Dáil Éireann debate -
Tuesday, 7 Oct 1997

Vol. 481 No. 1

Adjournment Debate. - Drink Price Increase.

Mr. Rabbitte

The reported increase in the price of the pint was permitted by a decision of the Government. I am displeased that none of the Ministers responsible have presented themselves in the House this evening. The matter will be replied to by the Minister of State at the Department of Health and Children with special responsibility for food safety and older people.

This is an important matter. As recently as 9 July the Minister of State at the Department of Enterprise, Trade and Employment with special responsibility for labour affairs, consumer rights and international trade, Deputy Tom Kitt, told the House that he had no plans to raise the price fixing order that I imposed last March. However, it is reported in the newspapers that the Minister has done that and has permitted the trade to take an increase of 5p.

In so far as we can establish a reason for this it is that the brewers have increased the price of a pint by 2p and that the remainder is taken by the licensed trade. It is shameful that any Minister with responsibility for consumer affairs would capitulate in this fashion to the powerful lobby of the licensed vintner's trade, which is well represented in Government. There is no justification for it either in terms of fairness to the consumer or its impact on inflation.

In terms of fairness to the consumer, the proportion of the cost of a pint going to the publican has consistently increased in recent years at the expense of the Exchequer. The rainbow Government refrained on three successive budgets from imposing an increase in excise duty on alcoholic drink on the understanding that the trade would show similar restraint. However, the trade took a price increase of 5p and, having failed to persuade those publicans outside Dublin to rescind it, I found it necessary to impose a price fixing order effective from 11 November 1996. That contributed to depressing the CPI by 0.2 per cent.

I seek permission to have circulated a note on the statistics of this from the weekly monitor produced by Davy Stockbrokers which point to the fact that the depression in the CPI in the past year was 0.2 per cent arising from that price fixing order because alcohol forms such a disproportionate share of the basket of items that make up the consumer price index. In submitting to the lobby from the publicans the Minister is prepared to put the present low inflation environment at risk.

Whatever the excuse for permitting the brewers to take an increase, which is not justified in this low inflation environment, there is no excuse for the Minister of State to bow the knee to the publicans in the fashion that he has done so. He told the House on 9 July that he had no plans to raise the price fixing order but as soon as the vintners visited him he rolled over.

It is a particularly inauspicious start for any Minister of State at the Department of Enterprise, Trade and Employment, as his first act in Government, to impose on the ordinary pint drinker an increase of 5 pence in the price of the pint with, apparently, the support of his colleagues in Government.

It is a disgrace and I ask the Government to reconsider it.

Minister of State at the Department of Health and Children (Dr. Moffatt)

Following detailed discussion with representatives of the drinks industry, and having received undertakings on price restraint, the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Tom Kitt, confirmed by press release dated 3 October 1997 that he would revoke the Retail Prices (Intoxicating Liquor) Order, 1997 with effect from 8 October, 1997. Revocation of the Order will result in a maximum increase at retail level of 5 pence per pint of beer and half glass of spirits from 10 October onwards both in rural areas and in Dublin where there has also been a de-facto price freeze.

Based on data provided by the Central Statistics Office price increases of the amounts proposed would add 0.26 per cent to the consumer price index in so far as they would apply to the licensed trade.

The Retail Prices (Intoxicating Liquor) Order, 1997, effective from 11 March, 1997, froze alcoholic drink prices sold in licensed premises outside of the Dublin metropolitan area at the levels pertaining on 4 November, 1996. In the meantime there has been a de-facto freeze on Dublin drink prices but there are now isolated instances of breaches of this voluntary arrangement.

The making of the order resulted from the refusal by Limerick publicans to reduce drink prices voluntarily last March, which contrasted with the withdrawal of price increases of 5 pence per pint of beer, stout and ale and 5 pence per half glass of spirits, implemented by certain Dublin and rural publicans during the December 1996-January 1997 period.

These increases provoked strong consumer reaction and were deemed to be unnecessary and unjustified given the present low inflationary environment. They did not coincide with any major cost increases and for the third year in succession there were no duty increases on drink in the January budget.

However, it was always intended that the order would be a temporary measure. Statutory price control can have uneven and unintended effects and is inconsistent with the thrust of public policy over the past 10 years which has been to foster increased and more effective competition. The order was largely a warning to the licensed trade to deter irresponsible behaviour but, in this form, is unlikely to be effective over time. The Director of Consumer Affairs regards it as unenforceable due to the difficulties of obtaining the proofs necessary to sustain a prosecution.

The order is also vulnerable to legal challenge. The Vintners Federation of Ireland has been given leave by the High Court for a judicial review of the order on the grounds that it is discriminatory and constitutes a restraint on trade contrary to the Treaty of Rome. As well as excluding Dublin pubs which charge much higher prices, it does not cover clubs or off-licences. The case is due to be heard on 19 October.

Contemporaneously with the adverse publicity about the price increases, the Competition Authority announced its intention to invoke its powers under section 11 of the Competition Acts 1991-96 and investigate barriers to entry to the drinks trade, particularly the licensing provisions. The expectation was that the authority's investigation would be completed by end June last and that the Prices Order would then be lifted. It now transpires that the Authority's report will not be available until the end of the year.

The Minister of State with responsibility for labour, trade and consumer affairs has engaged in intensive negotiations in recent weeks with Guinness, Irish Distillers and the vintners. Guinness Ireland has been pressing strongly since early July to implement a price increase of 1.93p per pint on stout, ale and lager. To do this, they have repeatedly asked that the Prices Order be lifted. They point to the fact that their most recent price increase was on 1 June 1996 and that the increase of the size mentioned is necessary to compensate for additional costs. Irish Distillers, whose last general price increase occurred in autumn 1991, is also now seeking to raise its prices for whiskey, gin and vodka by the equivalent of 2p per half glass. The VFI, which represents 6,000 rural publicans, adverts to the threat to the viability of some of its members because of the continuance of the prices order. Over 75 per cent of the pubs represented by the VFI have, according to the Revenue Commissioners, an annual turnover of £150,000 or less. Apart from the temporary upward movement earlier this year, the last general price increase was in June 1996 and, since then, the Vintners Federation of Ireland members have had to bear a range of cost increases. The Licensed Vintners Association, representing about 700 licensed establishments in Dublin, has also been pressing for the removal of the order. The final phase of the PCW was paid on 1 April, while the first phase of Partnership 2000 was paid on 1 October. Like the VFI, its members' last price increase took place in June 1996.

The Minister of State's negotiating strategy has been predicated on the preservation of order and stability in drink prices without the need for continued statutory price control. The negotiations have resulted in agreement, in the event of the prices order being revoked, on the following price arrangements in accordance with the following timetable and subject to prior notification to the Government: amount/share of proposed price increase — 5p maximum per pint at retail level for beer, ale and stout and 5p maximum per half glass of whiskey, gin and vodka, of which 2p would accrue to brewers and distillers, 2p to publicans, and 1p in additional VAT.