I am happy to report that in 1983 the premiums expected as appropriations in aid under subhead M(3) — £1.3 million — should exceed the amount being provided in 1983 under subhead I.1. This is very satisfactory when it is borne in mind that premiums must be pitched at as low a level as possible so as to minimise the cost to exporters.
Also for the support of our exporters, there is the special scheme of credit financing for capital goods which normally attract from one to five years credit. The scheme is operated in accordance with the International Arrangement involving OECD countries and provides export credit finance at concessionary interest rates to exporters of capital goods. The facility is administered by the Associated Banks on the security of export credit insurance documents and with the aid of the interest subsidy which is provided for in subhead I.2 — £2.459 million. Generally the amount of the subsidy in any particular case relates to: the amount of export business financed; the gap between the concessionary interest rate to the exporter and the prevailing rate of interest at which the banks must get the funds; and the exchange rate of the Irish Punt in relation to foreign currencies, principally the dollar and sterling.
By way of further support for our exporters I am pleased to tell the House that during 1982, the working capital for exporters scheme was extended, in the aggregate from £10 million to £45 million. The scheme provides subsidised loans to meet the additional working capital requirements of small and medium-sized manufacturing industry and particularly exporting firms.
This scheme which was introduced on the basis of the arguments and initiatives of my Department, is administered by the Industrial Credit Company and provides subsidised loans to meet the additional working capital requirements of small and medium-sized manufacturing industry and, particularly, of exporting firms. While the loans under the scheme are provided in Irish Punts, the rates of interest are related to low interest-rate EMS currencies.
The rate of interest charged to the borrower includes an exchange risk premium as well as a margin to cover credit risk. Loans are made to firms operating in accordance with an approved export development plan and while the up-take is rather slower than expected I am confident that it has an important role in funding any export efforts.
As regards the operations of financial institutions generally in the area of trade-related finance, my Department have been pressing forward with consultations with most of the institutions with a view to the introduction of improved and more competitive schemes of export credit finance linked to export credit insurance; the involvement of a broader range of financial institutions than previously in the operation of the schemes; and the increased promotion and marketing of export credit insurance as a valuable security to Irish exporters as they diversify from traditional to new markets. I am glad to inform the House, as I have announced publicly recently, that these discussions have been satisfactorily concluded.
I would also remind the House that the current budget provides for the remission of VAT at point of importation on materials used by firms exporting 75 per cent of their output and this decision will provide a further very welcome boost to exporters.
While on the subject of export credit insurance it is, of course, true to say that, in keeping with our trade policy, Ireland's trading pattern is diversifying from our traditional markets into expanding markets which present greater long-term opportunities for our export potential. Some of these new markets, and particularly those in the Middle East, represent considerable medium to long-term potential but on a short-term perspective can be perceived as being volatile with resulting increased exposure for claims under export credit insurance. It is, I think prudent that the Oireachtas should be advised of this risk and should recognise its possible financial consequences.
There is a compelling need, however, to take a more long-term view of the returns accruing from the development of markets rather than the simple outturn of the export credit insurance scheme. This is the policy adopted by our competitors who, with a view to the development of exports, extend export credit insurance cover for particular projects or markets which, in their view, offer considerable potential for development. It is clear that if we want to get new business, and to extend our export frontiers, we cannot dictate the terms ourselves, but must respond as best we can to the realities of the various markets.
I think that all the foregoing activities and arrangements demonstrate clearly that I am sparing no efforts to carry out my duties and obligations as Minister responsible for international trade and in the national interest. I would invite the co-operation of Deputies on all sides of the House to do anything they can to assist and encourage the development of our exports.
In concluding this topic of my speech I might add that the making of economic forecasts is a dangerous exercise at the best of times but there is reason for cautious optimism about the prospect for the major world economies. There are signs in the USA and elsewhere that the world may be entering a period of more general and more sustained recovery and various international gatherings have the objective of trying to get the world economy moving again.
Turning now to tourism, let me say that the Government regard the tourist industry as an integral part of the economic life of the country. The appointment of a Minister of State to my Department, to whom responsibility for tourism has been assigned, is indicative of the Government's commitment to this industry. This commitment has been further underlined by the Government's decision to reduce the VAT chargeable on hotel and other similar accommodation. There is a clear appreciation in Government that tourism brings major economic and social benefits to Ireland through spending by foreign visitors. The Government's objective is to nationally maximise the benefits accruing from overseas tourists and from domestic tourists, in the most cost-effective way, while, at the same time, ensuring an equitable spread of the advantages throughout the regions of the country.
The negative factors prevailing in our society for the past few years continue to have their effect on the tourist industry. The years following 1979, which was a record year for the industry, proved difficult for several reasons; industrial relations problems and world recession affected 1980, and in 1981 good prospects were negatived by the Northern Ireland situation and attendant massive publicity overseas. Over the last couple of years, of course, high inflation levels have continued to adversely affect the competitiveness of the industry. Notwithstanding these difficulties, 1982 saw a marked revival in tourism and, while the early part of the year was slow, by early summer business had picked up significantly. Tourism earned £500 million of foreign currency in 1982. Without these earnings the deficit in the balance of payments on current account, of course, would have been significantly higher. In addition, spending by Irish people on holidays in Ireland put a further £260 million into circulation particularly in the more remote areas of the country. The total value of tourism in 1982 was £760 million and represented a 2 per cent increase in real terms over the 1981 level.
While there are signs that the world economic recession is easing, 1983 is likely to be a difficult year once again for tourism. In their published tourism plan Bord Fáilte set a target of 4.5 per cent growth for this year. As a positive support to Bord Fáilte in their efforts to reach this target, the Government have provided the board with a current expenditure allocation of £21.258 million — an increase of £3.131 million over the 1982 out-turn. In real terms this represents an increase of about £1 million. This additional money will be spent in expanding the board's promotional activities abroad.
Proposed initiatives to help achieve the growth target set include effective marketing abroad of the country as an international tourist location, increased emphasis on the need for the private sector in tourism to complement the board's efforts by an even greater marketing presence and the encouragement of Irish people to opt to a greater extent for home rather than overseas holidays. The possibilities of extending the tourist season will, in so far as possible, be pursued to ensure greater utilisation of tourist resources and to increase the profitability of enterprises engaged in the tourist business.
The VAT reduction provided for in the Finance Act will be of particular assistance in this regard. With effect from 1 May last the VAT chargeable on accommodation provided by hotels, guesthouses, hostels, holiday camps, motels and camping sites was reduced from 23 per cent to 18 per cent. Ancillary activities carried on by hotels etc. such as the letting of conference rooms, ballrooms and various sporting facilities also benefit from this reduction. This is a concession which had been sought by the industry and I am very pleased that it has been possible to grant it. The decision is indicative of the clear appreciation by the Government of the high export content of tourism. It has been warmly welcomed. I am sure it will be of real benefit to the industry and help it not only to earn more foreign currency for the economy but also to safeguard the jobs of those employed in tourism.
This year, Bord Fáilte will be employing extra resources in the British market. A three-year programme is being launched aimed at raising awareness and improving the image of Ireland among potential British holidaymakers. Ireland has an image problem in Britain which has caused our tourism industry to lose out on the growth in holiday-taking there in the past five years. The goal of the new programme is to arrest this trend particularly in the principal segment of the market, among non-Irish-related holidaymakers. Bord Fáilte's long-term campaign will include advertising, publicity and public relations activities. It would be foolish to expect immediate success from this programme. The board has set itself a target of a 5 per cent increase in visitor numbers from Britain in 1983. Present indications are, however, that this target will be difficult to achieve.
On the North American market, promotional activities this year are geared to maintaining the 1982 growth in visitor numbers and to increasing the Irish share of US-Europe traffic. In 1982 Ireland's performance, aided by attractive air fares and a strong US dollar, was well ahead of other European countries with an approximate 15 per cent increase in US traffic to Ireland. However, there has been a reduction in our price competitiveness this year vis-á-vis other markets competing for American tourists and best estimates at this time would indicate a total traffic level similar to 1982.
On the Continent, despite recessionary and other problems, there are also some encouraging signs. For the first time in a couple of years it seems likely that we will have real growth on a number of markets. In Germany — our most important market in mainland Europe — the level of advance bookings, coupled with a renewed interest in Ireland as a holiday destination, strongly supports this prediction. Even in France, where the recently introduced currency restrictions on foreign travel have created problems, there are still some grounds for optimism. Bord Fáilte, working closely with Irish tourism interests have responded with revised holiday packages to meet this situation. In fact, Bord Fáilte had the distinction of being the first tourism body out on the market promoting new packages in the wake of the French measures.
On the domestic front, the general outlook suggests that the holiday market both north and south will not be buoyant for 1983. The market place is highly competitive and it will be a question of the industry fighting hard to maintain the trend towards an increased domestic market share of total Irish holiday spending.
It is clear that if 1983 is to be a good year for Irish tourism the full commitment of the industry throughout the year is needed. As costs within the industry rise, it is essential now more than ever that attention be paid to the key areas of value for money, standards and quality of service. Ireland, putting it bluntly, is no longer a cheap country for the holidaymaker and it would be unrealistic to expect our tourism industry to compete purely on a basis of price with destinations which, for a variety of social and economic reasons, are cheaper. If we cannot offer low prices, we can — indeed we must — offer value. The only sensible way of tackling the problem of steeply rising costs and restricted demand as a result of the international recession is to increase the perceived value content of the product so that the customer is left in no doubt that the value he receives is as good, or even better than that offered by the competition.
We must be careful, however, not to become so involved in our short-term difficulties that our long-term prospects are ignored. It is essential that the industry is, when the upturn in the world's economy takes place, in a position to benefit from the anticipated growth in tourism business. It is essential that the industry be sufficiently developed to handle the expected growth in the years ahead and have the flexibility to adapt its products to changing tastes and the innovation to create new products. The Government for their part will continue to examine ways to ensure that the full potential of the tourist industry is reached.
The accommodation development programme which includes the self-catering scheme and the caravan-camping scheme continues to aid the industry by encouraging the improvement and development of accommodation stock. In addition, the £6 million provided by the European Investment Bank to the Industrial Credit Company to aid capital development in the tourist industry is now being supplemented by a further £4 million. Another important contribution to tourism development has been the working capital scheme for tourism introduced in 1982. At that time £5 million was made available at preferential interest rates to enable tourism concerns to benefit from loans up to a maximum of £250,000 for periods of up to three years. I am happy to say that, in the light of the considerable interest shown in the scheme and the rapid take-up of loans by the industry, it has been necessary to double the initial fund to £10 million. This additional financing will undoubtedly be a boost to development in tourism.
As I have said already the Government will continue to play their part to ensure the development of this valuable industry to the fullest extent. I hope to bring legislation before the House shortly to raise the statutory limits on the amounts of money used by Bord Fáilte for capital development in the accommodation and amenity areas. I may also use the occasion to propose one or two other legislative amendments.
The House will be aware of the review of tourism policy which has been undertaken in my Department. A significant factor which has emerged is confirmation that effective tourism marketing abroad is of the utmost importance. Promotional publicity is considered to be a highly effective and indispensible policy approach to securing more overseas tourists. The Government accept this and, as I have already said, an extra £1 million in real terms, has been provided to Bord Fáilte for increased promotional activity in 1983. I am sure that this expenditure will have a very positive effect on tourism receipts.
The whole tourist accommodation area and Government assistance towards its development have been looked at in the review. The findings which have emerged would indicate that, in the past, development grant schemes may not have produced the maximum possible benefit. In particular, schemes as originally conceived seem to have had too little regard to changing circumstances between their launching and the final implementation of projects aided. Bord Fáilte have been asked for a complete assessment of present and future accommodation needs and, when this is received, I will be looking into the question as to how we should go about ensuring that supply will be able to match future demand.
The activities of the regional tourism organisations is another area which has been examined. It is clear that there is a need for greater efficiency and cost-effectiveness in their operations. Bord Fáilte and the regional boards are already moving to introduce certain efficiencies and improved work practices in the regions and I hope that this effort will be accelerated to reap early positive results.
I will be looking at other aspects of tourism policy over the coming weeks with a view to ensuring that the State's continuing investment in tourism will be more cost-effective in future and of maximum benefit to the industry and the country as a whole. Any future State investment must, of course, be matched by renewed and more vigorous effort on the part of the industry itself. Without this high level of commitment from those directly involved in tourism, the broad objectives which I have outlined are unlikely to be achieved.
In my opening comments I referred to the considerable volume of legislation promoted by my Department. I will now deal with that aspect. A wide-ranging programme of amending legislation has been planned to reform and update company law over the next few years. This will give effect to the provisions of various EEC Directives which have been adopted in the area of harmonisation of company law in member states and also deal with other issues of a domestic nature arising from a number of abuses of the existing law that have been highlighted in recent times.
The Companies (Amendment) Bill, 1982, giving effect to the Second EEC Company Law Directive and related matters has recently reached the Statute Book. It will become operative shortly under a commencement order.
It was a largely technical and uncontroversial measure which I was anxious to see enacted as soon as possible, not least because the legislation was long overdue and we had been taken to the European Court by the EEC Commission for failing to implement the Directive by the due date. Later this year, I shall be taking steps to implement three EEC Directives relating to the Stock Exchange. These deal with admission of securities to listing, prospectuses for listed securities and interim reports furnished by listed companies. Their requirements will not result in any significant change in the existing Stock Exchange procedures and requirements.
At the moment, however, my first priority in the area of company law is the preparation and introduction of legislation designed to prevent abuses and evasion of responsibilities in the operation of limited liability companies. The proposed Bill, which will realise a commitment given in the Joint Programme for Government, will strengthen, as appropriate, the existing provisions in the 1963 Companies Act and will introduce new measures the objective of which is to eliminate, deter or penalise with severe sanctions, malpractices in the conduct and direction of companies generally.
Limited liability status is a privilege and not a right and it is appropriate, therefore, that those who enjoy such status should be left in no doubt as to the standards of behaviour required of them and the serious consequences of blatantly ignoring or failing to comply with these standards.
We have seen, all too frequently, the situation where company operators liquidate one company — without any regard to the debts outstanding to creditors or employees — with the unmistaken objective of forming another company and, if it suits their purposes, to repeat the process and deceive further creditors and employees. I have asked my officials to give this particular problem the most searching analysis with a view to achieving the most effective solution. As regards the treatment of offenders who persist in this kind of activity, I will be seeking to impose the stiffest penalties acceptable within the legal code generally.
The enactment of legislation is, undoubtedly, a fundamental step towards the elimination of the various abuses to which I have referred and which have, unfortunately, now become all too widespread. Lest too much be expected of such legislation it is only right to recognise the fact of life that, as with other laws, its presence on the Statute Book will not, by itself, rid the business community of those who are intent on fraud or wrongdoing. Moreover, it cannot protect the many people who are foolishly induced by the prospect of a marginal gain over normal rates of interest to invest their savings in doubtful investment bodies. The best possible situation can only be achieved if all who are parties to corporate activity are continuously prudent and vigilant in their transactions and dealings.
A later Bill will follow to translate into Irish law the provisions of the Third Directive on mergers and divisions of public limited companies and a related directive on divisions of such companies. Mergers by fusion and division are rare in Ireland. Therefore, the legislation ensuring on the two directives is not expected to have any widespread application in practice.
An important EEC Directive in relation to company law is the Fourth Directive on the preparation, publication and auditing of the individual accounts of public and private limited companies. The implementation of this complex measure will have a major impact both by significantly increasing the level of detailed disclosure required in accounts and, in particular, because private limited companies will for the first time be required to publish their accounts. There are certain optional provisions in the directive, however, which vary its full impact on different sized companies, particularly as regards publication of accounts and disclosure generally. Ireland is at present behind schedule in implementing this directive but so, too, are the majority of all other member states. I am hopeful, however, that when I have completed my examination of the issues in question I will be able to bring forward the necessary legislative proposals as soon as possible to give effect to this directive.
A Co-operative Societies Bill, designed to replace the existing industrial and provident societies legislation, is at present being prepared in my Department. I hope to be in a position to introduce this Bill early next year.
The Registrar of Friendly Societies, at my request, is undertaking a review of the Friendly Societies Acts, 1896-1977, to see what changes are necessary or desirable. Those Acts govern the registration and operation of friendly societies and certain other types of societies, including benevolent societies. The objective of the review is to provide a modern legislative framework for such societies. They are mainly of the self-help voluntary type and provide insurance and other benefits for members.
Before leaving the subject of companies and other incorporated bodies I should like to refer to a particular associated aspect. My Department have received over the years a considerable number of complaints from the legal profession and others who use the Companies Registration Office about company files not being readily available for inspection. While the great majority of inquirers are facilitated without significant delay, some files cannot be produced immediately either because some other inquirers are using them or because the staff of the office are working on them. Because of the huge volume of files in the office and the ever-increasing demand for services, operational difficulties have arisen.
Before dealing with the question of tackling these difficulties I should like to refer to the remarkable increase in the amount of business transacted in that office in recent years. At the end of 1972 the total number of companies on the register was less than 28,000 and at the end of 1982 the total was over 70,000 — an increase of 150 per cent. There was also in that period an increase of over 75 per cent in transactions relating to business names. Additionally, the other services provided by the office to the community, mainly legal, accountancy and other business interests, have increased no less dramatically. In the area of access to company files for search purposes, for instance, less than 50,000 inspections were made in 1972 whereas the number in 1982, at over 106,000, showed an increase of 112 per cent.
Against this background of increased activity should be noted that staff resources in that period increased by only 60 per cent. That the office have been able to provide a service to the extent that it has done in the past number of years is a remarkable tribute to the hard working and highly skilled staff, who will continue to do their best to give the public the quality of service they are entitled to.
The operation difficulties to which I have referred cannot, however, be overcome by dedication on the part of staff alone. It has been necessary to devise new systems with a view to having immediately available the information most frequently required by the public. When current plans are implemented, hopefully within two years, the main information on company files will be stored on computer and will be available both on visual display units and as printouts. Needless to remark, the planning and implementation of such a project is both complex and expensive but it is being pushed ahead as quickly as possible and provision has been made in the Estimates for the necessary expenditure. In the meantime certain complementary changes are being introduced which should considerably reduce the delay in obtaining information. These include the installation of new mobile shelving to increase storage capacity and make files more readily accessible and a modern card retrieval system.
A further important piece of legislation — the Casual Trading Act, 1980 — is now fully operative. On 12 February of this year the Street Trading Act, 1926, was repealed and the Casual Trading Act, 1980, applies to Dublin city and other urban areas which had adopted the 1926 Act. With a few exceptions specified in the Act, any person who proposes to engage in retail trading on the roads or in any other public place must now have a casual trading licence. These licences are issued by my Department. The Act empowers local authorities to designate casual trading areas and when an authority has designated such areas it is an offence to engage in casual trading elsewhere in that authority's area. The local authorities are also empowered to make by-laws to regulate casual trading and they can attach conditions to the casual trading permits they grant. I am satisfied that the local authorities have all the powers they need to ensure that all the nuisances associated with unregulated street trading can be abated, and it is for them to achieve this objective. They do not have to get my approval of their plans.
Insurance is, needless to say, a very important sector in my Department's functions. In recent years, the non-life insurance sector has seen increasing participation in the market by new entrants following the implementation in 1976 of the First EEC non-Life Insurance Directive. A similar trend in the life assurance area is likely to emerge when the First EEC Life Assurance Directive is implemented into law later this year. The resultant increased competition and greater variety of classes of cover on offer should be of benefit to the insuring public. When the Insurance Bill, 1982, to control life commission levels was introduced, the then Government indicated in their press release that, if agreement were reached, the Bill would not be proceeded with. I am happy to note that all life companies have now signified their agreement on a maximum scale of rates. Such agreement will undoubtedly redound to the benefit of all concerned. However, I want this House and the insurers to be clear that should the commission's agreement run into difficulties, or its continued existence be thrown into doubt, I will immediately reintroduce the Bill and add to it any further measures which would be considered necessary or desirable to deal with the situation.
The rising cost of motor insurance continues to give cause for concern. Each application for an increase is rigidly scrutinised in my department and also by the National Prices Commission. The inescapable fact, however, is that the cost of claims on which the ultimate size of premium rate increases depends, continues to escalate at an alarming rate. Motor underwriting losses amounted to £26 million in 1981, an increase of over 36 per cent on 1980. There is a need, therefore, for motor insurance to be kept under constant review. In this connection the Prices Advisory Committee, established in November 1981 to inquire into the factors contributing to the cost of motor insurance, has now reported. The committee's wide-ranging recommendations are being considered in my Department and in the other Departments concerned. A further expert committee, the Motor Premiums Advisory Committee, is currently finalising a long-term exercise aimed at establishing a statistical basis for the application of loadings to insurance premiums. These investigations will help to determine whether the loadings applied to premium rates reflect the additional risk involved.
In speaking of motor insurance, I must refer to a relatively recent phenomenon, which is of particular concern to me, namely the introduction of so called "discount schemes". I am concerned by what seems to be a departure from prudent underwriting in the interests of increased cash flow. I am also concerned about the attempts by some insurers to corner what might be termed "the better risks".
Schemes designed to achieve these aims carry with them the inherent danger of severe underwriting losses as well as distorting the motor insurance market. I have clearly indicated to all insurers that any losses which may be incurred on such schemes will not be permitted to be spread onto the general insuring public. In other words, such schemes must stand or fall on their own merits. Adverting now to the area of competition policy I have received a report from the Restrictive Practices Commission into restrictions placed on dental technicians by sections 45 and 46 of the Dentists Act, 1928. I have laid the report before both House of the Oireachtas and arranged for its publication. The report recommends that section 45 of the Act should be amended to allow for the provision by non-dentists of dentures to a person of 18 years of age, or over, provided it does not involve work being done on living tissue.
The commission have also produced a report of their public inquiry into the effects on competition of the restrictions on conveyancing and restrictions on advertising by solicitors. The recommendations contained in the report are at present being studied in my Department and I expect to be in a position to take decisions on it fairly shortly.
The Commission have also carried out an inquiry into the provision of tour operator and travel agency services insofar as they are affected by the activities of associations in the travel trade and are at present preparing a report to me in the matter. In the coming year I also expect the commission to carry out an inquiry into the policies of building societies in relation to insurance and valuers' or surveyors' reports in respect of mortgaged properties.
While on the question of building societies there are a few general remarks which I would like to make. The House will be aware from the last report of the Registrar of Building Societies that comparisons between the management expenses of Irish and UK Building Societies did not indicate any cause for concern about the performance of Irish societies in this area. It is to be pointed out that the management expense ratio is only one measure of the efficiency of societies and the Registrar has exhorted all societies to keep their overall performance under continuous review and to ensure that maximum efficiency is attained. It should be widely recognised that building societies occupy a privileged position under law, the object of which was to enable them to provide a better service to the community. It behoves us, therefore, to see to it that the public are properly treated in their dealings with societies. It is pleasing, consequently, to note that the Registrar of Building Societies, who is the person charged statutorily with responsibility for the supervision of societies, will continue to monitor the performance of societies, both generally and at the level of individual societies. This exercise will also be concerned with such other aspects of building societies operations as redemption fees charged, legal expenses and other related matters.
In the area of competition, I am also responsible for the operation of the Mergers, Take-overs and Monopolies (Control) Act, 1978. A report on the cases considered under the Act is contained in an annual report which is presented to the Houses of the Oireachtas. I expect to be presenting, shortly, the report for 1982. I understand the report will show that the number of applications received results in a considerable decrease on the 1981 figure. This, I think, reflects the very difficult year experienced by business in general and is a good indication of the retrenchment which has taken place in most areas. It is also fair to say that a larger proportion of the cases considered during 1982 fell into that category which might, broadly, be described as rescue operations.
I will now turn to the subject of prices and price control. As the House is aware, the National Prices Commission advise me on prices matters and examine and make recommendations on price increase applications. The commission examine applications in accordance with strict criteria which lay down what increased costs may be recovered by applicant firms by way of increased prices.
Generally speaking, only unavoidable increased costs that have actually been incurred are allowed to be passed on to the consumer. Applicant firms must be in a position to verify that cost increases claimed have actually been incurred. In the case of material costs, for example, this is done by way of providing documentary evidence, in the form of invoices, of the cost increases claimed. Price applicants are also obliged to submit their financial accounts certified by auditors and detailed to the extent ordimi narily required by the income tax authorities.
In deciding the level of price increase warranted under the guidelines the capacity of an applicant firm to absorb at least some portion of allowable cost increases is taken into account. A company's trading record and the influence of competitive factors must also be assessed and evaluated.
There is no obligation on the commission to compensate price applicants in full for increased costs and occasionally less than full compensation is given to encourage productivity and efficiency. The commission are very aware of the need for companies to at least maintain, if not increase, efficiency in the production of goods and the provision of services in order to ensure that consumers should not have to pay for inefficiency or lower standards. As Minister, I am very concerned that these principles in the operation of price control are upheld.
Occasionally, applications are received from companies seeking price increases to improve their profitability for investment purposes or to generate employment. Approval of such price increases is usually limited to companies whose prices are already competitive, who have a proven track record of investment in the past and who have viable investment plans for the future. I am particularly concerned that capital generated as a result of price increases approved in this manner will be spent in this country on productive job creation projects.
During 1982, 374 price proposals were considered by the National Prices Commission. The applicants who made these proposals claimed that they had sustained increased costs amounting to £661 million approximately on an annualised basis. Based on recommendations by the commission it was considered that £300 million of these costs could not be allowed. The effect of the cut-back was that consumers at retail level paid about 45 per cent less for the products and services covered by the applications than they might otherwise have had to pay. This figure more than likely understates the true saving to the consumer when one takes into account the efficiency improvements and the costs absorbed by firms arising from the mere existence of a price control mechanism.
In the operation of an effective price control system it is necessary to maintain a balance between the competing needs within the community. To adopt a simplistic approach to price control by suggesting that all applications for price increases be rejected would have serious repercussions. If companies whose costs continue to be affected by imported and domestic inflation found that they could not recover increased costs in higher prices, supplies of goods and services to the consumer would be seriously curtailed within a short period and in some cases would cease altogether. The inevitable consequences of such an approach would be redundancies and firm closures on a large scale. The social costs inflicted on the community for such policies would be intolerable.
I would now like to mention some reservations I have about the effectiveness of the existing price control procedures. One of the features of the present system is that it tends to create in the minds of businessmen the idea that if they incur extra costs they can expect to be compensated by means of commensurate price increases. In that kind of environment one must wonder whether cost increases are resisted as strongly as they ought to be. Some new thinking is required here and it seems to me that more effective means of measuring competitiveness, rather than costs incurred, may have to be introduced. At any rate the notion of automatically passing on increased costs to the consumer is firmly rejected by the Government.
In recent months there has been clear evidence of a slackening in the underlying rate of inflation, particularly in relation to imported inflation. This slackening is due largely to the current international recession and the action taken by our competitor countries to reduce their own levels of inflation. When this recession ends, we cannot expect them easily to allow their economies to return to the double figure inflation rates that were so widely prevalent in recent years. The decline in imported inflation has been reflected in the reduction in the number and the level of price increase applications received in recent months. In 1982 the rise in Irish consumer prices was 17.1 per cent compared with 20.4 per cent in 1981. Projections for the current year suggest that, despite the devaluation earlier on of the Irish pound within the EMS, the rate will be less than 10 per cent in 1983. However, considering that most of our competitors will expect to have rates of inflation of half this level, there is no room for complacency on this issue. A greater moderation in domestic cost increases is essential if Irish industry is to maintain its markets both home and abroad. This factor will be obvious to firms exposed to international competition, but it may not be as obvious to firms — whether importers, manufacturers, or service industries—operating in the sheltered sector of the economy and it may have to be made clear to them that price control procedures will ensure that excessive cost increases will not be permitted to be passed on to the consumer.
In the context of prices matters I might mention here what is a very considerable element in the Estimate, that is the amount for food subsidies. The sum provided for the consumer subsidy on bread in the current year is £40,621,000, an increase of 3 per cent on the final out turn for 1982 of £39,579,000. The consumption of bread in 1982 was less than anticipated and the 1983 allocation is considered adequate to meet the expected demands.
The consumer subsidy on flour and wheatenmeal was terminated on 1 August, 1982 but a token provision has been made to cover the possibility of any carry over of claims having to be met in 1983.
Turning finally to consumer protection, I am pleased to note an increased focussing nowadays on the needs of the public as consumers; to some extent this can be traced back to the Consumer Information Act, 1978, which has created a new awareness. Indeed, apart from my specific responsibility, other Ministers and their Departments have a general responsibility for protecting the interests of the public as consumers within their own functional areas, whether it be in regard to medicines, safety of manufactured products, transport, traffic safety or otherwise. The House will be aware that there are a number of EEC Directives at various stages of development which have important implications for consumers. Regulations have been made to implement the Food Labelling Directive which requires particulars such as ingredients, storage conditions, durability marking and quantity declarations to be given. Deputies on both sides of the House have spoken in support of the implementation of the directive requirements. Industry obviously needs some time to introduce the necessary changes into labelling practices. My Department have been in direct discussion with the Confederation of Irish Industry and individual manufacturers/packers regarding the requirements of the regulations and I plan to bring them into effect later in the year. Already the effects of the directive are becoming evident on the shop shelves in the range of new information being provided on labels and this represents an important step forward for consumers.
I have recently signed regulations which will encourage the rationalisation of a number of sizes in which household goods are sold. Regulations to give effect to the unit pricing of foodstuffs are at an advanced stage of preparation and I hope to sign them shortly. Other directives being discussed in Brussels cover such items as product liability, doorstep sales, consumer credit and misleading advertising.
The Product Liability Directive would impose strict liability, irrespective of fault, on a producer of a product in respect of injury caused by a defect in the product. The injured party would simply have to prove the defect, the damage and the causal relationship between the two. This draft directive would give an important and additional form of protection to consumers as liability would be created whether or not the manufacturer was negligent. It obviously has important ramifications for manufacturers and there are also insurance implications. It is not surprising therefore that progress has not been as fast as originally envisaged. Nevertheless, all member states accept the principle of strict liability on which the directive would be founded and there is a fair measure of agreement as to the general shape the directive should take.
The Doorstep Sales Directive is at an advanced stage of development and I expect to see it adopted without much more delay. The Directive on Misleading Advertising is making progress, again after being the subject of protracted discussion on some fundamental aspects of scope, and the Consumer Credit Directive has been reactivated in the past year.
Most of the EEC initiatives under comtemplation derive from the EEC First and Second Consumer Programmes. In some ways, progress with many of the elements in these could be regarded as disappointing. The reality is that it reflects in part the general difficulty of getting the member states to put aside national differences in favour of a Community agreement. It also reflects, however, a certain hardening of attitudes towards consumer protection by member states because of the continuing worldwide recession. There is evidence that in some of the countries which have been to the fore in consumer protection in the past two decades the general zeal for new initiatives displayed in earlier years is easing back and is being replaced more by consolidation measures within the framework of existing consumer legislation.
I have stated already in this House in response to Dáil questions that I am examining certain matters relating to consumer credit to see if they can be effectively dealt with using existing powers. I believe, for example, that on the tourism front consumers, both foreign and Irish, would welcome menu prices being displayed outside restaurants and dining rooms. This is the practice at present in many other countries; it is also fairly widespread here. I now propose to make such price display a requirement.
The foregoing do not purport to show the relative priority or gravity of consumer issues facing us but are intended simply to illustrate the type of measures which it might be appropriate to consider under existing legislation and which could have beneficial consequences all round. However, I believe that no amount of formal consumer regulation or regimentation will ever be the complete substitute for the application of reasonable care and intelligence by consumers when making purchasing decisions.
I would now like to refer briefly to weights and measures, prepacking and hallmarking legislation which have strong consumer implications. A weights and measures Bill has been under preparation in my Department and is now nearing completion. This Bill will update and modernise the existing weights and measures legislation to take account of technological progress, EEC developments, and the general pace of change. The Bill will make provisions for a unified inspectorate under the control of the Office of Weights and Measures and will lay the foundations for the development of a modern progressive metrology service able to serve the needs of traders and consumers.
The Packaged Goods (Quantity Control) Act, 1981, provided for the establishment of a comprehensive system of quantity control for prepackaged goods, thus significantly increasing the protection afforded the consumer from short weight while at the same time increasing the acceptability of our exports by bringing our control procedures into line with practice elsewhere in the European Community. A special inspectorate within my Department concerned with enforcing this legislation has been concentrating on helping and advising packers in meeting the requirements of the legislation.
Finally, this country lodged recently the instrument of accession to the International Convention on the Control and Marking of Articles of Precious Metals. The Hallmarking Act, 1981, was introduced to enable this to be done and as soon as the accession formalities are completed I will sign the necessary regulations to bring the Act into effect. The advantage of accession is that Irish traders in precious metals will be able to compete favourably in the markets of other contracting states but especially in the UK which has been the most lucrative market for Irish exporters. The whole regime of hallmarking provides a valuable protection for the consumer in terms of the quality of the article of precious metal purchased and arising out of our accession to the convention this protection is now being extended to platinum.
Having dealt as comprehensively as possible with the topics I had decided to include in my speech to-day I now conclude by saying that I will also, in my reply, endeavour to deal with matters which may be raised in the course of the debate.
I recommend this Estimate to the House.
