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Dáil Éireann debate -
Thursday, 1 Jun 1939

Vol. 76 No. 4

In Committee on Finance. - Local Authorities (Combined Purchasing) Bill, 1938—Fifth Stage.

I have opposed this Bill since its introduction to the House and I do so as a member of various public authorities. The Minister indicated on the Second Reading that he was of the opinion that this combined purchasing system was highly beneficial in so far as local authorities were concerned. My experience is an entirely different one. The Act that has been in operation for some years now has been found by local authorities to have been against their best interests and against the interests of the community over which they have jurisdiction.

When this type of legislation was first introduced to this House, it was pointed out by the then Minister for Local Government that it prevented rings in certain quarters and that, in his opinion, rings were formed in order to secure that certain people should get the custom of local authorities. I am of opinion now that rings are being definitely formed.

Hear, hear!

But not by traders within the jurisdiction of the local authority. I have in mind an incident that happened in Wexford within recent weeks. The Wexford Corporation wanted certain implements and they were able to secure these implements cheaper in Wexford from a merchant than they could get them from the trade list. The person whose name was on the trade list was the person who was supplying them to the local merchant. There certainly seems to be something wrong when something like that can happen. It goes to show, I think, that some of the particular people who are on the trade list are making huge profits. Otherwise, they could not sell to local traders at a lesser price than they would supply to local authorities.

Under the legislation that has been in operation for some years past, it was permissible for a local authority, if they could get commodities which they required at the same price or a lesser price than the price for which they could get from the combined purchasing board, to do so. Under the present Bill that is prohibited. I appealed to the Minister, both on the Second Stage and on the Committee Stage, to permit the old practice to continue. There is no use in appealing at this stage unless the Minister softens his heart and proposes something in the Seanad to enable that to be continued. I do not think it is fair at all to local ratepayers who are contributing rates—high rates—to the local authorities, that they should not be permitted to supply certain articles that are locally required. Under this Bill also an estimate has to be made by a local authority as to what their requirements would be over the financial year. I submit that, in a great many cases, that is absolutely impossible. Under the Bill, if a local body underestimates and they have to get more than they estimated for at the beginning of the year, the contractor is permitted by law to charge an extra price for that commodity. If, on the other hand, an overestimation is made and the local authority only requires 50 per cent. or 75 per cent. of the particular article, the Minister insists, through the medium of this Bill, that the local authority take the goods. In my opinion, that is handing over local authorities entirely into the hands of rings of manufacturers in this country, and it is certainly very unfair to the local authorities. The men who are on those bodies are men who are interested in local administration and endeavour to do their very best on behalf of the community at large. This Bill, I suggest, takes away the powers from the local authorities which they are entitled to have. In my opinion this can be styled "Coercion Bill No. 2" in so far as local authorities are concerned; and I certainly very definitely oppose it, because of my experience in the different boards of which I am a member. I am going to vote against the Fifth Stage of this Bill. I objected to the Fifth Stage being taken last week, because I wanted to delay the passage of this Bill as long as I possibly could.

No reasonable man can controvert a word of what Deputy Corish has said. Anyone who knows the circumstances fully realises that what he alleges is the strict truth. There is nothing like an example to demonstrate the truth of a general statement. I am sorry the Minister for Industry and Commerce had to leave the House. Everybody knows that certain trades in this country have been converted by our Government into effective monopolies which have given rise to rings.

There are two systems by which the ring is worked. The first system is that a restricted number of persons who are large wholesalers in the commodity manufactured, combine into an organisation which they describe as a wholesalers organisation. They go to the manufacturer and say to him: "You must quote us one price for your product, which will allow us an ample margin of profit for distributing. You must give that price to nobody else but the individuals who belong to our association; and, if anybody else applies for that price—no matter what quantity he would take—you must refer his order back to us, asking whether he is a member of our organisation; and, if he is not, you must refuse to give him the terms that you give to us." When they get that undertaking from the factory they close the ring, and nobody else—be he local authority or enterprising merchant or a new man starting in business on his own—will be let into the wholesalers' ring. It is closed tightly, and there may be no new entrants, so that they get a complete control of all the supplies of that commodity within Éire. In the old days, before this system of creating monopolies existed, if any group of wholesalers attempted to do that, if a merchant—a retail or a wholesale businessman — were refused supplies by the parties that have entered into that agreement he would go elsewhere to get the supplies and thus break the ring. In the monopolies that are now in force, however, he has no other person to go to since the wholesalers' ring has got control and no one is ever allowed to become a wholesaler thereafter, and the only people who will get preferential terms are the original members of the wholesalers' ring. They have an absolute stranglehold on the consumer on the one hand and on the factory on the other, and they use that stranglehold to create a closed corporation in which they alone take the profits.

There is another type of ring, that is the flour ring. They have an office here in Dublin.

The matter under discussion is the Fifth Stage of this Bill, and the proper matter for discussion, the only relevant matter, is what is contained in the measure. Reference has been made to the possibility of monopolies not dealing fairly with public boards, but such reference should not be allowed to deviate into a discussion of rings, monopolies of various kinds, or the evils of protectionist legislation. The Deputy purported to give one example of monopoly. He is now proceeding to give a second example.

I mentioned that there were two types of ring—one created by the wholesalers and one created by the manufacturers themselves. The object of this Bill is, I understand, to place local authorities, as we see it, in the hands of the ring.

Mr. Boland

Does the Deputy say that that is the object of the Bill?

I do not say it is the Minister's intention. I am trying to explain to the Minister what is going to happen. Perhaps, as Deputy Corish suggests, it might be better to say the "result" of the Bill. It is to put the local authorities into the hands of the rings. I am trying to explain why this Bill should be voted against at this stage. Otherwise, I do not see how the local authority can keep out of the toils of the ring. I do not want to circumnavigate your ruling at all, but I think it is relevant and I want to submit a picture of what is actually going to happen when this Bill comes into force and the local authority, say, the Roscommon County Board of Health, goes to buy bacon or flour for the County Home in Roscommon. These two bodies have an office in Dublin and they meet once a week, when they summon to their meetings a representative of every producer of that commodity who belongs to their associations. They say to their members: "If we all stand together we can get any price we want. Therefore, although you get individual applications from the Combined Purchasing Board in the Custom House, let us agree to-day that when we fill in the figure on the tender all of us will fill in the same figure." That is the position with which the Minister will be confronted. In the old days the Minister, if he got a whole series of tenders which appeared to him to be the result of a conspiracy, was entitled to tear them up and say: "I wanted to give preference to an Irish firm and tried to do so, but I was met by a conspiracy amongst them to abstain from competition. Faced with that conspiracy I will go outside, and I will take quotations from Belfast or Liverpool or New York. I did not want to do it: I tried to give a preference at home and it is only because they conspired against me that I am driven to the other resource." He cannot do that now, because there is an overriding law prohibiting the importation of flour, and he is face to face with a conspiracy such as I have mentioned. Previous to this, the local authority could go to a local merchant or flour vendor and say: "If you will supply at a cheaper price, your tender will be accepted and the miller will be left sitting there."

Now they have to enter into a 12 months contract on the basis of any price the flour miller chooses to put up. Many people in this House will say "If the flour millers are in a conspiracy, how are you going to get a better price from the local merchant?" In practice you could, but I admit that that is not easy for the average Deputy to understand unless he has had some experience of rural trade, but when you come to the bacon men— and I am not going beyond this: I stop at these two instances—it is quite clear that we could at present get a better price, and I want the House to know why.

There is a ring in the bacon trade representing the larger curers, but there are, as Deputies know, a number of small curers scattered about the country, men who do about 300 pigs a week. Under the existing system, if the Minister got, as he certainly will get, a flat price from all the bacon curers for supplies of bacon, it was quite open to the Roscommon Board of Health to go to the Ballaghaderreen bacon curing company and to ask them if they would take 5/- or 10/- less for so many sides of bacon than the central purchasing people had fixed as the price, and, in the vast majority of cases, they would have got a cut in the price of bacon. So much is that so that Deputies will remember that I produced in this House an angry letter from the leaders of the bacon ring addressed to the small curers and remonstrating with them because they were not playing the game. Do Deputies remember that? I produced a letter from the big men in the bacon ring addressed to the small men, saying that it was monstrous that they should be cutting the price of bacon, and that if they would only stand fast they could get any price they liked out of the consumer, "and," went on the letter, "if this does not stop we will take steps to stop it." Most Deputies, when they heard that letter read, were astonished and shocked that such activities should be going on. This Bill is going to make it clear to the small bacon curers that it cannot possibly be of any interest to them any longer to cut the price, or to offer the consumer better value because it will do no good. The central purchasing board, or the local authority, are committed, under the contract, to the ring price and they have got to take it.

The precise error underlying this whole legislation arises from a confusion of thought. Before the extreme tariff policy of the present Government, it was considered a patriotic thing to prefer Irish manufacture, and it was considered the legitimate thing to give Irish industry a hand wherever you could in any legislation which you were passing through this House, because it was felt that they were then open to intensive competition and required other kinds of help; but now all these industries have got immense protection, water-tight protection, and we are trying to give them, having given them that protection, the kind of help which we thought it was legitimate to give them before they had any protection at all. I put it to Deputies that the consumers and ratepayers of this country are entitled to some little consideration. Every burden imposed by this House is ultimately carried by the ratepayers and taxpayers of the country. They have to carry a very substantial burden as a result of the protection policy of the Government. Is it right, once they have consented to accept the burden created by tariffs, to pile on top of them a further burden by delivering them, tied hand and foot, into the hands of the rings that have been created behind the tariffs, or should we rather say that having given the industry as a whole adequate protection, it is up to that industry to compete within itself in order to afford the consumer, the taxpayer and the ratepayer a chance to get the best value that efficiency and hard work is capable of producing within the country?

I submit that it is bad and unjust to the taxpayer and ratepayer to pass this Bill. I submit that there is even a greater evil than that in this Bill. I submit that this Bill is an invitation to Irish industrialists to be content with the second best. It is a way of telling them: "Even if your stuff is not as cheap as it ought to be, even if your stuff is not as good as you ought to be able to make, we are going to force the people to buy it from you in any case." That is no service to the industry itself because anyone who is concerned with industry or trade knows that we are all human, and that, if we have no competition, we are inclined to let things ride and do not break our necks trying to improve things, but if we do get a bit of competition we wake up and try to make things better than they were, and when we find ourselves under the necessity to make that endeavour, we go down to the men who are actually working on the bench and say to them: "So and so's product is outstripping ours: we shall have to exert ourselves to make ours better and cheaper."

Unless we are in a position to say to ourselves and to the men who work with us: "Unless we put a little more effort into this business, we are both of us going to lose our livelihood," you cannot get that increased efficiency which progress demands. If you go down to remonstrate with your colleagues in any enterprise on the ground that the product is not good enough, with the passage of this Bill, they, in so far as they are supplying local authorities, are entitled to say: "It will do. They will have to buy from us in any case, so what is the use in our breaking our necks trying to make things better when we will get the same price for this?" What answer have you to make to that? It is perfectly true. There is no inducement to do things better, and there is no reason why anybody should work a bit harder, or be a little more careful, to produce a thing as well as it can be done, because this Bill is an invitation to produce anything, and get it accepted. I put it to the Minister that instead of doing Irish industry a service, this Bill is going to do it an injury. I put it to him that it is going to impose on the taxpayer and ratepayer a far greater burden than he realises, and, on those grounds, I invite the House to vote against it.

Mr. Boland

I think this is all rather an unusual proceeding because I understand that, on Second Reading, the principle of the Bill was accepted. It is a new departure that, on the Fifth Stage, we are going to divide on the principle but, of course, Deputies are free to do as they please. I do not think there is any justification whatever for what Deputy Dillon has said. The articles he mentions have never been on the list. Flour, bacon, eggs and butter are not on the list, have not been on the list and are unlikely to be on the list, so that I do not see that there is any point in bringing in matters of that kind. Other articles, it is believed, as has been the experience of the Local Government Department, can be got cheaper and better under this contract system, because manufacturers, or wholesalers, when asked to supply in quantity on a firm order, are undoubtedly able to supply at a lower price.

I am not surprised that Deputy Mulcahy has left. He was Minister for Local Government and Public Health for a number of years and I am sure when he heard Deputy Dillon he decided to go and leave the case to Deputy Dillon who did not know what he was talking about. Deputy Mulcahy, as I have already said, was Minister and he saw this system being worked under his administration. He, no doubt, saw the loopholes which this Bill is designed to fill up. This measure will not in any way permit rings to be formed. If there is any individual ring in operation, Deputies may take it that that ring will be broken up. If there is even the suggestion of a ring the people connected with it will not be put on the list. The body that recommends to the Minister and whose recommendations are accepted is an advisory body, made up of two representatives of the Department of Local Government and Public Health, two representatives of the local authorities, two representatives of the employers, and two representatives of the trade unions. They will, no doubt, deal with anything in the nature of a ring if it is being attempted.

Were these consulted when the Bill was being drafted?

Mr. Boland

I cannot answer that question right off. I am quite satisfied they were. I am not the Minister who introduced the Bill but I believe that it was as a result of the experience of that Advisory Committee and as a result of the experience of the Departmen of Local Government and Public Health that this Bill was brought in. Deputy Dillon has painted a wrong picture altogether. I cannot understand the attitude Deputy Corish has taken up in this matter about buying locally. If that is to be allowed, if a contractor contracts to produce certain goods and to sell them to the local authorities on the expectation that he is going to get a certain quantity of orders, then it is quite clear, if the local authorities are permitted to buy anywhere they like elsewhere, that it is not fair to the contractor. I am satisfied that if that were allowed to continue the whole thing would break down.

How does the Minister account for the action of a person who has contracted to supply the local authorities at a certain price being able to supply the traders in the town of Wexford at a lower figure than that at which he is supplying the local authority? He is selling cheaper to the local traders than he is to the public authorities under the contract.

Mr. Boland

Would such a person be the producer himself?

There was an inspector in Wexford last week and we proved it to him that this is happening.

Mr. Boland

The Deputy cannot expect me to go into individual cases. But if we were to take, for instance, the town of Wexford, it may be found that there is an industry there that may have a monopoly in the supplying of certain goods. That industry could probably supply traders in the town of Wexford at a cheaper rate than that at which it tendered to supply the local authority.

But the case I am putting to the Minister is an entirely opposite one. It is a very opposite sort of case that I am quoting.

Mr. Boland

I have not that particular case before me. I am not going to say that Deputy Corish is not correct, but I can assure the Deputy that if there is any evidence of a ring or anything of the kind, the Department of Local Government and Public Health will deal with it. Deputy Dillon has said that would be dealt with as it was on a former occasion. Deputy Dillon said that this was handing the local bodies into the hands of monopolists or rings. That is what he said. I have a note of it—that local bodies will be placed in the hands of monopolists or rings. The Department of Local Government and Public Health will see that these persons or firms are not likely to be put on the list if there is any evidence of such a thing as a ring. Deputies can do what they like but it will be a strange thing if Deputies, after having accepted the principle of the Bill, are going to vote against it now. I cannot understand such an attitude.

Take the case of a big institution like a mental hospital. They want a certain quantity of clothing and the contractors know the amount that will be required. If it is found at the end of ten months that a certain quantity beyond what has been catered for in the contract is required, it will be found under this Bill that they are not entitled to get that from a local merchant even if they can get it from him at a cheaper rate. Now, is not that unfair to the local body?

Mr. Boland

The fact is that this is a new principle brought into this Bill. It was accepted after a full debate on the Second Reading that the estimate system was to be a feature in the future, that every local authority was to make a fair estimate of their requirements.

It was not accepted on Committee Stage.

Mr. Boland

I know that, but the estimate system is vital to the whole Bill. If it were not there the thing would be a failure. The contractor will have to be in the position of knowing what quantity of material we will require. This is essential if we are to get the full benefit of the cheap prices. But if we are going to let people break away from that, the whole system might as well be broken up. Why should not local authorities get very close to their requirements when they are estimating?

Quite true.

Mr. Boland

Then why do they not? As I said on the Committee Stage, things may have changed during the year, the cost of manufacturing the goods may have increased. The contractor may have to charge a higher price; if the cost has not increased he may not have to change his price. If he could get a higher price he would be foolish not to do it. The price of materials may have decreased and he may be making a bigger profit by selling more goods. At all events, it is only fair to him that he would be allowed to supply all the requirements of the local body for which he had tendered.

Certain hospitals could estimate with some degree of accuracy but in other cases it is absolutely impossible to do so. The measure before the House is encouraging these local bodies to be extravagant in ordering more than they may require.

Question put.
The Dáil divided: Ta, 49; Nil, 20.

  • Aiken, Frank.
  • Bartley, Gerald.
  • Boland, Gerald.
  • Brady, Brian.
  • Breathnach, Cormac.
  • Crowley, Tadhg.
  • Derrig, Thomas.
  • De Valera, Eamon.
  • Flinn, Hugo V.
  • Flynn, John.
  • Flynn, Stephen.
  • Fogarty, Andrew.
  • Fogarty, Patrick J.
  • Friel, John.
  • Fuller, Stephen.
  • Gorry, Patrick J.
  • Harris, Thomas.
  • Hogan, Daniel.
  • Kelly, James P.
  • Kennedy, Michael J.
  • Killilea, Mark.
  • Kissane, Eamon.
  • Lemass, Seán F.
  • Little, Patrick J.
  • Loughman, Francis.
  • Breslin, Cormac.
  • Briscoe, Robert.
  • Buckley, Seán.
  • Carty, Frank.
  • Cooney, Eamonn.
  • McDevitt, Henry A.
  • McEllistrim, Thomas.
  • MacEntee, Seán.
  • Meaney, Cornelius.
  • Morrissey, Michael.
  • Munnelly, John.
  • O Briain, Donnchadh.
  • O'Grady, Seán.
  • O'Loghlen, Peter J.
  • O'Reilly, Matthew.
  • O'Rourke, Daniel.
  • O'Sullivan, Ted.
  • Rice, Brigid M.
  • Sheridan, Michael.
  • Smith, Patrick.
  • Traynor, Oscar.
  • Victory, James.
  • Walsh, Laurence J.
  • Ward, Conn.

Níl

  • Bennett, George C.
  • Benson, Ernest E.
  • Brasier, Brooke.
  • Cole, John J.
  • Corish, Richard.
  • Cosgrave, William T.
  • Curran, Richard.
  • Dillon, James M.
  • Doyle, Peadar S.
  • Fagan, Charles.
  • Giles, Patrick.
  • Gorey, Denis J.
  • Hickey, James.
  • Keyes, Michael.
  • McGovern, Patrick.
  • McMenamin, Daniel.
  • Morrissey, Daniel.
  • Mulcahy, Richard.
  • O'Sullivan, John M.
  • Pattison, James P.
Tellers:—Tá: Deputies Little and Smith; Nil: Deputies Keyes and Hickey.
Question declared carried.
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