State gets blame for services inflation

The State contributes to high inflation by increasing the cost of services that it provides or regulates, an Oireachtas committee heard yesterday.

Mr Richard Nesbitt, Arnott's director and chairman of industry body, Retail Ireland, told the Oireachtas Committee on Enterprise and Small Business yesterday that the State had accounted for a disproportionate share of inflation growth in the last few years.

"During the last three years, when the Consumer Price Index (CPI) was a cumulative 9.7 per cent, the State implemented or sanctioned prices increase for the consumer of 69 per cent for water supply and refuse services and 25 per cent for electricity." He added that the State was behind a range of other increases for public services.

The committee is investigating the high cost of groceries.

Mr Nesbitt said that the Republic's minimum wage regime and high levels of pay also contribute to high prices. "The average employee wage for all occupations in retailing in Ireland is now €637.20 per week," he said. "Staff in retailing here are paid 28 per cent more than in the North."

A recent Retail Ireland survey revealed that its members had to cover total non-wage cost increases of 22 per cent in the years 2003 and 2004.

These increases included 26 per cent for insurance, 21 per cent for transport, 25 per cent for waste collection, 21 per cent for local authority rates and 21 per cent for energy. In waste alone, cumulative increases have been as high as 264 per cent in Fingal and 380 per cent in Cork

"Clearly no retail business can pass on cost increases of this magnitude to customers," he said. "However, it would be naive to assume that cost increases of this sort do not have implications for prices to consumers."

Retail Ireland is an IBEC affiliate that represents most of the industry's big players.