Breeda Moynihan-Cronin
Question:45 Mrs. B. Moynihan-Cronin asked the Minister for Finance the potential implications for inflation arising from the introduction of the euro; and if he will make a statement on the matter. [4673/01]
Other Questions. - Euro Changeover.
The changeover to the euro should have no implications for inflation and, to this end, a number of steps have been taken. In the Programme for Prosperity and Fairness, the social partners agree that the changeover to the euro cannot be used to justify price increases. The cash changeover plan, which has been signed up to by a wide range of retail organisations, contains a commitment to carry out the changeover to the euro fairly and to seek no advantage from the conversion.
On 14 December 2000, the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Kitt, launched a national code on euro changeover. All suppliers of goods and services to consumers are encouraged to subscribe to this code or to a sectoral code approved by the Director of Consumer Affairs. All subscribers to the national code commit to carrying out the changeover to the euro fairly and to seek no advantage from the conversion.
More recently, the Euro Changeover (Amounts) Bill, 2001, which I published on 5 February 2001, provides for the substitution, with effect from 1 January 2002, of convenient euro amounts for Irish pound amounts at specific references in listed Acts and statutory instruments. Together with the Finance Bill, 2001, and the Social Welfare Bill, 2001, and other forthcoming legislation, it will provide an appropriate framework of convenient euro amounts to apply from 1 January 2002, in the principal areas of law under which citizens regularly transact business with the State.
In all cases where a change to convenient amounts in euro is considered necessary, the policy is to ensure the change is in favour of the citizen. As the Deputy will be aware, Irish pound amounts in law that are not affected by this national legislation will be converted to euro on 1 January 2002 at the conversion rate, under council regulation (EC) No. 974/98.
I agree with the Minister in principle, and welcome the legislation he recently introduced. The widespread public view is that the euro changeover will be used by unscrupulous business owners to increase prices. I suggest that temporary additional powers be given to the Director of Consumer Affairs so that as well as investigating, he can impose restrictions on businesses that unjustifiably increase prices during the first six months of next year.
Legislation in this regard would be a matter for the Tánaiste and Minister for Enterprise, Trade and Employment, under whose aegis comes the question of consumer protection. I do not object to the Deputy's suggestion in principle, and proceeding in such a way is still possible. We are keeping in contact with the Minister for Enterprise, Trade and Employment's office. The belief that the changeover may be used to raise prices artificially stems from what is anecdotally believed to have happened when decimalisation occurred in February 1971.
In the past few years, Dr. Garret FitzGerald has published an interesting article which challenges the view of what happened in 1971. My Department's analysis of Dr. FitzGerald's article shows that the question cannot be proved either way. It may be that Dr. FitzGerald's contention that widespread inflation did not happen is correct. I agree with Deputy McDowell that there is a belief that this may occur again. There is now greater and more solid competition, so the same dangers may not arise. The matter is being kept under review, but legislation would be a matter for the Minister for Enterprise, Trade and Employment.
I share the concern expressed by Deputy McDowell and the Minister. However. I would not dispute such an eminent authority as Dr. Garret FitzGerald. Neither would I be prepared to say he is always right.
In fairness to Dr. FitzGerald, he just posed the question that it may not have been as clearcut as was always thought.
What happened in 1971 was different as we reduced the number of pennies in a pound from 240 to 100, so that any increase after that date was by at least 2.4 old pennies. On this occasion, a cent will be less than a penny in value. We should guard against those who may try to round upwards. The Minister has made provision that public authorities will change in a way that benefits the citizen. Legislation should also ensure businesses will benefit. Any rounding should be down, not up.
We are discussing the desirability of price legislation, a matter of which I am very conscious. I agree with Deputies McDowell and Jim Mitchell that we need to be on our guard. To be fair to Dr. FitzGerald, he was interestingly querying the long held belief of many. He argued that the reasons for the inflation of 1971 were not clearcut. Subsequent examination showed that we cannot prove or disprove Dr. FitzGerald. Deputy Mitchell has outlined the reasons the situation is different coming up to 1 January 2002. The Euro Changeover Board of Ireland and my colleague in the Department of Enterprise, Trade and Employment are on top of these matters.
For many years, currency exchange has been a source of considerable profits to banks. The number of such transactions will be substantially reduced when the euro becomes our currency, and this profit will no longer be available to them. I am concerned that banks will make up for losses by charging customers in other areas. Does the Minister agree we need to be particularly vigilant in ensuring this does not happen?
We will be vigilant.