the Minister for Finance the steps that he has taken in order to prevent an increase in excess of 10 per cent in the consumer price index between May 1980 and February 1981 in view of the escalator clause in the national understanding.

23.

asked the Minister for Finance the proportions of the most recent 12 month figure for inflation which is attributable to budgetary decisions taken by the Government in 1980 and 1981; and whether the contribution of the 1981 budget to inflation was greater than that of the 1980 budget; and, if so, by how much.

24.

asked the Minister for Finance whether he anticipates any lessening in the rate of inflation this year; and whether he will make a statement on the matter.

25.

asked the Minister for Finance whether following the decision of Agriculture Ministers in Brussels any assessment has been made of its effect on the price of foodstuffs; whether the effect of higher prices for milk, butter, cheese and meat products will result in a further increase on our rate of inflation; and if he will make a statement on the matter.

26.

asked the Minister for Finance the plans the Government have to combat inflation.

I propose, with the permission of the Ceann Comhairle, to take Questions Nos. 22 to 26, inclusive, together.

The increase in consumer prices between May 1980 and February 1981 has been largely the result, directly or indirectly, of external developments outside our control, notably increased oil prices and the appreciation of certain major trading currencies.

Because the 1980 budget was later than usual, the increase in the consumer price index in the 12 month period to mid-February 1981 was artificially inflated by the effects of indirect taxation increases in that budget as well as in the 1981 budget. This distortion will not be reflected in the year-on-year increases in subsequent quarters. It is estimated that the 1980 and 1981 budgets added 3.8 per cent and 2.3 per cent respectively to the consumer price index. As the figures indicate, the contribution of the 1981 budget was 1.5 per cent less than that of the 1980 budget.

I anticipate that the rate of inflation will lessen later in the year, despite the likely effect on food prices of the recent decision of the Agriculture Ministers in Brussels. The decision is expected to add 1¼ percentage points to the CPI over a 12 month period.

It will be appreciated that the imposition of the increased indirect taxes was necessary to pay for the substantial improvements in direct tax allowances, social welfare benefits and other concessions introduced in both the 1980 and 1981 budgets, and which the Government felt should not be met by increased borrowing. Furthermore, I should point out that the indirect taxes bore mainly on discretionary and less essential items of consumer expenditure.

The Government continue to adhere to a firm anti-inflationary policy. Price control has been used to ensure that the impact of these developments on prices is no more than is warranted. Government appeals for pay moderation have been designed to avoid an inflationary spiral in which earnings rise in response to unavoidable externally generated price increases leading in turn to further rises in prices here. We have also supported the anti-inflationary stance of EEC economic policy while of course stressing the need to sustain output and employment. The reduction of inflation is one of the central aims of the Government's medium-term plans now in preparation.