The upward trend in inflation was a cause of concern, the Minister for Finance, Mr McCreevy, acknowledged to the Seanad. Services inflation had reached 6.5 per cent last month. "This is a worrying development and must reflect an acceleration in wage inflation," he said. "It may also reflect some margin-building for higher profits. Excessive cost developments represent a serious threat to our economic prospects.
"It means we must strictly adhere to the pay terms of PPF or we could find ourselves in a damaging wage-price spiral. "I am confident the agreed pay increases combined with the promised tax reductions will provide continued gains in disposable incomes. The take-home pay of workers will increase by 25 per cent or more." Claiming the partnership pay deal was dead, Mr Shane Ross (Ind) said: "Virtually every private sector plc in the country is ignoring it or taking nominal notice of it." He said it would be worth considering ways of paying off our £2 billion surplus. The debt was not a problem at present because interest rates were so low, but it was `nonsense' to assume they would remain low. Mr Ross said a greater commitment to overseas development aid should also be a Government priority.
Mr Feargal Quinn (Ind) said the greatest worry was the continuing spiral in house prices. "The price of houses goes up and up like there is no tomorrow - but only in the past weeks we have had an uncomfortable reminder of how close tomorrow could be. The sterling rate has detached itself from the dollar and in a few weeks has fallen 10 per cent against the euro - good news for us on the inflation front, but bad news for companies who sell into the UK market. They will be the first to go to the wall in a shake-out, and the resulting panic could have a wider effect right across the economy.