Deputy Michael O'Leary was given permission to raise on the Adjournment the non-co-operation of the interests involved in implementing the 2 per cent levy, with the consequent danger of an increase in meat prices and the measures the Government are taking to avoid such a consequence.
Adjournment Debate. - Meat Prices.
Earlier this week there was realisation amongst the public that the saga of the 2 per cent levy would not be ended without severe consequences for consumers. There were reports that butchers' leaders and farmers' leaders were predicting that the 2 per cent levy would be reflected in increased prices for meat products and that consumers could expect price increases in the order of 10 per cent. Butchers have said that if they must collect the 2 per cent farm levy for the Government the consumer will have to pick up the bill. They have also said that the levy idea is unworkable. The concept of the levy is outside the scope of our discussion today, but a convincing answer is needed from the Minister to consumers who are reeling under price increases consequent on the removal of food subsidies. They must be told whether, as a result of the unworkability of the 2 per cent levy, there will be a dizzy ascent in meat prices. The Minister must give convincing evidence that the housewife will not be forced to pick up the tab.
There has been a rather strange denial from the Department. A departmental spokesman said on Wednesday, 9 May that consumer resistance would ensure that beef prices would not increase dramatically because housewives would simply change to pork, mutton or chicken. I do not know who this spokesman was or what his official status could be. It appears he was saying that consumer resistance would mean a shift from the more expensive meat products to cheaper meat not affected by the levy, and it would seem that the butchers' representatives are on the right track in predicting a 10 per cent price increase.
In one of the national daily newspapers on 1 May a reputable commentator said that the farmer who fed his heifer during the long winter will look for a price which will give him a profit and will not allow a 2 per cent deduction. Butchers purchasing these beasts at marts or elsewhere will find that the prices have gone up and, as we predicted, the 2 per cent levy will be exacted from the housewife. The departmental spokesman spoke of consumer resistance as the only defence in this situation. The Department say the scheme is workable, while butchers say that it is unworkable. Reputable agricultural correspondents say that farmers will look for prices which will give a profit and that unless a law is brought in forcing the farmer to sell at a price he will hold on to his beast until it is worth more money. Already we have heard of one factory closing down, presumably the closure being contributed to in no small measure by this reaction among farmers.
From a Government who can be so loquacious on many national issues we have a reticence about what is to be done in this situation. We have had simply a reassurance by an anonymous departmental spokesman that consumer resistance will look after the matter. The immediate effect will be less beef and higher prices, as well as the disruption of the operations of the meat factories and consequent unemployment. The commentator to whom I referred earlier said he would not be surprised if the marts mutinied in regard to the levy. However long and protracted were the recent discussions between farmers' leaders and the Government, there still remains opposition among farmers to the imposition of the levy. That matter lies outside the scope of this debate, but apparently there will be no defence erected between the consumer and the Government's inability to exact the 2 per cent levy. It has been said that an army of taxmen would be necessary to collect the levy and no satisfactory explanation has been given by any Government Minister to disarm the well-founded suspicion that consumers will, as usual, be expected to pay the price. It is not as if we were talking about consumers who have been untouched recently by price rises or as if this were a Government whose hands were clean in regard to price rises. Prices have been rising steadily over recent months. There have been increases in the cost of milk, butter——
We are dealing now with one price increase only.
One hypothetical price increase.
It may be hypothetical but during the past few days there have been many statements by spokesmen for different representative groups pointing out that the levy scheme is unworkable and why, in their opinion, the full impact of the price increase will be felt by the consumer. I am not entering into the rights and wrongs of the levy scheme itself but it is not satisfactory that the only reassurance to the consumer has been the statement by the departmental spokesman that consumer resistance will deal with the matter. It is remarkable that this statement about pending price increases could be made without a fuller and more adequate official reaction. All the statements have been to the effect that the consumer will have to pay. We have the opinion of experts that farmers will compensate themselves for the 2 per cent levy. The law would appear to operate in that instance that only the consumers will have to take up the price tag.
It has been argued that the original idea of the levy was not well founded, but that is outside the scope of the debate and I do not want to go into it. The Government appear to have rushed into an improvised scheme without full consideration of its impact on consumers. In recent months the consumer has been at the receiving end of many increases in prices inspired by Government policy, inspired by such actions as the removal of the food subsidies. We have no guarantee that the farmer who fed his heifer over the long winter will seek a price giving him a profit but not allowing for the 2 per cent deduction.
Information available at present, unless the Minister can reassure the House otherwise, is to the effect that the immediate effect of the levy will be less beef and higher prices. We have had the disruption in one factory to which I have already referred with a number of people laid off, I think, today. The former agriculture spokesman, Deputy Clinton, referred to that yesterday. In the circumstances I do not know whether the Government could consider postponing the 2 per cent levy scheme. I do not know if that is contemplated but certainly if they have no means of ensuring that the consumer will be protected, they must consider what steps they should take. From the very beginning they have been careful to say that the levy was not directed at the consumer: that has been a consistent Government approach. Yet this week and in the weeks ahead it seems that the consumer will be asked to pay the piper. Probably the consumer will move to poultry and other substitutes. The spokesman at the Department conveniently made that point in his statement, that consumer resistance would ensure that meat prices would not increase dramatically because the housewife would simply move to pork, mutton or chicken and the levy does not apply to pigs, sheep or poultry.
The departmental spokesman also said last night that the butchers' organisations' claim that the levy would lead to price increases had been carefully considered. He said that a number of market forces would ensure that the levy would operate as planned. No information is available to me or to anybody who has examined the situation—I am relying on the statements of certain agricultural experts who have considered it—to suggest that normal market forces in this instance would lead to anything other than increased prices for the consumer. The effect of an across-the-board increase at the rate of 10 per cent, if that turns out to be the cumulative effect of this 2 per cent, being borne by the consumer can be imagined. If butchers' organisations and those involved in the meat trade can say that it will be borne by the consumer, the House and the country need a good deal more reassurance from the Minister than we have had. Consumers have had enough bad news in recent months. Over the past 12 months there has been an increase of 17.9 per cent——
The Deputy is getting away from his own question. We are dealing only with meat prices.
I agree but I think the Chair will agree that I have not dwelt very long on the over-all position regarding price increases. I have concentrated on the disturbing implication of a breakdown in the operation of the levy and that it is the consumer who will have to pay the price. There appears to be no adequate official refutation at this point other than a spokesman of the Department maintaining that normal market forces will prevent this happening. That is not satisfactory. I ask the Minister to clarify the situation, to explain how the levy will work not to the detriment of the consumer and to explain the means by which it will be collected and the means of ensuring that it will not be passed on automatically to the consumer. That is my concern in raising the matter this afternoon—the fact that it has been commented on at length during the week by various national organisations and the danger that there would follow a further escalation of meat prices. It is not satisfactory in these circumstances to have a departmental spokesman say that normal market forces would look after the matter.
There is the other consequence of the effect on employment which could be very serious in the meat factories. I should like to give Deputy Bruton an opportunity of contributing, with the permission of the Chair.
I said on another occasion that I think the levy is wholly wrong but it is doubly wrong that it should have to be paid by the consumer. It was not introduced as a consumer tax and yet there is every reason to believe that in the case of meat that is what it will turn out to be. There was a very apt quotation by Deputy O'Leary of the optimistic departmental statement to the effect that consumer resistance and reliance on market forces would ensure that the levy was not passed on—that was quite groundless. The fact is that in a situation where there is diminished supply market forces operate to ensure that it is passed on. If there is more demand than the supply can meet market forces operate to ensure that the levy or other tax will be paid by the purchasers rather than the sellers. We are in such a situation as regards meat because of a serious rundown of cattle numbers and there is a static or increasing demand for meat. It is quite clear in that situation that market forces will operate to ensure that whatever levy is imposed will be paid by consumers. That could only be prevented by the introduction of a maximum prices order such as operates in the case of milk and milk products. But it is not possible to have a maximum prices order for meat because of the variety of cuts and qualities. One would have to have about 2,000 levels of price for different cuts and qualities of meat to enforce an adequate system of retail price control. That is not on and market forces certainly will not work in the present demand and supply situation.
The levy is quite unenforceable because the premises by which it is to be collected are supposed to be licensed and under the provisions of the order those premises are supposed to apply in writing for licences. How can they apply in writing when there is no postal service?
We are debating the order now rather than the question.
This order is completely unworkable and the control system which the Minister is endeavouring to institute to prevent the cost of the levy being passed on to the consumer is unworkable. Deputy O'Leary was perfectly correct in raising this matter. Further, the EEC price will not control the matter in respect of meat for this country because meat for this country is supplied by heifer beef, essentially a different commodity from bullock beef used for exports. The export price determined by the EEC is the price essentially for steers or bullocks and the EEC will not control the situation.
Sorry, Deputy I must now call the Minister.
The basic premise of Deputy O'Leary's question is invalid, as I hope to demonstrate in a moment. So far as the levy is operating at the moment, it is operated satisfactorily in regard to milk and non-mart cattle transactions. The mart representatives have indicated, in discussions with the Revenue Commissioners, that in the marts, meat factories and exporters who are liable for the levy and, indeed, purchase far more in the marts than butchers do, are operating the mart's terms of sale.
As Deputy O'Leary said, I issued a statement on this matter and set out the position as I saw it. It would appear that I have to explain to Deputy O'Leary what is basically the flaw in the argument he is putting forward, which is based on statements by people with a vested interest in this matter. The suggestions by the butcher's representatives that the consumer will end up bearing the levy on cattle, or that in some way the 2 per cent levy will transform itself into 10 per cent increase in meat prices, cannot be accepted.
First, on what basis is it said that, even if the butchers had to pay another 2 per cent, this transforms itself into a 10 per cent increase in the price of meat? Nobody has attempted to explain that. It has been accepted by Deputy O'Leary as a fact, which I have to refute. An assertion of that kind has to be explained. Secondly, there are a number of factors which operate in this matter to protect the consumer. The consumer price argument starts from, to put it mildly, the unlikely premise that, before the introduction of the levy, butchers and farmers between them were short selling themselves to the extent of at least 2 per cent rather than charging what the market would bear. The argument goes on that they can now simply raise meat prices by 2 per cent—I am ignoring the nonsense about 10 per cent—on account of the levy without loss to their trade.
Are we seriously expected to believe farmers and butchers, prior to the introduction of the levy were selling their beasts or their meat for at least 2 per cent less than they could get? If Deputy O'Leary believes that, he would believe anything. Of course he does not believe it. He is simply trying to cash in on what he sees as a difficulty. Before I conclude I will have a word or two to say on that, I hope. Most consumers have far too much respect for the business acumen of farmers and butchers to accept the proposition that up to now they have been selling for at least 2 per cent below what they could have received.
As regards the factors operating on the market, as I am sure Deputy O'Leary knows, the major factor operating in regard to market prices for meat is the price the animals will achieve on the export market—in other words, when they are bought for export. Some three-quarters of all meat killed is exported. That is the major factor in determining the price of meat. I do not think any butcher would have the nerve to deny that because frequently they raised the price of meat for that very reason. Because the export price went up the price they had to pay in competition went up. I accept that proposition. It is true. Since the major aspect of the market is subject to the levy, how can it be alleged now that some factor will operate on what butchers purchase—at most one-quarter of the meat involved—which will be a different factor from the factor operating on the three-quarters which determines the price of meat and which is subject to the levy?
It is also clear that, if the price of meat were to rise for non-market reasons, butchers could reasonably be expected to look to the North of Ireland as a source of butcher heifers which, being imports, would be free of the levy. It is known that at least some such imports have taken place in the past week. I would suggest to any consumers who feel their butcher is trying to take advantage of this to increase the price of meat that they should ask him why does he not get his supplies free of the levy, as is open to him. It would cure a lot of problems if that were done. In their own interests most butchers will be competitive and, if they are competitive, they will be charging what the market will allow as they have always done. If they are trying to exploit the situation there will be enough of them who will be keen enough businessmen to be able to sell at a lower price and get the business.
I should also point out that the market forces argument holds true whichever method of collecting the levy is operated, either the one advocated by the marts, which I accept as being reasonable, or the one argued for by the butchers' organisation. It is an established fact that prior to the levy consumer resistance was operating to contribute to a drop in slaughterings for the domestic market. There are other factors, and Deputy Bruton referred to them. There is an overall drop in the size of the national herd, which is a major national problem. It would not be appropriate for me on this occasion to go into the reasons for it. I can say that the catastrophic drop occurred while Deputy Bruton and Deputy O'Leary were in Government. That is outside the scope of this discussion.
Presumably the 2 per cent levy will not help.
The fact that there are alternatives available which are not subject to the levy despite Deputy O'Leary's remarks is an important factor also as regards the protection of the consumer. I repeat that if there is to be any basis at all for the arguments being put forward one has to accept that butchers and farmers heretofore have been operating as fairy godmothers to the consumer and selling below the price they could get. I want to make it clear that because of the drop in the national herd and because of the extremely bad weather we have been having there has been a shortage of grass and a shortage of cattle coming on the market. Everybody knows that. It was true before the levy came in and will be true for at least some weeks to come. Let nobody try to pretend that difficulties in the meat factories are due to the levy. They are due to those factors and it is well known that they would occur without the operation of the levy and when it was not known whether the levy would operate.
I want to make it clear that I am a little concerned to hear Deputy O'Leary once more, as the Labour Party have done consistently, come out against this levy. They have done it consistently and Deputy O'Leary is doing it again here today. He is repeating the arguments of the farming organisations' leaders that the levy is unworkable when, in fact, it is working. He is quoting from the farming organisations and the butchers' associations with approval. He is quoting the statement about an army of inspectors being necessary to operate it and that the Government should have considered postponement of the levy. All the arguments from the IFA and others are being repeated here with approval by Deputy O'Leary.
I reject the central theme of Deputy O'Leary's remarks for the reason I mentioned. You would want to be a very redulous person to believe the basis on which we are asked to accept that this will pass on to the consumer, because we are asked to believe in the fairy godmother-like qualities of farmers and butchers. I would urge all the trade interests involved to co-operate in the levy. I know they do not want to, for other reasons besides the levy itself. They want to make a point. I am aware of this. I do not think it is good enough that Deputy O'Leary or the Labour Party should give any encouragement whatever to the farming organisations or the butchers not to co-operate in the levy or try to pass on the price to the consumer.
I want to assure the House that anything I can do to prevent that happening will be done. I do not think it will be necessary for me to take any action. I hope the people in the Euro-constituency of Dublin will note the consistent support by Deputy O'Leary for opposition to the levy, the declaration that it is unworkable, and the encouragement of people to apply it in such a way that, according to him, it will increase the price to the consumer.
The Dáil adjourned at 5.30 p.m. until 2.30 p.m. on Tuesday, 15 May 1979.