On behalf of the joint committee, I welcome the Minister for Enterprise, Trade and Employment, Deputy Martin, and his departmental officials. I wish him well in his new portfolio.
Grocery Prices: Ministerial Presentation.
He is not new anymore.
The joint committee worked very well with his predecessor, Deputy Harney, with whom we made progress. We certainly look forward to working with him.
This is the final day of the inquiry into the Groceries Order in terms of the first interim report. We have been looking forward to the Minister's submission. I also welcome our consultant, Mr. Myles O'Reilly and his team.
I thank the Chairman for his words of welcome and kind comments. I look forward to working with him and the joint committee on an ongoing basis on the range of policy items that fall within the remit of my Department and that of the committee. I look forward to a genuine exchange of views as we do not have all the answers. It is not a question of me outlining a position and not being amenable or open to good ideas or suggestions. I will take on board whatever views are expressed by the committee as a whole or individually and give due weight to any opinions expressed.
I see the joint committee as an important player in the arena in which policy is formulated. It is within that context that we participate in the exercise in which the committee is engaged. I am pleased that I have been asked to appear before it to discuss the important issues affecting every citizen of the State.
The retail grocery sector forms a key part of the economy, both in terms of the number of people it employs directly and the jobs it provides in the associated manufacturing, supply and distribution sectors. It is of particular importance to the consumer. In turn, the consumer is of vital importance to it.
I am encouraged by what the joint committee has been told so far by supermarket operators about the level of goods they purchase from Irish food suppliers. I note that Tesco buys €1.5 billion worth of goods from suppliers in Ireland each year and that 50% of its food products are Irish sourced. I understand, too, that it operates an Irish supplier development programme and that the substantial growth in its purchasing of Irish products is a direct result of this programme.
I recognise the benefits of Enterprise Ireland's supplier development programme which is intended for companies supplying or wishing to supply products to retail multiples. It has already assisted 120 client companies.
Musgraves has indicated that 75% of the products sold in its stores, worth €1.88 billion, are sourced in Ireland. Some 57% of its sales, worth €1.43 billion, relates to goods, either produced or manufactured in Ireland. I welcome the level of support given to Irish suppliers and hope this will continue to increase over time. To ensure this happens the State agencies see it as part of their remit to encourage the development of the correct mechanisms and supports.
As regards competition, the retail grocery market has seen significant changes in recent years, most notably the entry of the German discounters, Aldi and Lidl which continue to grow their businesses here. There have been other developments such as the opening of more 24-hour outlets by Tesco and the stocking of more non-food items to facilitate the way people live today. While some operators might feel uneasy about the additional competition generated by the expansion of the multiples, I am pleased that players such as Spar and SuperValu have faced up to this competition by investing further in their operations and opening more new stores. Such investment is important for improving the services and choices available to consumers. While competition is vital to all sectors of the economy, I recognise that it is only effective if it provides real choice for consumers who, in turn, must be able to exercise that choice in an informed manner, to seek out the best value in the products or services they require. The mix of retail grocery outlets in the State has created a situation where the retail grocery sector is competitive and local and international players coexist in a dynamic marketplace. Today, Irish consumers have the choice to shop in their local grocery shop or convenience store, or, if they so wish, they can opt for the services of the larger supermarkets, which are becoming more and more accessible around the country. The Irish grocery market, therefore, provides a level of choice to consumers which compares very well internationally.
It was clear to me from the input provided by the retail representatives that they are operating in a dynamic sector and have been working very hard to meet changing consumer needs in recent years. It is invaluable to have heard from the coalface, so to speak, the sector's views on whether the Irish consumer is getting a good deal in comparison with its counterparts in other countries.
The contributions to date have confirmed my view that the issue of examining Irish retail prices as compared to those abroad is not an easy one. I am regularly asked whether I am conducting studies into the price levels of different commodities, depending on price levels prevailing in different sectors at the time of the request. Contributors have quoted EUROSTAT's health warning that cross-border comparisons are only possible to a certain extent with difficulties arising in compiling a representative basket of products.
Dr. Fingleton, chairman of the Competition Authority has also cast a question mark over the usefulness of examining margins in great detail. While it might be tempting to instigate visible steps to address inflationary tendencies before assigning State resources to examining in detail price levels of different products in different sectors, I must be satisfied that it is possible to conduct such examinations and that the results would be of use to consumers and others.
The contributions to date have clearly signalled that there are many factors feeding into price levels in the grocery sector. The data in the National Competitiveness Council's statement on prices and costs 2004 followed on from previous work on comparative consumer prices undertaken by Forfás at the Government's request and confirmed that Ireland is now the most expensive country in the euro zone for food and non-alcoholic beverages. However, it is important to note that the Government has been taking rising inflation rates seriously and we should welcome the fact that the average annual rate of inflation in 2004 fell to 2.2% in comparison with the rate of 3.3% in 2003.
The National Competitiveness Council made recommendations across a range of policy areas — fiscal, competition and regulation, trade, incomes and labour market. From the perspective of consumer policy my officials have worked closely with the Central Statistics Office, the Office of the Director of Consumer Affairs, the Consumers Association of Ireland and Forfás on the issue of price transparency. This led to the publication last July, for the first time, of the CSO consumer prices average price analysis for Dublin and outside Dublin for May 2004. This initiative continued with the publication of figures for November being brought forward to December last. My Department proposes to continue to work with these interested parties to consider if there is further potential to build on this CSO work in the area of prices to enhance price transparency for consumers and empower them to seek out the best value possible.
With regard to other sources of price transparency, I mention the ongoing work of the Director of Consumer Affairs who has also appeared before this committee and has published and highlighted the results of price surveys on products such as petrol, potatoes, over-the-counter medicines, beans and drink price increases coinciding with major sporting and social events. The consumer strategy group was established last March to advise on the development of a national consumer policy strategy. In the performance of this role the group is carrying out a range of activities, including studies that investigate issues of special concern. The studies are intended to identify areas where policy intervention could lead to improved consumer access, choice, and redress. Some of these studies are particularly relevant in the light of today's discussions. One deals with promoting consumer interests in the retail industry and another with planning and land use and how it affects the consumer. Price trends in comparison with other European countries are also being examined, and some prices are the subject of additional investigation, including those of fruit and vegetables, alcoholic beverages, and pharmaceuticals.
The group is due to produce a final report to me shortly and I expect its recommendations to form the basis of national consumer policy in the coming years. We can discuss this matter later during questions and answers.
We look forward to that.
I am determined that this new national consumer policy will, above all, bring about the increased empowerment of Irish consumers in order that they can play a key part in a competitive marketplace. The invitation to appear before this committee specifically asked for a view as to whether Irish consumers are getting as good a deal as their counterparts in the UK and other European countries. It is clear that it is not easy to make direct comparisons, although there is little doubt that the introduction of the euro has helped transparency in this regard. On the basis of evidence to date, I am bound to say there is cause for concern at higher prices in Ireland relative to the rest of Europe. However, the consumer strategy group was specifically asked in its terms of reference to determine objectively whether the Irish consumer was getting a fair deal. I and committee members will be particularly interested in the result of the group's deliberations on this topic. It will come forward with clear pronouncements based on its research on this specific issue. It may be best for the committee to await the outcome of that process, although it is not my business to say how the committee should do its work.
It is a good suggestion.
I have had preliminary meetings with the chair of the consumer group and it is clear the pronouncements will be of a definitive kind. The sort of research the group has conducted will allow us all to form an objective view on whether higher prices are justified.
On the issue of the level of commitment on the part of grocery multiples to the purchase of Irish-made products, the evidence points to a very high level of commitment and this has to be encouraging. However, it would be wrong for Irish producers to become complacent and they must always strive to improve their position relative to overseas suppliers. The demand for lower prices from the retail multiples will continually necessitate innovation in operations and processes as well as more effective supply chain management to take costs out of the manufacturing process to preserve operating margins as well as satisfying the stringent supply and distribution demands of the multiples. This is the type of incentive provided by open and fair competition in the marketplace and which ultimately will ensure better deals for consumers.
In conclusion, my key message to the committee is that ultimately the most effective way to positively impact on price levels in the interests of ordinary consumers in the grocery sector, as in others, is to facilitate effective competition in a marketplace where empowered consumers are making informed choices between retailers.
Before I call Deputy Hogan, I will address one question. Is the Minister concerned that the pressure on production costs has led to an increased use of pesticides? This is a matter we had not contemplated at the start of this inquiry but it has since come to our attention. We are concerned and want to address it in the report.
I take the Minister's point that we would wait for the consumer strategy report before bringing out our first interim report. To ask an obvious question, what are the Minister's views on the Groceries Order?
I will have to check the specific issue raised by the Chairman as to whether the pressure on production costs has led to increased use of pesticides. However, it is clear in this debate that there is a balance between innovation in manufacturing, processing and operation costs, on the one hand, and the achievement of higher margins on the other. I have met suppliers and retailers. It is clear that suppliers, particularly on the food side, would argue there is significant strength within the multiples and the supermarket sector and that they are under increasing pressure to supply goods at competitive prices, to say the least. This has allowed an inward look back at how suppliers operate in terms of manufacture, process and distribution, and this has led to innovation. There is no question about this if one considers the past decade. Green Isle Foods, for example, constantly states that improvements in its processes — how it manufactures and operates — has allowed it to gain market share in the United Kingdom. One could argue that if it did not have that dynamic forcing it to innovate, Green Isle would not be the successful company it is today. On the other hand, it would equally argue that the pressures are of a kind that place considerable strain on employment levels, etc.
A good illustration on the foreign direct investment side is a company such as Dell. It is still the case that Dell in Limerick produces boxes cheaper than Dell in China, although labour costs in the two countries are in no way comparable. Dell's headquarters in the United States claims that the world leader in global manufacturing is Dell in Limerick and that the personnel there are the global leaders in terms of high-end manufacturing processes, supply chain management and so forth, the point being that the driving force for them has been the imperative to keep innovating. There is a balance in this regard and it is important we do not skew this balance by driving companies out of business or by developing a complacency culture which stymies and reduces the capacity to innovate.
I have an open mind on the issue of the Groceries Order. I do not want to pre-empt the findings of consumer strategy group but it is clear from divine discovery by certain sections of the media that there will be a recommendation on this issue. My inclination is to facilitate a public debate and put some timeframe on the issue as it has been ongoing for a few years.
That is decisive of the Minister.
The committee might want to be decisive in advance but that is a matter for the members. The various players have asked that, subsequent to the publication of the consumer strategy group findings, a facility would be made available for them to make submissions to the Minister. I would be wrong if I were not to facilitate this. I will impose a timeframe and bring the matter to Government for a decision.
I presume the Minister will take the committee and its first interim report into account when going to Cabinet.
Yes.
I welcome the Minister and his officials to the committee for this important work. I note the Minister did not make recommendations to the committee on the grocery trade. He relies a great deal on the consumer strategy report. While the Minister stated he did not have a view on the Groceries Order, he had a view last October when he stated he was against any amendment to it. The Minister stated it was operating well as it stood and that he would make no proposal to amend the order in any way. Is this his present position?
Does the Minister propose to amend the Competition Act to meet the requirements of the chairman of the Competition Authority, Dr. Fingleton? He regularly complains to the committee that artificial intervention in policy terms, such as the Groceries Order, contributes to higher prices for the consumer. I am sure the Department and the Minister have views on whether he is correct. I am surprised the Minister stated he put a question mark over the utility of examining margins in great detail because Dr. Fingleton regularly does this, even in regard to nappies, to which he regularly refers. A court case was taken against an outlet for dropping the price of that product and Dr. Fingleton regularly uses this as an example of how Government policy is inhibiting the reduction of prices for consumers. Does the Minister agree with Dr. Fingleton?
What is the Minister's view of the recent amendment of the retail planning guidelines by the Minister for the Environment, Heritage and Local Government, Deputy Roche? Will it have an impact on creating greater competition in gateway centres? Did the Minister make a submission to the Minister, Deputy Roche, in this regard?
I wish to refer to below cost selling, in particular to a range of products used by the less well-off in society. Is it correct to allow basic foodstuffs and consumer items to fall through the net of below cost selling guidelines? I am sure those items would be used by companies as price leaders and there might be further price reductions by the companies to drive people into their stores and increase profitability. However, the point is that the practice should be used to the benefit of the less well-off in society.
While I do not know which newspaper Deputy Hogan read, we are open to reviewing the Groceries Order. That is on the agenda.
Therefore, the Minister will not be reviewing it now.
The consumer strategy group will come forward with a recommendation on it. There will then be further submissions by the players who have made submissions to the Department on a variety of issues. It would only be fair to allow other interested parties to have a say. The committee has already taken a preliminary view on the Groceries Order.
We will make a submission to the Minister in that regard.
That will be part of the submission. Government will have to take a position on this. It has been open to periodic review for the past five or six years on an ongoing basis. As members are aware, different bodies have pronounced on it in different ways over the past seven years. It is a call one must make in the context of the impact if the Groceries Order were lifted. It is a call we will have to make in light of the evidence. The substantive position will be advanced by the consumer strategy group and the debate will follow the publication of its report.
The Competition Act is in place since 2002 and there are no immediate proposals to amend it. However, emerging clearly from the consumer strategy group's report will be the overall issue of a structural response to facilitate a stronger voice for the consumer in policy formulation than is currently the case. One of the strongest messages that will come from the report of the consumer strategy group is that the consumer did not and does not have a strong voice in Irish policy formulation. This relates to Government decisions, constant well resourced campaigns on behalf of the consumer and strong monitoring and advocacy roles in regard to consumer interests and so forth.
This leads into Deputy Hogan's third question on the retail planning guidelines. It was interesting when I met the chair of the consumer strategy group that she made the point that no one ever took a consumer perspective in the context of the original formulation of the planning guidelines. I support the move of the Minister for the Environment, Heritage and Local Government, Deputy Roche, in regard to the modification of the retail planning guidelines, which I argue is a modest modification to facilitate the entry to the market of new types of activity that are flourishing across the globe.
The world is in constant and dynamic change. The way consumers purchase is changing. Many people regularly leave the country to spend their money elsewhere on a range of consumer goods. We cannot ignore this reality. The Competitiveness Council made a strong recommendation for complete abolition of the planning guidelines and the Competition Authority would have equally strong views in that regard. The Minister, Deputy Roche, made a modest amendment to the retail planning guidelines, which I support.
Senator Hanafin asked about below cost selling and whether there will be a dividend for those on low incomes. At this stage, the consumer strategy group is dealing with the issue and will focus on the degree to which, in its opinion, the Groceries Order may not be of particular benefit to low income family in terms of pricing and so on. I do not wish to pre-empt the report but assure members this issue will be adequately addressed.
Will the report take into account the dreadful repercussions of the development of large out-of-town stores in the UK?
The change to the retail planning guidelines does not affect the groceries industry. The original decision by Government some years ago to introduce planning guidelines was informed by work and research, under the then Minister, Deputy Dempsey, in regard to the need to preserve an inner core in cities and towns. That was the argument behind it.
However, circumstances continue to change as the economy develops. Recent statistics indicate that the on-line retail sector in the UK increased significantly in 2004, particularly over the Christmas period.
Is that sector restricted to higher income earners?
The statistics did not provide differentiations in that regard.
My experience indicates this sector is mostly availed of by higher earners.
The point is that the sector is growing and that new forms of retailing are developing all the time. The on-line sector is just one example. We cannot be blind to global trends and must remain competitive in this regard. Equally, Northern Ireland manages to attract much investment into its jurisdiction and the Government must not be blind to the implications of this in terms of revenue leakage, VAT and so on.
There are many factors that must be balanced in this area. I support the Minister for the Environment, Heritage and Local Government, Deputy Roche, in the decision he took which struck a reasonable balance on this issue.
Are the Groceries Order and the grocery industry in general affected by that decision?
No.
I welcome the Minister and his officials and hope their presence is not simply pro forma. We are looking at the issue of competitiveness but also a range of other factors that are socially important in terms of access, the elderly, convenience, the built environment, the integrity of town centres and so on. All these factors impinge on our attitude to the two issues under review, the retail planning guidelines and the Groceries Order.
I am sure our consultant, Mr. O'Reilly, will be gratified that the bulk of the Minister's speech is essentially a précis of evidence already presented to us. It gives no indication of the Minister's views on any of the issues. However, that is the reason he and other Ministers were asked to come before the committee. In this context, my first question relates to process. Have we any function as a committee? We were in the middle of this review when the Minister for the Environment, Heritage and Local Government announced the decision regarding the planning guidelines. He did not wait for our view since it seems we have no status as merely a committee of the Oireachtas.
The Minister for Enterprise, Trade and Employment has told us in regard to key issues, such as prices in the grocery sector in comparison with those in other EU states, that a consumer strategy group is undertaking a review. In this regard, the Minister stated, "I for one will be particularly interested in the result of the group's deliberations on the topic." I would be surprised if the Minister were not interested in these deliberations. However, what is the Minister's view? Will the findings of the consumer strategy group rather than the deliberations and work of this committee represent the definitive position?
This also concerns me.
The Minister should, instead of patronising us, tell us if we have no function. We are busy and have other work to do. In regard to many issues, outside bodies, pressure groups or others have much more impact than the deliberations of Oireachtas committees. This must be examined and I present it as the first significant issue for consideration today. Having cross-examined the Minister for the Environment, Heritage and Local Government on his attitude, the preliminary conclusion in this regard is that this committee does not matter a whit. That Minister set up a committee of one — himself — to examine the planning guidelines and, having trenchantly debated the matter with it came to a conclusion.
The Minister for Enterprise, Trade and Employment has been asked to confirm whether the multiples are purchasing Irish products in an acceptable way. His response is that the commitment in this regard is "very encouraging" but that "we cannot be complacent". What does this mean? Is the input satisfactory and what action is the Minister taking to ensure there is the maximum possible take-up of Irish produce? This is what we want the Minister to tell us.
Those are my three questions. First, will the Minister define the process at work in this area and clarify whether this committee will be listened to and allowed to play a role? What weight will the Minister put on our conclusions before he comes to a decision on the Groceries Order? Second, does the Minister believe grocery prices are too high in relative EU terms and what is his view of the impact of the Groceries Order in this regard? Third, is the take-up of Irish produce by the multiples satisfactory and how does he propose to ensure the maximum take-up?
The process cuts both ways. The Chairman came to me on an ongoing basis prior to Christmas with requests that I attend the committee. I argued that it would be better to wait until the consumer strategy group had produced its report so there would be meat on the table for a discussion. The committee wanted me to attend before the publication of this report but I believed it to be more advantageous to all concerned to defer my attendance until after publication. However, I did not wish to be discourteous to the committee and was aware the view might be advanced that I was not bothered to attend. The process is a two-way endeavour, therefore, and I will have no difficulty in coming back in the future.
Does the activity of the consumer strategy group represent the decision-making process?
No. However, the group has a substantive contribution to make to the debate. It is not for me to propose how the committee should do its work. However, in my opening address I suggested that it might be wise for the committee to await the findings of the consumer strategy group before coming to its own definitive conclusions. I am satisfied in my discussions with the chairman of the group that its contribution will be of a substantive nature and that it would be unwise for anyone, including myself, to make definitive decisions in advance of the publication of its report and the ensuing debate which I will facilitate.
I have made the point that I am particularly concerned about increased prices. I observed in my opening address that the data contained in the National Competitiveness Council's statement confirmed that "Ireland is now the most expensive country in the euro zone for food and non-alcoholic beverages". Deputy Howlin quoted only one aspect of my speech.
We must establish one matter today. The committee has spent much time, as Deputy Howlin observed, in deliberating with the captains of industry in regard to this retailing sector. Does the Minister guarantee that this work and our recommendations to Government will be given serious consideration, as was always afforded by the Minister's predecessor in regard, for example, to the insurance inquiry?
Yes.
I am echoing Deputy Howlin's question. Attendance at this committee has been exemplary and members have made themselves available early on Wednesday and Thursday mornings and on Tuesday afternoons to contribute to the groceries order inquiry. We want our involvement to be appreciated and to get the full backing of the Minister and the Government for the serious points raised. The work of this committee has been magnificent over the past two and a half years and we do not wish to see that interfered with. I am concerned to hear Deputy Howlin request assurances. I have worked closely with the Minister for a number of years and I feel uplifted by his appointment to this portfolio by the Taoiseach, but Deputy Howlin's concern should be addressed before we answer the other two points.
The process goes both ways. I assure the Chairman that I would not be here were I not prepared to appreciate the committee's views. In my opening address I quoted from the deliberations of the committee in the context of the supply and use of Irish goods, but I have been attacked for doing so. Deputy Howlin said that I quoted submissions to the committee in my speech as if I should not have done so.
We want the Minister's view.
I would have thought this presented evidence that my officials and I took the deliberations of the committee seriously.
Has the Minister a view?
Earlier submissions to the committee were reflected and articulated in my submissions to the committee in order that we have an integrated approach. That seems to have been frowned upon.
The Minister has made his point clearly.
I want to make it clear that, as I suggested earlier, I would like to meet the committee again.
Would that be before we publish our first interim report?
I have already volunteered to inform the committee prior to making any decision.
The consumer strategy group report will be published within the next few weeks. We had envisaged that our first interim report on this would be finished by the end of March. We would appreciate the Minister's assistance to the committee after the publication of the consumer strategy group report and before we publish our first interim report.
If I may be upfront with the committee, I intend to bring the work of the consumer strategy group before the Government because it contains expenditure proposals.
Will decisions be made then?
With respect, I am going to bring it to——
What is the point in coming out with a decision?
Not before we publish we publish the interim report.
If new bodies are to be formed, these will involve expenditure proposals.
Will the Minister come before the committee before he goes to Government?
Ministers cannot unilaterally formulate policy through the Chairman of this committee. They must go to Government.
We could discuss the report.
We will do so.
Our first interim report will be published a matter of weeks after the consumer strategy group report. Is the timeframe that the Minister will consider both and then go to Government with a proposal?
No, I have to bring the report of the consumer strategy group before the Government once I receive it.
All decisions will have been made when the Minister returns.
The decisions will not have been made because I have already indicated my intentions for the Groceries Order.
Where will the committee's interim report be incorporated into the Minister's planning?
Has the interim report been published?
No, it will be published two or three weeks after the publication of the consumer strategy group report. Today is the final day's hearing.
The committee should publish its interim report. I have no difficulty in it being submitted by the committee to my Department in the next week.
By next week it will be too late.
No, it can be timed to coincide with the consumer strategy group report being brought before the Government.
Is it agreed that the committee will work with the Minister and his officials to ensure that the first interim report will be published before the consumer strategy group report is brought before the Government?
There are very clear roles for the Executive and for parliamentary groups. I have already stated that in the context of the Groceries Order, I will facilitate a public debate, just as the committee did. There is nothing wrong with that. I will have another opportunity to meet before any decision is taken on the Groceries Order.
Is that the only assurance we will receive?
There are expenditure items potentially involved in other issues in the consumer strategy group report, which, owing to its role, I am obliged to report to Government.
Would the Minister answer Deputy Howlin's other two questions?
I answered the question in which Deputy Howlin frowned upon my utilisation of the submissions that were made to the committee which I thought was a reflection of my desire——
The Minister should not invite comment. Will he answer the third question?
We have already dealt with the third question in the context of the Enterprise Ireland supplier development programme, which I mentioned in my speech, and the Enterprise Ireland first sale programme. These programmes are designed to support Irish suppliers, particularly new companies with new products and services, to properly, effectively and professionally access the retail market. For example, an interesting pilot programme that we are supporting is the Enterprise Ireland first sale programme with the Musgrave Group which looks for start-up food companies with high potential to enter the retail market. Many new food developers or promoters do not have the training or experience to present their produce correctly when they first begin trading. This programme could have an important impact on that. The wider Enterprise Ireland supplier development programme has already helped about 120 food companies and they have been actively involved in the programme. The feedback from companies and retailers is quite positive.
The committee will have heard evidence from different retail multiples and groups on the degree to which they encourage the sourcing of Irish goods. Deputy Howlin asked me if I was satisfied. I am never going to say that I am satisfied because the minute that phrase is used, the downward slope begins.
The Minister was satisfied when he entered the Department of Enterprise, Trade and Employment.
The Deputy has had that experience. We must keep a competitive edge. The greatest difficulty facing Ireland, especially because of our economic growth over the last decade, will be the issue of competitiveness. When there was 17% unemployment in the late 1980s, there was a collective imperative to get out of that downward cycle. We now need to create the imperative to stay ahead of the curve. That is why the phrase "I am satisfied" will never be part of my vocabulary.
We fully support the Minister in that.
A long time has been wasted in unnecessary debate from Deputy Howlin. He is confusing the IKEA situation and the groceries situation. The particular order made by the Minister for the Environment, Heritage and Local Government, Deputy Roche, has nothing to do with the Groceries Order.
Has the Senator read the terms of reference for the inquiry?
They concern groceries as far as I am concerned. I thank the Chairman for working with the Minister to arrange an appearance here. The Minister has a very busy schedule. I compliment the Minister on examining the deliberations of this committee. The groceries order is a myth because it is not about below cost selling but below cost purchasing. The Director of Consumer Affairs, Ms Foley, made it clear that large companies such as Tesco, the Musgrave Group and Dunnes Stores are buying below cost and selling items on the shelves at the same cost. They are destroying small shops in rural areas. The Chairman elaborated further on the issue and the Minister is aware it was a key point in our deliberations. I recommend that the Groceries Order, whatever it is worth, be retained as the floodgates would open if it were removed. Another difficulty is that the multinationals' purchasing power ensures they are not concerned about below cost selling. No multinational has made a case for the removal or amendment of the order by the Minister.
I welcome the Minister as his co-operation with the joint committee is essential.
We heard three reasons from the retail industry for the cost differences between Great Britain, Northern Ireland and the Republic, namely, the cost of wages, the cost of insurance and the massive cost of waste management. The joint committee also dwelt on the purchase of Irish goods. As the Minister noted, some of the multiples have stated they are using Irish goods up to a figure of 50%. Others, however, are not. The committee has a problem with the origin and traceability of own brand products. We only see the retailer's name on own brands, not where they were produced.
Their place of manufacture.
The joint committee's greatest problem with the retail planning guidelines is that they apply to gateway towns and cities. Taking County Galway as an example, the towns of Loughrea, Ballinasloe, Athenry and Tuam lie between the gateways of Athlone and Galway city. Retailers in these towns will be in competition with the major multiples in the gateways. There will be a serious problem if the guidelines take effect as many people who work in Galway or Athlone will buy all their groceries in the bigger and cheaper stores in the gateways, leaving the smaller towns empty. The Minister should bear this in mind.
As a farmer-producer, I have a problem with low cost selling. We must protect producers. For example, we are told milk is imported and sold below cost. I do not know whether that is true but the producers of milk say it is. Although it costs so much to produce a pint or litre of milk, it is cheaper on the shelf than a litre of water. We must look at both sides. It is important to keep the small number of producers of products such as liquid milk alive, although I accept we must also have competitive prices for the consumer. None of the retail outlets which have opened here appears to have a problem with either the Groceries Order or the retail planning guidelines. If something is all right, why break it?
I welcome Deputy Ned O'Keeffe as a full member of the joint committee. He replaces Deputy Wilkinson, a very hard working member who has been promoted to act as convenor for the Joint Committee on Transport. I look forward to Deputy O'Keeffe bringing his experience to the assistance of the committee in its deliberations in a wide range of areas. I invite him to ask the Minister questions relevant to this inquiry.
I am delighted to join the joint committee. The Chairman is one of the most innovative Members of the House. I observe his work very closely and look forward to working with him.
I am in the presence of my fellow Corkman, Deputy Micheál Martin, the Minister for Enterprise, Trade and Employment, for whom I have great admiration and who is one of our more progressive and innovative Ministers. I may not agree with everything he says as now and again we go our own way. He mentioned Dell and the cost to it of making boxes in Limerick. In that context, I was concerned and somewhat taken aback recently when it decided to open a new facility in Scotland. I gather its decision was based on Scotland having a more attractive cost base for manufacturing than Ireland.
We are discussing the Groceries Order. Does the Deputy have a question on it?
I am sure the Minister will answer my question.
Recently there was a furore concerning a colouring ingredient used in foodstuffs. It was mainly used in own brand products. When I looked at a partial list of the affected products in the newspapers, I saw it was mainly used by the newly arrived multiples. I did not find the names of SuperValu or Dunnes Stores on the list. The Food Safety Authority of Ireland was involved in the matter.
What is the position on own brand products? One manufacturer can make own brand products for five multiples. This is an abuse. Legislation is needed, if this is permissible under the EU directive, to state the place of manufacture. This is of particular importance to the food sector.
For traceability.
I gather SuperValu's market share is falling quickly because of competition. I admire SuperValu and Musgraves, in particular, for its ties to indigenous products and its attempts to hold the line.
I was one of those who led a campaign within my party and with the Opposition on the retail planning guidelines, although I have no problem with any retailer opening here. B&Q asked unsuccessfully for the guidelines to be lifted. Recently the merger of Heitons and Grafton, two Irish companies I admire, was held up by the Mergers and Competition Authority for a significant period. The planning guidelines were lifted to allow a major company open here. While the merger of Grafton and Heitons has been approved, the delay was unnecessary. They are two major Irish retailers selling similar products to IKEA. I understand they also sought a change to the planning guidelines to help themselves. People are shaking their heads. I do not understand the contradiction.
On a day when I attended the joint committee in the absence of Deputy Brady representatives of the Society of St. Vincent de Paul andCROSSCARE appeared before it. They supported our view on the retail sector, although we had thought they would support competition because it might help those on the margins. I was shocked that the two charities were opposed to a change to the planning guidelines. They saw nothing but higher prices in the longer term.
The Minister comes from Cork city. Let us acknowledge that it is a small city which is as rural as Mitchelstown. Rural shops are closing every day of the week. I come from the same area as the Minister's ancestors who were well known and popular. The region is densely populated and for 50 or 60 years I was able to buy a newspaper within walking distance of my house. Today, however, I must travel between four and six miles to buy a newspaper or bottle of milk. This is a major change. I shop in a village called Glanworth where only one retail shop remains. The shopkeeper tells me he will not be able to continue. That is the reality. I do not know what is the problem. Dublin does not run Ireland. We have seen in the past day or so——
Does the Deputy have questions to ask?
Yes.
The Deputy is making statements. A Second Stage speech——
We should give relevant examples——
We should get through this before 11 a.m.
Did we see the profits announced by AIB in recent days? It has a major branch structure, servicing areas that often present a problem——
What is the question?
Why can we not keep within the guidelines? Why must we amend them to introduce new operators? Why must the guidelines be altered to allow some persons entry?
These contributions have given a welcome perspective to this debate and will be taken on board. The public representatives from rural Ireland have focussed on this debate. This is a democratic forum and the wisdom of the committee will be considered.
Senator Leyden raised the issue of the retail planning guidelines. It is his opinion that any change in conjunction with the Groceries Order would have a significant impact on smaller shops. Change has been constant over the past decade. We have moved on from the time of corner shops within a mile of housing and cannot return. When the supermarket first came to Ireland people believed the world would collapse but it did not. It changed. We have witnessed reorganisation, redevelopment and new types of stores emerging.
Following discussions with the Musgrave Group, the Government view that Supervalu's market share is in decline, for example. There has been a considerable expansion in its number of outlets, it is a significant employer and has a considerable market share. The percentages are available to the committee for examination. Spar has also increased in these ways. The area of convenience shopping is growing. It accounts for approximately 16,000 jobs in contrast to none several years ago. We must be careful when making global declarations. A new phenomenon has developed in the retail sector and smaller convenience stores are doing very well because they tap into changing consumer trends and lifestyles.
The market has changed dramatically. For instance, discussions with suppliers and manufacturers of ready-made meals indicate that they are attempting to shorten the length of time needed to prepare these foodstuffs for people who buy them in convenience stores. This may be a cash-rich, time-poor type of society but if people want to buy meals and have them on a plate and ready for consumption in ten minutes, that is the reality.
Green Isle and many other companies monitor consumer trends and use this data to inform their operations. I visited the graduate entrepreneur start-up companies in the Cork region recently and it was fantastic to see two local men develop an instantly popular type of ready-made meal that sources Irish goods, cuisine and expertise. The meal could be anything from shepherd's pie to fish. It was a very quick start-up with the Supervalu and Centra chains. Marks & Spencer created much of this phenomenon in Ireland and now the Irish believe they can follow suit.
There will be constant change. Spar and other companies are growing, particularly in the convenience and health food sectors, a potentially significant section of the market in the future. I accept Deputy O'Keeffe's point that the colouring issue is very serious, as is traceability. I am not entirely happy with the European regime with regard to rebranding and so forth. The consumer requires absolute traceability in order that we know what is in our food and where it comes from. We do not desire to be alarmist but, according to the website, the number of products affected by this dye in the Irish and UK mainline retail streams is in the hundreds. It is worrying that these products had to be withdrawn for risk management and public health protection reasons. This issue must be examined at European level.
The Minister must answer the other questions put to him.
The impact here has not been the same as in the UK but it is still a warning shot across the bow. Deputy Callanan raised this issue from the perspective of a producer. He also raised the issues of traceability and own-brand. Many co-ops view own-brand as growing, placing them under increased pressure. The major multiples wish to drive this agenda further. The future of the Irish food industry is in the development of value-added products. We are currently witnessing a significant restructuring of the agri-food business, such as a shake out of jobs. My Department is working with Enterprise Ireland. We view the future as requiring the development of a stronger indigenous research and development base in co-operation with the food industry if we are to create new products and types of employment.
Market trends will increase the pressure but there is little point in complaining about it. We must acknowledge that changes are coming down the track and take proactive steps that will create new areas and opportunities for food producers. I have visited the Moorepark research centre, for example, which is engaged in a significant degree of research. It is estimated that this sector alone could soon grow in worth worldwide from €20 billion to €50 billion. This is where we have to be. Those who are in the business on either side of the equation agree that a large shift is occurring. The competition authority is an independent body and I cannot interfere in how it conducts its business.
Does the Minister regulate it?
No. It is under the financial aegis of my Department but is an independent body. We cannot interfere in any judgment it makes. Its independence is crucial and Dr. John Fingleton has been a strong and welcome voice for competition. He keeps people on their toes. From time to time his may be a discordant voice but it is still necessary. The day a Government can muzzle or undermine a competition authority is the day it should be disbanded.
We are conscious of the rural perspective articulated by the committee. The Minister for Community, Rural and Gaeltacht Affairs, Deputy Ó Cuív, and his Department have developed a policy position and framework with regard to rural enterprise. We will work with them to devise ways of generating enterprise and jobs in the context of the outcome of the enterprise strategy group.
I welcome the Minister and thank him for outlining his views. This committee does not want Ireland to take the route of "ghost town Britain", so to speak, or the worst effects of what has happened in France. I agree with the last few speakers. I am concerned about provincial towns, villages and rural areas in Ireland. There was reference to previous presentations made by the Society of St. Vincent de Paul, CROSSCARE and the Combat Poverty Agency. They were unanimous in their assertions that changes should not be made to the retail planning guidelines or to the Groceries Order. They were concerned for pensioners and other people on low incomes who do not have access to public transport, who cannot get to large stores out of town and who need convenience stores. We cannot have a convenience shop every mile along the road, as Deputy Ned O'Keeffe would have wished. People want choice and convenience. The groups that appeared before us were very concerned about that — they wanted choice and a multiplicity of outlets. They did not want to see the large stores wiping out the opposition, reducing choice and, perhaps, subsequently reducing competition. I am glad the Minister will hear more from this committee before making any further decisions. I thank him for that.
I welcome the Minister who might agree that his ultimate aim should be to get the best deal for the consumer, but this has to be measured socially as well as economically. Sometimes, the best deal economically might not be the best deal socially. Deputy Ned O'Keeffe outlined this earlier. Future legislation must strive to keep a balance between the needs of the small supplier and the small retailer. The best way to do that is through legislation that controls the growth of large supermarkets, without impinging on a good deal for the consumer. There could be a difference between what is good for the consumer in the short term and in the long term. For example, if sufficient small suppliers are wiped out the consumer gets a bad deal through the creation of a monopoly. I see a great opportunity for enterprise boards to link up with second level schools, particularly in the leaving certificate vocational programme, LCVP, with which the Minister will be familiar from his days as Minister for Education and Science. Somewhere in the curriculum we must create awareness of entrepreneurship in second-level schools. If someone wants to be a carpenter, he or she should be told that one can own one's own business. If someone is destined to inherit the small grocery shop from his or her father, we should inculcate the need for change. Enterprise boards can do that very well. Does the Minister have any intention of linking the enterprise boards more closely with second level schools?
There is a very strong programme between county enterprise boards and schools. At a national level there is a major showcase every year. This summer it will be in Tullamore. Hundreds of schools will converge there with individual enterprise projects and there will be regional winners and a nationalwinner. I see a strong role for county enterprise boards to link up with secondary schools to nurture an entrepreneurial culture. According to most global surveys of entrepreneurship, Ireland has one of the highest levels of entrepreneurial activity. By most international benchmarks, Ireland is doing very well. Looking back 20 years there has been a dramatic change in our attitude. One in 12 people working today is engaged in some form of entrepreneurial activity. I see that increasing dramatically increasing over the next decade. This must happen if we are to remain competitive in the context of global change; outsourcing; the growth of China, India and South America; and expanded growth in eastern Europe. The growth of these economies presents an opportunity. In order to capitalise on this, Ireland will have to move up a gear in the areas of research and development, innovation and entrepreneurial activity. Central to this is a strong link between enterprise and education at all levels. I will be doing everything I can as Minister to encourage that. Senator Coghlan raised the issue of ghost towns in the United Kingdom and France, but the model that has developed in Ireland which gives people choices has prevented that from happening.
So far.
This is due to several factors. Some would argue that the Groceries Order was a factor, others that the retail guidelines were responsible, but I would suggest it was the ability of the Musgrave Group and others who saw how the market was changing and decided to change the product. Also, if one understands the market, if one understands consumer needs, and if one can predict consumer trends through research, one can design and develop a product with a competitive advantage that meets those trends. From my observations the last factor has been critical in the way the retail sector has evolved, along with the provision of choice, meeting consumer trends, increased competition and innovation. This has led to a very competitive scene on the retail side.
We do not want to hamper it.
I know.
Allow the Minister to continue without interruption.
Let us consider the non-retail side. Eating out is very expensive in Ireland. Non-alcoholic beverages are more expensive here than in other European countries. Certain sectors of the economy are not as competitive as the retail sector. Deputy Dempsey raised an important point about social implications. As the Minister for Enterprise, Trade and Employment, my ultimate aim is to give a stronger voice to the consumer than has been the case heretofore. Equally, we want to create employment in rural Ireland. That is what the spatial plan and the gateway issue is about. There has been much growth in rural Ireland. It is important that the magnet centres — Galway, Limerick, Cork, Waterford, Kilkenny and Wexford — are allowed to grow and develop. They will have a ripple effect across the towns the Deputy mentioned. Getting employment into those areas is the best guarantee of bringing services along. The ultimate challenge for us is to implement the spatial strategy — to create critical mass in rural and regional Ireland, which in turn supports the provision of services across all sectors. There have been some notable achievements in attracting foreign direct investment. Technology has enabled us to attract and locate some significant players in areas that would not have been obvious choices, for example, FEXCO in Caherciveen and MBNA in Carrick-on-Shannon. We have examples and models where we were able to attract major investment.
: I thank the Minister for coming to assist us here today. I also thank Mr. GerryDonnelly and Mr. Gary Dixon. I look forward to the Minister coming to the committee, and having an exchange of views in a fair and frank manner. It is to the advantage of the consumer in the long term. The Minister is the final person to make a submission to the committee. I look forward to working very closely with him over the next two and a half years. We have some housekeeping matters to attend to and will suspend for five minutes.
Sitting suspended at 10.45 a.m. and resumed at 11 a.m.