This year Ireland will be the most expensive country in Europe. It is expensive across the board. In supermarkets, pubs, restaurants, hairdressers, buses and trains the Irish consumer is being fleeced. VHI increases are up by 27% since 2001, ESB charges are up 13%, college registration fees are up 69% and so on. The blame for this lies at the door of the Government. It drove up inflation and is responsible for 60% of the inflation increase since 2002.

The recent Forfás report recommended two central changes. It stated that the Government should set a credible inflation target for the year and that it should avoid increases in customs and excise duties, VAT and State-sponsored price increases such as education, health insurance and transport for the remainder of 2003 and 2004. Does the Taoiseach accept the findings of the Forfás report that the finger is pointed at the Government as being responsible for 60% of the inflation increase? Does he accept the central recommendations of the Forfás report that the Government should set a credible inflation target and avoid VAT and other State-sponsored stealth increases for the remainder of 2003 and 2004, and will he implement those recommendations?

The Forfás consumer pricing report and the National Competitiveness Council's statement on inflation, which were published last week, are matters of importance on which the Government has been working. We will continue to look at the recommendations and will continue our work on them. Inflation is falling – that is what the Minister stated at the start of the year. Our policies are designed to try to curb inflation in every way we can. The fall was in line with what the Minister said in the House last December about the strengthening of the euro, the fall in oil prices, the cuts in the ECB rates and hopefully the continuation of those cuts. There has been a cut of 0.75% since last December and the ease in services sector inflation, which was down by 2.5% in the last quarter, is helping.

It is true, as Deputy Kenny says, that the indirect tax changes and increased administrative charges have impacted on inflation but not to the extent that he has said. These charges were necessary to fund the cost of providing services, which Members of the House every day seek, the extra €1 billion that we are spending on health and the large amounts of money that we are spending on education, the significant increases that we are spending across the board. Many people in the House would like us to spend more but they cannot have it both ways. At budget time it was estimated that indirect tax changes would add about 0.85% to the inflation rate but the estimate did not take account of subsequent administrative charges.

To answer Deputy Kenny's last question on whether the Government is committed to trying to bring down inflation, I stated in a major address to the IMI conference a few months ago that over a period we hope to get inflation back to about 2% or 2.5%, that is, the euro average. That is the target the Government wants to achieve but it will not be done in a short time. However, we are committed to doing that and to doing as much as we can to drive down prices where there are large increases.

Deputy Kenny mentioned drink and other sectors that show 30% of the rate outlined in the Forfás report, but as the House is aware this is always a dilemma. We tried to get agreement that items like cigarettes and drink are taken out of the CPI because we do not consider them to be essential household expenditure, but we were not able to get that agreement in the partnership talks. Even when we do not raise excise tax – we have followed that policy for the past six years – unfortunately prices are increased anyway and that creates the inflationary impact. It also has an effect on health and that is a dilemma with which we are continuing to deal, as has been discussed recently, but it is not an easy one to resolve. The Government is committed to trying to deal with the inflationary position as effectively and as fast as it can.

The Taoiseach has given a long answer. Does he not accept that excise and other charges are six times greater in this country than in other European Union countries, that the CSO figures indicate that indirect taxes are responsible for a 1.4% increase in inflation and other charges are responsible for a 0.85% increase in inflation, making Government actions directly responsible for almost 2.5% of that increase? The Taoiseach says these charges were necessary, but that is so because of the Government's mismanagement of the public finances and the economy. If the running of the economy were based on penalty points the Government would already have lost its licence. Does the Taoiseach not accept that his record every week in government since he took up office has been to put 800 extra people on the register of unemployed persons? Does he accept that is an appalling record? The Taoiseach has said that the Groceries Order is not under review, but the Tánaiste said it is. Which is true? This is a matter of great concern to thousands of people.

Hear, hear.

A straight answer.

We want a straight answer to a straight question. Can the Taoiseach name one proposal he is now implementing that has arisen from the special meeting he had in Farmleigh recently on competitiveness in the economy? Can he tell us of one proposal that has come from that meeting that the Government is now implementing?

I do not accept any of the points made by the Deputy. The reality is that unemployment is at an historically low level—

Will the Taoiseach answer the questions he was asked?

This is Leaders' Questions, the Deputy is not the leader of his party.

—in spite of international difficulties.

The Taoiseach was asked two straightforward questions.

Up to the last quarter employment increased by 1.5%, or 23,000 to 24,000. Economic growth is still at a very respectable rate. I totally reject Deputy Kenny's accusations that the Government is not controlling its fiscal policies.

The Taoiseach is in total denial.

We have one of the lowest debt to GDP ratios in Europe—

The Government has made a dog's dinner of it.

—and our budget position for this year at 0.6% is one of the lowest in the European Community. At the same time we are continuing to grow expenditure at high rates.

Will the Taoiseach answer the questions he was asked?

Allow the Taoiseach to continue without interruption.

This does not relate to what came out of Farmleigh.

It is our management of the economy that is allowing us to continue to grow, to generate jobs and to keep unemployment at a low rate – that is the success of it.

We are hearing everything but the answers to the questions the Taoiseach was asked.

Deputy Kenny asked me about one initiative that has emerged. In spite of this being a difficult year, under the capital programme we will spend more than €5 billion on infrastructural development—

What came out of Farmleigh?

—and every single one of those projects, which we discussed in Farmleigh, are linked—

The Deputies opposite do not want to hear this.

Allow the Taoiseach to continue without interruption.

—and directed towards generating economic growth. The fact of the matter is that at the end of a year in office, and even though times have been different, we can look back and note that we are bringing down inflation, creating more jobs, keeping unemployment at a low rate and our deficit level in a healthy position.

I call Deputy Rabbitte.

The euro is doing that for the Government.

The Government is running the country into the ground and the Taoiseach knows that.

Allow Deputy Rabbitte to continue without interruption.

We have had no answers to the two questions the Taoiseach was asked.

Deputy Allen, allow Deputy Rabbitte to continue without interruption.

We had two questions but no answers.

We have had 14 minutes of talk, but no answers.

Deputy Allen, the Chair will have to deal with you if you do not behave yourself. I call Deputy Rabbitte and ask Members to allow him to continue without interruption.

Deputy Harney knows where I am going. I cannot believe that the Taoiseach can come in here and give an answer like that and suggest to Deputy Kenny that these charges, indirect taxes and stealth taxes were demanded by this side of the House, the implication being that they were to fund public services. The reason those charges were imposed in the last budget and that we have stealth taxes is because of the over-inflation of the economy during the boom, which has inevitably resulted in services inflation, and the Taoiseach knows that. He knows that the Government body, Forfás, has produced a year end report which shows that we are now the second highest priced economy in the eurozone. It shows inflation at 5.1% up to last February, as compared to a eurozone average of 2.3%. The Taoiseach knows that there are ordinary working families at home watching him waffle about the great job he is doing who know from the weekly shopping basket that they are the ones who are most seriously affected.

I will give the Taoiseach an example. It is a while since we dealt with Duncan and Mary. They were Deputy McCreevy's creation in terms of how much they got out of the budget. This is what has happened to Duncan and Mary since. They are faced with the following additional expenses: €274 on college registration fees; €72 on ESB bills; €178 on VHI charges; €8.30 to visit an accident and emergency department; €30 to tax the car; €69.50 stamp duty on credit and ATM cards; €40 on gas bills; €43 on the TV licence; 1% VAT on fuel, hairdressing, cinema tickets and car repairs; and an extra €200 on prescriptions.

What about benchmarking?

Allow Deputy Rabbitte to conclude.

The Minister for Health and Children has found his voice – the man who hides his reports on any of the critical matters on health so that every journalist in town can have a copy of them except Members of this House. People cannot get a hospital bed and the Minister wants to intrude on price increases.

What about benchmarking?

I ask the Minister to allow Deputy Rabbitte to conclude without interruption.

Deputy Rabbitte is a long way from the old printing press.

I ask the Minister of State to allow Deputy Rabbitte to conclude. His two minutes has long since concluded.

If the Chairs wishes, I will give way to comical Willie. Does the Chair want me to do that?

We got enough of his waffling on Monday night.

We do not want to hear the Minister of State.

What does the Taoiseach have to say to people on fixed income who are now living in the second highest priced economy in the eurozone and there is no evidence from the Government that it is taking any measures to address our competitiveness situation or the extent of the escalation of price rises?

At the risk of repeating myself, I have already said what the inflation rate is. I have already stated what the Government is trying to achieve. I have stated that we have created 300,000 jobs in the past five years. I have already stated that the Government is committed to maintaining, as we did in the previous budget, increases for those people in receipt of social welfare and those on fixed incomes. This year the Government was criticised by most economists on the basis that it gave pay increases that were above average. We did so because inflation was high and, therefore, we wanted to make sure we would protect the people about whom Deputy Rabbitte spoke. We also wanted to protect services.

I say to Deputies Rabbitte, Kenny and other Members of the House that unfortunately one cannot have a position where one calls for the Government to follow policies that control the economic situation and then call every day for increased expenditure on this, that and the other.

That is what the Government did last year.

One cannot do that. The Government is determined in a difficult period – thankfully this has been agreed by the social partners, if Opposition parties do not adhere to it – to continue to have economic growth, to work towards low inflation, to continue to try, as we did in the past year, to increase employment by 1.5% and to try to maintain the unemployment rate as low as possible – it is still at an historically low rate of 4.6% in this very difficult climate, which is about four points below the European average. When we have had to make increases, we have kept figures as tight as possible – that is the reality – in order to generate the resources that were necessary for us to invest large increases in expenditure in health, social infrastructure and the welfare budget. We have continued to do that and at the same time we have not gone back to the old way of high borrowing. Any reasonable person would note that in a difficult international climate, we still have economic growth, are able to give sizeable increases—

Of only some 23 cent a week.

—in payments to the old and to people in receipt of social welfare and we are still protecting them from inflation, we are still working to bring down inflationary trends and we will continue to do that. In a very difficult year, the Government has put in a good performance in respect of all these targets and we will continue to do that.

Does the Taoiseach recall that in 1997 when he inherited the economy on the cusp of a boom that the inflation figures under the then Finance Minister, Deputy Quinn, was 1.5%? How can he go on talking about increases in various benefits and so on when they have been eaten up by inflation. This is not Deputy Kenny and me advancing figures plucked out of the sky; this is what is stated in the Government's own year end report from Forfás – from the National Competitiveness Council. They are the ones who have concluded that not only are we the second highest priced economy in the eurozone, but that the Government is the main contributor.

That is a lie.

It is not a lie, it is a fact.

I ask the Minister of State, Deputy O'Dea, to withdraw the word "lie".

I replace it with the words "terminologically inexact".

That is unacceptable. I call for an unequivocal withdrawal of the word "lie".

The Chair should put the Minister of State out of the House.

What Deputy Rabbitte said was not in accordance with the facts.

The Minister of State should withdraw the remark.

Deputy Stagg, the Chair is dealing with the issue.

I withdraw my remark, but the fact is that—

The remark is withdrawn.

—the Forfás report is exactly the opposite to what—

Allow Deputy Rabbitte to continue.

Would the Taoiseach ever put the Minister of State out of his agony and make him a Cabinet Minister?

Deputy Rabbitte, you are running out of time rapidly.

The Deputy is a carpet bagger. He has been through five different parties.

The Minister of State would not get to write that in the Sunday Independent.

We have come a long way from the printing press.

The Minister of State should allow Deputy Rabbitte to continue.

At least when the Minister of State had responsibility for school bus timetables, we did not see so much of him, but neither did the children waiting for the buses.

If the Deputy comes back to the issue under discussion and does not provoke the Minister of State, we can proceed with business.

This is the Government's document, these are its conclusions and they are the facts. Even the Minister of State, Deputy O'Dea, knows that. Government measures have contributed to a 40% increase in prices.

It is 30% at most.

What practical steps does the Taoiseach propose to take to achieve the inflation rate he has set of 2%?

The Deputy's minute is concluded.

How can he say that with a straight face when inflation is at 4.3%? He made a speech in Killarney about services inflation and costs rising in the services industry as if he were an observer. What practical measures does the Government propose to take to deal with the inflationary crisis that will be seriously exacerbated by the hardening of the euro, that will have implications for jobs and that will make more people redundant before the end of the year, and all the time inflation is out of control?

Deputy Rabbitte will have noticed that the most recent consumer price index figure for last month indicated that the increase in inflation is 4.3%, which is a decrease of 0.6%, the largest in two and a half years. We will continue to pursue the policies of doing everything we can within what is prudent budget control to apply pressure wherever we can to reduce prices.

I have already highlighted a number of the areas where Forfás believes Government action and control by the various State agencies can lead to a reduction in prices. Yesterday I answered questions on the legislation we will bring forward in the insurance area. We know that what has happened in recent years has placed enormous pressure on industry and prices and the Tánaiste has announced a range of proposals, among them the legislation I referred to yesterday.

Deputy Rabbitte knows that we could have taken the approach in the recent pay talks of not giving satisfactory increases. We could have tried to renege on benchmarking, but we did not do that. In our view, public sector workers are entitled to their increases so we have honoured our commitments in benchmarking. We are paying higher pay rates than the eurozone in a number of areas and probably in excess of what we should be paying.

We still believe we can reduce inflation, honour our pay commitments, cater for welfare increases, continue to create employment and honour commitments across the board. Some people said last year that we would return an enormous deficit, but we did not. Any fair analysis of the economy, and this is done by EUROSTAT, the European Central Bank, the IMF and OECD, shows that this country is managing itself much better in terms of growth, inflation, debt and all other aspects. Those are the facts.

I wish to put the Taoiseach's mind at rest in case he is concerned about running the risk of repeating himself.

That is mostly as a result of listening to the Deputy.