I thank the Chairman and members of the committee for providing Retail Ireland with an opportunity to make its presentation. Members may not have heard of Retail Ireland given that it is a relatively new development in the Irish retail scene. It is a business association within IBEC, which brings together for the first time a dedicated IBEC grouping and a range of food and non-food retailers. The membership consists of department stores, major supermarkets, symbol groups and a range of specialist retailers. The committee has received a copy of our submission. Appended to that document is a list of the members of Retail Ireland which consists of Penneys, Roches Stores, Brown Thomas, Clery's, Marks & Spencer, Easons, Arnotts, Argos, Superquinn, Atlantic, BWG, Musgrave, SuperValu, Centra, Blarney, Woodies, B&Q, Tesco, Dixons, ESB retail, House of Fraser, Boots and Shaws. It is fair to say membership of Retail Ireland represents a substantial grouping of people interested in retailing in Ireland. The important point is that the grouping is right across the board. We understand the committee is concerned today with issues relating to the cost of grocery goods and we will confine ourselves to those issues from the point of view of our association.
The committee has heard from many of our members who have dealt with our independent position in the market. We are attempting to bring a wider brief and do not purport to speak for individual members who have their own retailing models in the market and their own interests to represent. We represent a grouping that is trying to improve the lot of the consumer, the retailer and the persons supplying to marketplaces in Ireland. We have prepared a cut-down version of our submission because of the time constraints of the committee which has a lot of work to do and which we do not wish to delay unnecessarily.
There are a number of points we wish to make. Essentially we want to get across the message in our submission that the identification of an item being sold and its unit price and a comparison with that in some other jurisdiction such as the United Kingdom, France or Spain is not an appropriate way of understanding whether the people supplying grocery goods to the consumer here are doing a good job and giving the consumer a fair deal. It is extremely difficult to decide how best to develop a comparator. As a result of the introduction of the euro, it is obvious what the price of a can of beans is in Ireland or Spain. Regrettably, this does not tell us how efficient or competitive those delivering the can of beans are because each market has different structures, costs etc. We will deal with those details shortly.
The only way we can understand whether somebody is giving the customer a good deal is probably to consider a fair comparison of the gross and net margin made on the transaction. If we can get a proper comparison, this will tell us whether the can of beans is being sold in an efficient and fair way that is giving an appropriate price. It is easy to understand that will work as an economic model. However, we then get into incredible difficulty because we must go on to examine a model in some other country to try to understand how the structures work there. However, because everybody is in competition most other businesses are not willing to share much of the detailed information they consider confidential.
We have had that dilemma in Retail Ireland. We would love to be able to come to the committee and provide a set of comparisons across Europe in which it would find Ireland competitive. We believe as a grocery grouping that a weekly shop in Ireland will have some of the most competitive prices, taking into account the structures of the market, the trading models able to operate in the jurisdiction and the cost base. Our concern is to try to reduce the cost base in order that the substantial level of competition in the market will be sharpened even more.
We would also like to get the message across that it makes no sense for retailers to annoy the consumer. Retailers depend on consumers and must therefore have consumers who are happy to deal with them. They do that by competing. Consumers understand this. Ireland is a sophisticated country and people can easily see how much grocery goods cost in other countries. While they can see the unit prices, they also understand that markets differ for all sorts of reasons.
I will not attempt to justify the trading of any particular member of Retail Ireland. Those members have given their evidence before the committee. However, I would like to make a number of comments on what we believe is important. One important factor is price-cost linkage. The debate about prices is meaningless without taking into account business costs. Ireland is a relatively high-cost location for retailers. This cannot be ignored or it will mislead the consumer with regard to the work being done.
The economic significance of the retail sector is substantial. The economic importance can be understood by the fact that the sector employs approximately 220,000 people and accounts for one job in eight in Ireland. Approximately two thirds of the output of the Irish food manufacturing sector is sold by the retail sector with an associated 20,000 manufacturing jobs.
With regard to price trends, food prices in the retail sector fell by 0.5% in 2004 despite rising business costs and an increase in the overall consumer price index of 2.9%. This is evidence of the significant competitive pressure in the sector. During the past three years food prices have increased by just 2.4% in total, far below the overall rate of inflation of 9.7% during the same period. Most inflation rose in the service sectors over the past three years. During those years when the CPI showed a cumulative 9.7% increase, prices increased by 18% for meals in restaurants and fast food establishments, by 17% for doctors' fees, 26% for dentists' services, 25% for petrol, 24% for hairdressing, 24% for child care, 26% for financial services, 38% for sports admissions and 18% for a range of leisure services. Committee members have been provided with the sheet indicating these increases and we have added footnotes showing the source of the information because of previous experience of the committee asking from where the information was drawn.
We understand the Government and elected representatives have a job to do. Their job is not retailing but public policy. However, public policies impact on all markets, including the retail and food market. Government decisions, agencies and regulators account for almost half of the total consumer price inflation in the five years to January. This is a fact of life and is not stated in a derogatory way. During the past three years when the CPI was a cumulative 9.7%, the State implemented or sanctioned price increases for the consumer of 69% for water and refuse services, 25% for electricity, 44% for hospital services, 17% for motor tax, 15% for bus fares and 25% for education. We indicate the source for those figures, the CSO, in our submission.
Wages are a large component of any retailer's operating costs. They are the principle cost and controlling wages is the key to all successful retailing. When inflation is taken into account, wages in Ireland increased three times as fast in real terms as in the euro zone during the period 1998 to 2003. Staff in retailing are paid 28% more in the South than in the North of Ireland. Retail wages are 60% higher here than in Spain. Low unemployment and a strong economy exert strong upward pressures on wage levels. A recent study shows Ireland has one of the highest levels of minimum wage in the European Union.
With regard to wage cost increases, a retail survey of members revealed they experienced a 22% cumulative increase in non-pay business costs during the two years 2003 to 2004. Cumulative increases over the two years were 26% for insurance, 42% for rents, 21% for transport, 25% for waste collection and treatment, 21% for local authority rates, 21% for energy, 19% for professional services, 9% for telecoms, 13% for water charges, 22% for post and 35% for financial service charges. As this committee is investigating the issue of insurance I will not repeat what it already knows.