Inflation prompts Siptu call for new national pay talks

Trade union Siptu today called for talks on a new national pay agreement to be brought forward after new figures showed inflation remains above 5 per cent.

Siptu president Jack O'Connor called for what he said was the "unacceptably high" level of inflation to be placed at the top of the political agenda to protect living standards and job security.

He was speaking after the latest data from the Central Statistics Office (CSO) showed the annual rate of inflation was 5 per cent in May, down just 0.1 per cent compared with April.

The rate has doubled since December 2005. Compared to the rest of the European Union, Ireland now has the seventh-highest rate of inflation.

This comes on the back of an eighth interest rate rise in 18 months by the European Central Bank yesterday, placing further pressures on mortgage holders.

"There can be no comfort taken from the heading on today's Consumer Price Index that announces a 'slight decrease' in annual inflation to 5 per cent," Mr O'Connor said.

"It is also a fallacy to maintain that what has been driving this high rate is outside the control of any Irish Government.

"Quite the contrary, the impact of crippling mortgage repayments is not only due to European Central Bank interest rate increases," Mr O'Connor said.

"Four decades after the Kenny Report [which proposed a windfall tax on development land] no Government has ever confronted the need to deal effectively with the price of building land or invest sufficiently in the provision of social and affordable housing to maintain house prices themselves at some rational level.

"And as for energy prices, the present system of regulation has pitched electricity and gas prices far higher than they needed to be for this year. The priority must therefore be to protect living standards and job security by bringing down the high rate of inflation itself," the Siptu president said.

"The implications for the next pay agreement cannot be long-fingered. I am therefore calling today for the negotiations on a successor agreement to Towards 2016to be brought forward."

Siptu represents approximately 200,000 Irish workers across almost every sector of the economy.

Taoiseach Bertie Ahern said in a statement the Irish economy faces more difficult economic conditions and that inflation has to be tackled.

Mr Ahern said the Government at its meeting yesterday reviewed the outlook for the economy.

"It is clear that we are entering a period of more challenging economic conditions. It is important, therefore, that we focus our efforts in the development of policy and programmes, and in social partnership, to restore and renew our competitiveness across all dimensions," he said.

"While the combination of pay increases and Budget tax cuts is protecting employees' living standards it is essential that we curb inflationary pressures.

"The Government has been working with Ibec and Ictu on this issue under the relevant provisions of Towards 2016, and in particular we have been reviewing emerging trends over recent weeks," he added.

Mr Ahern said he and Minister for Finance Brian Cowen would seek early meetings with Ibec and Ictu to discuss the issue.

In the last two years inflation in Ireland has doubled and the rising cost of living prompted Ictu to warn that living standards of workers were coming under threat.

David Begg, Ictu general secretary, warned the Taoiseach that the level of inflation could no longer be seen as a short-term. "The cost of living is likely to exceed the pay terms of the Social Partnership Agreement Towards 2016, and that is a very serious problem indeed," Mr Begg said.

According to Ictu, the cost of living in Ireland is now 20 per cent higher than the European average.

"Workers cannot be passively expected to absorb these increased costs. The cost of the average mortgage has risen by €320 a month in less then two years, and that is unsustainable for people on average incomes," Mr Begg said

Ictu suggested two tax cuts by increasing relief on mortgages to a higher threshold and to the higher marginal tax rate, and reducing VAT from 21 per cent. The UK rate is 17.5 per cent.

The CSO noted incessant rises in the price of housing and energy such as gas, oil and electricity, all State controlled.

Economists said the consumer price index was likely to remain close to 5 per cent for some months due to strong energy prices and rising interest rates that have pushed up housing costs for those paying off mortgages.

"Irish inflation remains uncomfortably high," said Dermot O'Leary, chief economist at Goodbody Stockbrokers.