The Irish Small & Medium Enterprises Association (ISME), despite the reduction in inflation announced this week, have hit out at the Government for an apparent lack of leadership in its failure to address the current cost environment.

The ISME described the drop in inflation as a temporary 'blip' and forecast that the rate will increase again over the next number of months, primarily due to energy price increases and interest rates. The Association outlined that with consumer and business confidence plummeting it was now more essential than ever that the Government address the cost factors under its control.

Commenting on the figures, ISME Chief Executive, Mark Fielding, said, "The decrease in inflation is primarily due to the reduction in consumer spending, which has led to higher than usual discounts in clothing, footwear and household goods. It is notable that the latest reduction is tied to negative sentiment from consumers and not from specific government policies to address the cost environment. "For far too long the Government has sat on its hands and allowed the economy to drift aimlessly and negative indicators appearing on a daily basis, without any indication of what policies are in place to address the issue. Nowhere is this more pronounced than in the cost environment, which has shown Ireland to have one of the highest rates of inflation within the EU going back to the start of the decade. No action has been taken in that period to address a huge problem that will only get worse."

Fielding made specific reference to the recently announced electricity and gas hikes, which are going to have a huge negative impact on consumers and business and will lead to an increase in the inflation figures in the next number of months. He questioned what energy plan the Government had in place to offset further increases.

"As many businesses are staring into the abyss, with job losses being announced on an hourly basis, there is still no indication from Government on how it plans to tackle issues of concern, including the cost environment. Consequently, the Trade Unions are using this weakness to fill the vacuum and demand ludicrous pay increases, citing the cost of living as their main justification. Ironically, if their demands were met, which is unlikely, the implication would be a further increase in the cost environment, but this seems to be lost on them," continued Fielding.

"While accepting that external cost factors are outside our control, it is no coincidence that Inflation continues to be driven by Education and Health, primarily due to cost overruns and recruitment. Government needs to show leadership and address, as a matter of priority, these internal costs by immediately announcing a public sector pay and recruitment freeze. This would send out a positive message that for once the Government is seriously addressing a cost environment that continues to meander out of control," he concluded.

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