I move:
That Seanad Éireann takes note of the Second Report of the Joint Committee on Small Businesses — Retail and Distribution.
Report of Joint Committee on Small Businesses—Retail and Distribution: Motion.
I am happy to respond to the motion on this report which has been put down by Senators Dooge and Ferris. This is the second report which has been produced by this committee and I must again commend the group for the speed with which they have reached their conclusions. The report is quite extensive, containing in all more than 80 recommendations and relates to areas which are the responsibility of a number of Ministers, including the Minister for Industry, Trade, Commerce and Tourism and particularly, the Minister for Finance who is responsible for taxation matters generally. Indeed I notice that the question of taxation takes up a full chapter in the report and I would hope that the Minister for Finance might find it possible, at a later stage, to respond to the committee's report on this point.
For the moment, however, I will confine myself to dealing with the areas which are my responsibility and on which the committee have made specific recommendations. Before doing so I should perhaps say that in establishing this committee and in drawing up their terms of reference, the intention was to get a comprehensive and accurate idea of the concerns and interests of small businesses in the country at this time. I think this has been achieved in the two reports we have seen to date and the recommendations which are set out in those reports reflect very closely the views of the small businesses which the committee have consulted. However, Senators will appreciate that in the formulation of policy in this, as indeed in other areas, the Government must have regard to the broader question of the overall national good and must take into account the views and interests of other groups and organisations which may not always coincide with the views set out in these reports. This does not necessarily detract from the findings of a report such as this but I must emphasise that these may only be one element of the input which goes into the decision making process.
Let me deal now with some of the specific points raised in this report. The committee have devoted a full chapter of the report to the subject of multiple grocery stores and this reflects the concern which has been expressed in recent years both to the Minister and to his predecessors by representatives of the independent retail and distribution grocery trade. The questions that arise in this area fall mainly into the realm of competition policy and, with the indulgence of the House, I should like to outline briefly the history of developments in this area in order to paint the background against which these demands arise and the broader policy considerations which must be taken into account.
In the early fifties it was recognised that there was a need for a policy framework within which the various economic sectors could develop in accordance with the interests of the common good. One reflection of this policy was the enactment in 1953 of the Restrictive Trade Practices Act which facilitated the tackling of various undesirable practices which then existed. Under that Act, the Fair Trade Commission were established and given the powers to carry out inquiries into the supply and distribution of goods and to make recommendations to the Minister for action to deal with any abuses identified. Shortly after their establishment, the commission noted that there was creeping paralysis of price competition in large areas of distributive trading and a tendency towards the freezing of distributive arrangements without allowance for economic change. Among the practices which were recognised as being widespread were limitation or regulation of entry into trade, retail price maintenance by manufacturers, price fixing and margins fixing by trade associations, punitive action against traders who had not observed such fixed prices of margins and various other devices which were seen as restraining or suppressing competition unfairly or to the disadvantage of the public.
One of the first areas which received attention by the commission was the grocery sector and since then a number of public inquiries into various aspects of the grocery trade have been carried out by both the Fair Trade Commission, and their 1972 successor, the Restrictive Practices Commission. Since that first inquiry in 1956, a total of seven Restrictive Practice (Grocery) Orders have been made by successive Ministers.
The most recent such order was made in 1981 and followed on a public inquiry by the commission into the retail sale of grocery goods below cost. This brings me to the first of the joint committee's recommendations, that of a ban on low cost sales of grocery goods. The inquiry I have referred to was carried out by the commission under section 5 of the Restrictive Practices Act, 1972, and received submissions from all the major organisations having an interest in this area, ranging from trade interests such as manufacturers, distributors-wholesalers, independent retailers and multiple groups on the one hand to organisations representing housewives, consumers and workers in the trade.
The public sittings of the inquiry extended over 11 days and evidence on oath was taken from 25 witnesses. I mention this in order to underline the scope and breadth of the inquiry which was undertaken and the seriousness with which the commission viewed their task. Perhaps I might mention also that in undertaking public inquiries under the Restrictive Practices Act, 1972, the commission are statutorily obliged to have regard to a list of unfair practices which are set out in the Third Schedule to that Act. These include any measures, agreements or acts which are likely unreasonably to limit or restrain free and fair competition, unjustly eliminate a competitor, enhance prices of goods or charges for services, secure unfairly a substantial or complete control of the market, give preference in regard to the supply of goods or the provision of services or in any other respect operate against the common good or not in accordance with the principles of social justice. I am sure that Senators will agree that this gives the commission quite a broad and extensive remit and the commission did, in fact, produce a thorough and comprehensive report on the matter running to more than 80 pages.
In their report the commission considered the question of below cost selling in detail from the points of view of suppliers, distributors and consumers. The commission concluded that the prohibition of below cost selling apart from giving rise to mumerous practical points of difficulty would constitute a form of official retail price maintenance which would represent a reversal of a State policy which had brought rapid progress into trade and benefits to the consumer since the fifties. They considered furthermore that it would limit the scope for the deployment and development of the retailers' skills in meeting competition — most particularly in relation to prices — which must be regarded as vital to trade in any sector. They did not consider that the prohibition of below cost selling would be to the advantage of the manufacturer or distributor to an extent which would justify so serious an interference with freedom to trade, particularly having regard to the legal constraints which already existed in this area. These constraints, which now include a prohibition on the advertising of goods for sale below cost — and let us remember that below cost selling is used mainly as an advertising tactic and is generally of limited duration and effect — are consolidated in the Restrictive Practices, (Groceries), 1981 Order already referred to which regulates generally the relationship between suppliers, wholesalers and retailers in respect of grocery goods. I might add that in many respects, the 1981 order is not too dissimilar to the US Robinson-Patman Act of 1936, which is referred to in the committee's report.
I have examined this chapter of the committee's report particularly closely but I am afraid that I cannot find anything in the views put forward which would cause me to rethink the Restrictive Practices Commission's conclusions on the subject of below cost selling. I think the committee may have exaggerated slightly in claiming that the degree of concentration in the Irish grocery industry is much higher than that of the same industry in any other country. The position in the other member states of the EC was, in fact, recently examined by the Commerce and Distribution Division of the Directorate General for Industrial and Technological Affairs of the Commission.
The report produced by this working group, on which my Department were represented, found that the growth in market share of the multiple supermarket groups and the decline in the numbers of small retail grocery shops had been common to all member states with the possible exceptions of Italy and Greece. In Denmark, for example, which has a population roughly similar to our own, it was estimated that the share of the market held by the multiple groups was more than 50 per cent which is broadly the same as the figure for the national market here. I understand that the most recent figures for the UK show a market share for the multiples of more than 60 per cent. The EC group found that the trend towards greater concentration represented a shift to a more balanced relationship between industry and commerce and was a logical outcome of general social and economic development. These developments included the growth in the population and workforce, continuing technological progress and rationalisation of production, the introduction of self-service systems, the emergence of new types of store and forms of cooperation within the commercial sector.
One aspect I did find of interest in the committee's report was the section dealing with the views of the multiple groups themselves on the issue of below cost selling. The impression is clearly given in the report that the multiples would now be prepared to accept a ban on below cost selling. I am not sure if this is so but even if it were the case, it would not represent, in my view, a good reason for imposing such a ban by means of legislation. On the contrary, it could well be argued that if there is agreement on all sides that the practice should be stopped, then there is clearly no need for legislation and I would like to say, here and now, that if all sides of the trade are convinced that the practice is an undesirable one, I would have no objection whatever to a voluntary cessation of such activities. I would suggest, however, that the reality is that businesses which are as competitive as the major multiple groups at present are, will always seek to be "one up" on their competitors, and a legislative ban on below cost selling might well succeed only in encouraging competition in other—non-price — areas which might not have the same immediate — albeit temporary — benefit for a relatively large number of consumers.
It was suggested, for example, during the Restrictive Practices Commission inquiry that a ban on below cost selling would probably mean that multiples would turn more to prize promotions such as free cars, holidays, etc., which would be of much less overall benefit to the economy. I am concerned also about the possible effect of a ban on below cost selling on the food import situation. I know that this is an area of concern to the committee and they have referred to it in the report. The committee seem to be of the opinion that a ban on below cost selling could, in some way, cut down on the amount of food imports. I would suggest to them that it might well have the opposite effect. This view was expressed during the course of the Restrictive Practices Commission inquiry when it was pointed out that a ban on below cost selling could well lead to an increase in the number of imported grocery lines as the retailers sought to find a competing line with which to match or beat their rivals' prices.
We must bear in mind also that some of the major multiple groups have large UK parents which might well be capable of supplying produce to the Irish market at a price below that which could be matched reasonably by Irish manufacturers. I would suggest further that because of the economies of scale which inevitably exist in any trade the "cost", however defined, to a small retailer will almost always be higher than that of a group which has greater buying power, and thus a statutory ban on below cost selling would render it illegal for the smaller retailer to try to match the price of the larger retailer, which could be significantly lower.
The second of the committee's recommendations in the grocery area was that no one retail group or multiple should control in excess of 25 per cent of the Irish retail market. This is a recommendation about which I would have grave reservations. On this point I would draw the attention of Senators to the existence of the Mergers, Take-overs and Monopolies (Control) Act, 1978 which, as its title implies, deals with the control of acquisitions and of existing monopolies in business generally. I would draw attention particularly to the definition of monopoly contained in that Act.
A monopoly, for the purposes of the Act, is defined as being an enterprise, or two or more enterprises under common control, which supply or provide, or to which is supplied or provided, not less than one-half of goods or services of a particular kind supplied or provided in the State in a particular year. It is abundantly clear therefore that the wish of the Oireachtas, as reflected in that Act, is that the point at which concern should arise as to the market share of an individual company, or commonly controlled group of companies, is when at least 50 per cent of the goods or services in question is controlled centrally by a common control agency. I hardly need to point out to the House the implications of introducing a different threshold of concern in respect of a particular sector, in terms of the legislation as a whole.
I have no doubt that if such a figure were to be introduced it would immediately lead to calls for similar special provisions in other sectors and, once the general competition control legislation had been departed from and the principle of intervention conceded, it would be extremely difficult to resist and restrain such demands. This is equally true of a ban on below cost selling. In such a situation we could eventually end up with a plethora of ad hoc and fragmentary legislation which would be both costly and extremely difficult to enforce.
In any case I am not at all convinced that such a proposal is either necessary or desirable. I am extremely loath to introduce legislative restrictions in the conduct of trade, particularly in an area which is as competitive as this one. Such restrictions tend to introduce undesirable structural rigidities in the market place and would be likely to inhibit the incentive for multiples to engage in efficiency and cost improving methods and systems which, after all, are generally aimed at increasing individual market share. The figure of 25 per cent chosen by the committee is a purely arbitrary one and I can see no justification for it in this context.
Furthermore, so far as I am aware, no other country has found it necessary to introduce such an individual market share limit in this area. It is clear, even from the international comparisions contained in the committee's own report — which, incidentally, are quite detailed — that while the regime differs from country to country, it is evident that in all cases the question of supermarket, or a large store development is seen as one to be regulated primarily by means of the planning system of the country in question.
This, then, takes me to the third of the committee's recommendations namely an amendment of the Local Government (Planning and General Policy) Directive, 1982. I should, perhaps, point out here that this directive superseded an earlier and less extensive 1981 directive issued by the Minister for the Environment and was introduced as a result of strong representations by a group representing wholesaler and independent retailer interests.
Any question, therefore, of an amendment of the 1982 directive would be a matter for the Minister for the Environment but I should like just to draw the attention of Senators to the actual provisions of the 1982 directive, since they may not be aware of them. The directive specifies that policy in relation to planning and development requires that the establishment of retail shopping development which will represent a large scale addition to the existing retail shopping capacity in a locality, should be guided by certain specified considerations. These include the adequacy of existing retail shopping outlets, the size and location of existing retail shopping outlets, the quality and convenience of existing retail shopping outlets, the effect on existing communities including, in particular, the effect on established retail shopping outlets and on employment and the needs of the elderly, infirm or disabled or other persons who may be dependent on the availability of local retail shopping outlets.
I am sure Senators will agree that this lays down fairly clear ground rules for planning authorities in relation to any new developments and I would point out that the grocery sector is the only sector to date which has been singled out for such special treatment.
Lest the members of the committee think that I am being unduly harsh in relation to their conclusions I should say that I am in agreement with some of their findings in relation to the trade. In particular, I would echo their assertion that many difficulties of the independent retailers can be resolved only by their own actions in the areas particularly of quality control, presentation, hygiene, use of space and so on. Indeed I would go so far as to say that there will always be a place in the market for the good, professional small retailer who can identify his market correctly and service it using skills which the larger trader, because of his very size, cannot match, that is, personal service, specialisation, flexible hours, and so on. This point was also mentioned in the RPC inquiry report where they said, "it is clear that even at its fullest development the multiple sector needs to be supplemented by independents". They went on to point out that as supermarkets have broadened their range to include goods which the grocery trade of a generation ago left to specialist shops, such as butchers and greengrocers, some independents have successfully moved in the opposite direction and, while still carrying a range of foods, have specialised in wines, delicatessen foods and so on. This trend seems likely to continue and to offer opportunities for development to many independent grocers. One of the features of the trade, characterised as it is by a large number of autonomous entrepreneurs, is its ability to see and exploit local opportunities as they occur, and this is an advantage which the independent sector will continue to enjoy.
I would stress also to independent retailers the benefits, from a buying point of view, of co-operating with each other. It is a truism that "unity is strength" but it is particularly valid when it comes to an area where, as the committee themselves recognise, the multiple groups will usually have a competitive advantage by virtue of their purchasing power and economics of scale.
I should like to deal now with the subject of casual trading, which is dealt with in the committee's report in the chapter on the black economy. I would point out, first, that the summary of the scope of the Casual Trading Act is not strictly accurate. In particular I would point out that except for certain circumstances specified in section 2(2), the Act does apply to what the report describes — on page 23 — as "brown goods", and it also applies to the selling of fish, horticulture and agricultural produce unless these are sold by the person who caught the fish, or a member of the crew of his boat, or the producer of the horticultural and agricultural product or his servant or agent.
As the report indicates, there are local authorities who have not so far designated casual trading areas. It is not strictly accurate to say that it was intended that local authorities should designate trading areas. The Act was designed to give these, who had problems associated with casual trading, such powers as they might reasonably ask for to relocate street trading areas and — or regulate casual trading by means of by-laws — the authorities are empowered to make these by-laws and conditions attached to casual trading permits. Essentially, the Act empowers local authorities to fit casual trading into local development plans to make it a service to the community rather than the nuisance it can otherwise be.
As in all planning matters, conflicts of interest arise, and provision had to be made for appeals against a local authority's proposals to the Act. It is open to street traders, shopkeepers, tenants' associations or any other interests or, indeed, individuals, to appeal to the Circuit Court which, on hearing the appeal may oppose the local authority's proposals with or without conditions or reject them. The Planning Acts provide for appeals against other planning proposals, and it is excessive to say that the Casual Trading Act is unworkable if people exercise their right to object to what a local authority propose. I would point out that the Minister for Industry, Trade, Commerce and Tourism has no powers or functions in relation to the designation of casual trading areas.
I would point out also that persons holding casual trading licences, whether or not they also need casual trading permits, may employ servants or agents to sell for them; they have the same rights as shopkeepers to employ people.
Neither would I accept that my Department's letter of 27 August, 1984 to local authorities is ambiguous or contrary to that of the Act. The letter in question simply reminds people of Government policy in relation to travelling people and that the circumstances of those travelling people should be considered when administering the Act. Travelling people are members of the community who have percisely the same rights and obligations under the law as all others. It would not be possible to distinguish in trading laws between what the report describes as "genuine travelling people" and "well-funded travelling" traders of fixed abode.
There are other recommendations contained in the report in relation to casual trading which are not my responsibility, for example, prosecutions, and I would not, obviously, be in a position to comment on these at this point.
There are also, however, some matters in Chapter 6 of the report dealing with the legal and administrative environment, which call for comment by me. The first of these is the recommendation for the establishment of a malicious damage fund to be operated by the insurance companies; fund deficits to be met from court funds and State subvention. I find this recommendation rather vague and ambiguous and feel that it does not spell out how the proposed scheme would be funded. Furthermore it is not clear what the committee mean when they refer to any deficits in operating this scheme being financed from court funds. They have suggested also State subvention to finance the scheme. I would point out, however, that the decision to amend the Malicious Injuries Act, 1981 was taken by the Government in an effort to cut back on expenditure. Therefore, the committee's recommendation of State subvention in this report is not a practical undertaking at this time.
This is true also in relation to the recommendation that my Department should be involved with trade associations in developing support services to members in areas such as accountancy service, insurance cover and so on. It is not the function of my Department to initiate the setting up of such group schemes. Rather this is proper to the various trade associations to set up themselves in conjunction with the industries concerned.
The committee also make a number of recommendations in relation to prices and consumer regulations.
As regards the committee's recommendation that a major pilot programme of price decontrol should be initiated on individual products, I am happy to say that in the past year the number of products which have been controlled at retail level by means of maximum prices orders have been reduced from 17 to six. The products decontrolled at retail level were frozen foods, processed peas and beans, cornflakes, turf briquettes, sugar, margarine, flake oatmeal and cigarettes. In these cases I was generally satisfied that the normal competitive forces in the market were sufficient to keep prices down without the need for maximum prices orders. In fact in many cases competition has been sufficiently intense to keep the generality of prices charged well below those fixed by order. As regards the remaining products (petroleum products, prepackaged coal, bottled gas, intoxicating liquor, chickens, butter, milk, flour and babyfoods) I will continue my policy of removing retail price controls on a case by case basis once I am satisfied that competition is sufficiently evident to remove the need for such controls.
I do not agree with the committee's recommendation that prices inspectors should be empowered to impose on the spot fines, in the case of a first offence, rather than initiate prosecutions through the courts. Under the existing system of inspection, legal proceedings are not instituted automatically upon the detection of a breach of a prices order. Regard is had to the circumstances in particular cases before deciding whether to proceed with prosecution. In general, it is now the practice, where a breach of an order is detected, that the matter is brought to the retailer's attention and he is asked to rectify it. The inspector also takes the opportunity to ensure that the retailer is fully aware of the legislation in relation to price control together with the more recent consumer protection legislation such as the EC (Indication of Prices of Foodstuffs) Regulations, 1963. I think the present system is therefore more equitable than the system recommended by the committee.
I am afraid that I could not accept the committee's recommendation that the implementation period for prices orders should be extended from immediate effect to a fortnight. In the case of petrol, for example, the price falls to be reviewed on a monthly basis and the time lag envisaged in the proposal would defeat the whole objective of the new price control system. In this respect I would draw Senators' attention to the recent announcement in relation to the 4p per gallon drop in the price of petrol at the pumps. I think the present system which allows a gap of 2/3 days between the implementation of price increases at wholesale and retail levels is equitable, particularly in the light of the continuing reduction in the number of items subject to retail price control.
I agree with the committee's recommendation that in the context of price control halfpennies should be abolished and that the lowest coinage should be one penny. Indeed, for many years this practice has been adopted for some products which are subject to price control, e.g. alcoholic drink. However, this practice was not uniform, and I have asked the NPC to consider adopting this practice for all products from now on.
As regards the committee's recommendation that a major pilot programme of price decontrols should be initiated on individual products, I wish to say that with the reduction in inflation and increasing competition it has already been possible over this period to reduce considerably the number of products which are not now subject to price control.
I am happy that the committee have been able to produce a second report so promptly. I think they are doing excellent work. The committee allows participation by Members of the Oireachtas in examining the needs of small businesses. The members on the committee are performing an important and responsible public duty, and I hope they will continue to do so in the years ahead.
As Vice-Chairman of the Joint Committee on Small Businesses I would like, in the first instance, to describe very briefly the work of this committee to date.
On 12 September last this House debated our first report, which dealt with manufacturing industry. We had a good debate, and I was encouraged by the Government's response as given by the Minister of State at the Department of Industry, Trade, Commerce and Tourism. There was a subsequent Dáil debate and the Minister for Industry, Trade, Commerce and Tourism met the committee at the end of January to discuss in detail our recommendations on manufacturing industry.
Our first report was published last May. Our second report, which deals with retail and distribution and which is the subject of this debate, was published last October. The committee have just completed their third report, which deals with tourism, catering and leisure. Our fourth report will deal with the construction industry.
The subject of this debate is our report on retail and distribution. This sector represents a significant portion of our national economy. It takes in some 36,000 firms and 166,000 employees. This is 15 per cent of our entire workforce.
The sector spans wholesaling, haulage and retailing. It includes the grocery trade, butchers, bakers, fruit and vegetable outlets, newsagents, footwear and drapery, motor sales, chemists, hardwear, electrical goods, furniture and many other types of retail business. The selection of chapters in the report reflects the priority areas as perceived by the committee. There are separate chapters on the business environment, distribution and transport, the black economy, multiple stores, taxation, legal and administrative environment, services to the retail and distribution sector. My own remarks during this debate will be on a chapter by chapter basis.
I would like to deal first with the business environment. The first and second paragraphs of the business environment chapter accurately reflect the sense of demoralisation among small retail and distribution businesses today, and I have no hesitation in quoting these paragraphs in full for the benefit of Members of the House who will be participating in this debate. I quote:
A deep sense of depression coupled with a very low level of business confidence is widespread among those operating within this sector, reflecting the difficult trading conditions prevailing. The traditional wholesaler and retailer are being decimated by the pincer effect of large multiple stores on one side and on the other by casual traders and those operating in the black economy. These changes are dramatically aggravated by an acute economic recession and high taxation rates. The combination of these factors has severely demoralised many such businesses resulting in closures, job losses and a feeling of helplessness among politicians.
It may be worthy of note that something in the region of 770 small businesses were struck by that in 1984. That is an alarming figure and it reflects the concern of our committee with regard to the whole area of retail and distribution. Many of the firms referred to in Stubbs Gazette were not in the retail and distribution sector, but nevertheless a large number of them were and it reflects the committee's concern for this particular sector.
Unlike industry, agriculture or tourism this sector is not a direct generator of wealth and, probably for that reason, has never been the subject of any official policy for its overall development. If anything, this sector has been seen merely as a revenue gatherer for the Exchequer.
The results were clearly visible to us in compiling this report and included the burden of taxation, State imposed paperwork, casual trading, legitimate cross-border trading, smuggling and the black economy in general.
While this sector is in the front line in having to cope with the effects of the decline in disposable income the problems I have just outlined could be mitigated if the recommendations outlined in this report were implemented. The committee were strongly of the view that the sector needs to be reviewed by Government and its contribution to employment recognised. We recommended: (1) a Government White Paper on this sector should be published defining the key role of the sector in the national economy; (2) a sectoral committee of the National Economic and Social Council should be established for retail and distribution to monitor ongoing developments. I look forward to the Minister's views on the question of a White Paper on this particular sector.
The NESC are the responsibility of the Department of the Taoiseach. In a comprehensive reply to the chairman of our committee the Taoiseach stated that he did not think the establishment of a sectoral committee of the NESC to monitor ongoing developments in the retail and distribution sector would be consistent with the remit of the NESC. However, the NESC is currently undertaking a study in the area of private sector services which will cover inter alia the range of existing Government policies which impact on the private services sector. This study will cover retail and distribution. I am glad to know that the NESC will take this committee's recommendations into account. I stress that we are not recommending major State intervention or financial investment in the sector. What we are trying to achieve is the removal of many of the unnecessary existing obstacles to rational business development.
We are also mindful of the role and the responsibility of the sector in promoting Irish made goods. The committee welcomes the ongoing discussion between the Minister for Industry, Trade, Commerce and Tourism and the grocery trade with a view to getting home produced goods on the shelves. The committee have made specific recommendations in this regard particularly for a "trade linkages council" involving all interested parties "to provide a two way flow of commercial information to ensure the maximum market share for Irish consumer products".
With regard to distribution and transport, the second chapter deals with private haulage. Although the licensing system for private road haulage has been made much more level in recent years we still have a system which has its origin in a 50 year old policy of restricting competition by road hauliers against the railways. This policy may have been valid 50 years ago but I can assure the Minister and Senators that it is a long time since we had carriage of goods by rail in County Meath where I come from.
The committee welcome the Government's intention to overhaul the existing licensing system in line with modern requirements. However, we found that there is a major problem with regard to law enforcement. I will quote from our report.
There is also a justified feeling among reputable hauliers that existing legislation and EC regulations governing vehicle maintenance, vehicle testing and maximum loading are more honoured in the breach than in the observance. This is obviously unfair to those law abiding hauliers who involve themselves in considerable expense to meet their legal obligations.
Indeed our principal recommendations in this area relate to law enforcement and the curbing of hauliers who are consistently in breach of regulations. We recommend the formation of a special traffic corps for commercial vehicles, trained in national and EC laws, and an open licensing system based on qualifications.
The following extract from a recent Irish Times editorial puts very well the case for a traffic corps for commercial vehicles. I quote from the editorial:
The suggestion by the Joint Oireachtas Committee on Small Businesses, for the establishment of a special traffic corps has a good deal of merit. The aim would be for the corps to oversee the enforcement of regulations for commercial vehicles.
Road traffic is an essential and growing element of the country's commerce. Its planning and development is complex. With its expansion, legal requirements, safety precautions and proper loading and carrying procedures are of prime importance and must be rigidly enforced in the public interest.
The police, customs and other official agencies are responsible at present for seeing that requirements are observed. With the growth of traffic, the complexity of international needs, particularly in the context of an enlarged European Community, there is a sound argument for the creation of a special unit of trained people. They would be schooled in domestic and European laws and regulations and would act on the highways and on urban thoroughfares. Other countries have operated this method of traffic supervision for some years and it has worked to the advantage of all road users, including the owners and operators of the heavy vehicles themselves.
Our concern in this whole area was supported by newspaper reports late last year that the British Department of Transport had complained to the authorities here about the large number of defective and overloaded trucks arriving from Ireland. This statement should either be refuted by the Department of the Environment or corrective steps should be taken.
Irish road haulage vehicles now carry goods to and from several European countries, and a reputation for low standards in enforcement of EC road haulage regulations cannot be good for our image. I hope we will hear positive proposals to deal with these problems in the context of the promised reform of legislation on road haulage.
The black economy in many ways was the most difficult issue we had to face as a committee. What is the black economy? How big is it? Is it growing? To what extent is it damaging legitimate business? What information is available on the black economy? Whatever about the answers to these questions the committee are in no doubt as to its effects on Ireland.
A number of terms have been employed to describe the sum total of the black economy: cash, hidden, unofficial, informal, shadow, dual, unrecorded, moonlight and underground. Whatever terminology is used to describe what is, in essence, income (earned and unearned) which is not reported to the tax authorities, there is no doubt that it represents an enormous loss of revenue to the State, undermines tax morals, weakens the social welfare system, makes a mockery of the economic planning and interferes with both employees and legitimate employers.
Most of us would agree that the present burden of taxation, a burden which has grown rapidly in recent years, is an incentive to many to operate outside the official economy. I quote from the report:
Tax evasion and/or operating within the Black Economy carries little sense of disapproval in Ireland today. Deceiving the authorities is seen less and less as an offence and more and more as a sign of skill and enterprising spirit. We would all be at it if we could amply sums up the prevailing attitude.
While we may deplore these attitudes, we cannot ignore their existence and the consequences arising from them.
Evidence to the committee suggested that as many as 100,000 people could be operating within the black economy and it may even account for between 3 per cent and 8 per cent of gross national product. Indeed some people have suggested that even these estimates could be on the low side.
At this point I would like to express a welcome to the Taoiseach's written response to our recommendation that the Central Statistics Office should provide statistical data on black economy income, on the lines carried out by the UK Central Statistics Office. I quote his response as follows:
From the inquiries which I have I am satisfied that the Central Statistics Office is, within the resources available to it, taking steps to monitor the development of the Black Economy here. In this regard the office has undertaken a study of the practices adopted by other countries in estimating for the "black economy" in their national accounts. The topic is also under active consideration by the national accounts working group at the Statistical Office of the European Communities. The CSO is keeping in close touch with these developments and is also studying the methodology adopted by the United Kingdom Central Statistics Office on the matter. I have asked the CSO to keep the Joint Committee on Small Businesses informed of further developments.
In looking at the range of the black economy we identified (i), smuggling, (ii) unrecorded earned income, commonly described as "nixers" and (iii) casual trading and occasional trading. Before going any further, I should say that since completing our Report on Retail and Distribution we have found the black economy to be a recurring problem. For example, unregistered accommodation is a major problem for the tourism industry. We have just started work on our report on the construction industry and we can see already that the black economy is rampant in this particular sector also.
With regard to smuggling, I live near enough to the Border to know what has been going on and the effects on traders in the border counties of the Republic who have seen their businesses decimated because of smuggling from Northern Ireland and, indeed, from legitimate purchases in shops across the Border. During the Christmas shopping season last year we saw coaches and cars bring thousands of shoppers from the Republic to Belfast, Newry and other Northern towns. It was not just videos and toys that people were bringing back, but such ordinary basic household items as washing powder which carried a VAT rate of 35 per cent in the Republic.
With regard to smuggling I do not think any member of the committee seriously doubts that the television sales and rental business has been crippled by smuggling. Evidence from the Electrical Industries Federation to the Commission on Taxation showed that expenditure per head on colour televisions for 1983 was:
Eleven times greater in Bandon than in Clones which is only one mile from the Border. Three times greater in Killarney than in Monaghan town which is only four miles from the Border. Six times greater in Tralee than in Dundalk which is only five miles from the Border.
The reason is simple. Due to a combination of excise duties and high VAT rates a colour television costs £200 more in the Republic than in Northern Ireland. The temptation for people living in our Border counties is too great.
I must acknowledge that the decision of the Minister for Finance to cut the exercise duty on televisions by 50 per cent and to eliminate the 35 per cent VAT rate has had a substantial beneficial effect reducing cross-Border shopping in this particular area.
However, as long as considerable tax differentials remain between Northern Ireland and the Republic the problem will continue. For example, petrol, beer and soft drinks are still considerably cheaper in Northern Ireland. We could see some recurrence of this problem next Christmas.
I now turn to the question of unrecorded cash transactions or "nixers" as they are commonly known. "Nixers" can involve services such as having a roof repaired, a house rewired, an extension built or central heating installed. They are carried out on an unrecorded cash basis, and the whole "nixer" phenomenon hits particularly hard at legitimate traders who cannot avoid VAT and who are compelled to send in their VAT returns.
The committee were of the view that a low services rate of VAT, to be compensated for, if necessary, by VAT increases on parts and components would go a long way towards coping with this particular problem.
I would like to make a special plea to the Minister for Finance. VAT on car repairs is now charged at 10 per cent. For the repair, reconditioning and restoration of musical instruments it is still 23 per cent. I play a number of musical instruments. I know most reputable firms in Dublin and in the country and they have asked me to make a special plea to the Minister to have a look at this particular area with a view to rectifying it. The skills I am referring to include tuning, french polishing, cabinet making and other highly developed skills. More and more instruments are being sent to England for repair due to this penal rate of tax on labour which is threatening the survival of the business here. A concession in this area would have a minute effect on the State finances. The lacquering of brass band instruments is a special skill. When I inquired if I could get my saxophone lacquered I was told I would have to send it to England. Some years ago I got my saxophone gold lacquered in Dublin for £100. It was a very good job. It is a very special type of skill and a skill that may die out in this country if some action is not taken. I would appreciate it if the Minister would have a special look at this area.
The Casual Trading Act, 1981 has not proved effective. The committee are distinctly of the opinion that there is buck passing between the gardaí and local authorities when it comes to the enforcement of the provisions of this particular Act. It is unfair that legitimate rate-paying and VAT paying businesses should have to compete with goods available from vans parked often outside their front doors on peak selling days. The shopkeeper these days has to comply with a whole range of regulations, and it is adding insult to injury to expect him to suffer the consequences of uncontrolled casual trading from people who do not appear subject to either regulations or taxes. Pressure should be applied on all local authorities to provide designated casual trading areas as required by the Act, and the gardaí should ensure that casual trading does not take place outside these designated areas. We found occasional trading, that is selling goods from a premises for a continuous period of three months or less, to be less of a problem. However, we feel it should be brought within the Casual Trading Act. We will all have to live with the black economy but there are things we can do to reduce its effect, and I commend our recommendations to the Government in this regard.
Regarding the multiple stores, I doubt if any business has changed so dramatically in recent years as that of the retail grocery trade. From thousands of independent grocers 20 years ago we now have a situation where 58 per cent of the market is held by seven large multiple groups. In Dublin alone the multiples hold 81 per cent of the business. I acknowledge that this is a problem. Compared with the remainder of Europe our figures prove that we have the largest area controlled by multiples in the grocery trade of any country in Europe. Two of the multiples are foreign-owned and account for about 25 per cent of the total trade. The concentration of so much of the grocery trade in a small number of groups only gives these groups enormous purchasing power and scope to rearrange prices. This situation is not always in the best interest of the Irish food processing industry or of the consumers.
The number of family retailers has declined from 9,000 in 1977 to 7,700 now. This is due mainly to competition from the multiples. The independent wholesalers see their business declining at an accelerated rate for the very same reason. As one who lives in a small town in a rural area I see the adverse affects on local trade of multiple stores in large towns taking cash from other smaller towns and villages. We acknowledge that the solution to the problem for independent retailers lies to a large extent in their own hands. We have in mind here the highest standards of quality control, presentation, competitive pricing, selection, hygiene and efficient allocation of shelf space. However, price manipulation in the form of below-cost selling, as practised by the multiples, is not in the public interest. The use of loss leaders will not ultimately affect the overall profit margin of the multiples. That will be made on the other goods. However, the practice is causing major upsets in the food industry and in the independent trade. The housewife, attracted to a multiple store by the very low cost of one or two items, does not always realise that what is being given on one hand by the multiple is being taken away on the other. She has not really gained anything in the long run.
We looked at the situation in various other countries and found that with the exception of the UK all countries, whether they have socialist governments as in France or governments totally committed to free enterprise as in the US, operate controls on the development of the grocery trade in the public interest. The committee believe that some control should be brought in here to restore fair competition between the multiples and the independent wholesale and retail trade. In this regard our recommendation is modest enough compared with other countries but would be sufficient for our purpose. Our principal recommendation is that a ban should be imposed on below-cost selling. I know from the Minister's speech that he is not fully in line with the committee on this issue. We believe that such a ban is sought by the food processing industry and the independent retail trade and should be implemented. We took evidence from each of the four multiple groups and they said they would not object to such a ban at this stage. I want to reiterate the strong and unanimous views of the committee that below-cost selling is a pattern that benefits no one, does real damage and should be banned.
We also ask that no one retail group or multiple should control more than 25 per cent of the market and that teeth should be given to the Irish Local Government (Planning and General Policy Directive 1982) through the provision indices and ratio of square footage per head of population for the planning and development of any future supermarket or multiple store. In making these recommendations we accept fully that the multiples under any restrictions retain a competitive advantage by virtue of their purchasing power and economies of scale. However, this competitive advantage should be exercised in a fair manner.
Before leaving this subject of the multiples I would ask our food processors and the Confederation of Irish Industry why advertising by our food processors and indeed by our mineral water manufacturers and other Irish manufacturers consistently advise consumers of the various products available at the local supermarket —"go to your local supermarket." There is an independent retail trade. Surely, it would be more equitable if advertising had a more neutral wording such as "Now available at your local food store." At Christmas time we all hear on the radio of special offers of well-established products; it is always "Go to your nearest supermarket." The nearest local food store is never mentioned. I am making that special appeal to the Confederation of Irish Industries to have this discrimination against the retail trade ended.
Every submission the committee received referred to taxation. Taxation now represents 41 per cent of our gross domestic product compared with only 26 per cent in 1965. We point out in our report, and I quote:
the reduction in disposable income through high tax consumption has directly affected the level of sales, turnover and profitability.
There is another aspect of taxation that we overlook too easily. That is the role of the small business man as a tax collector. We say in our report:
The role of small businesses in tax collection had never been considered in the context of the extremely unfair burden it imposes in itself. The level and complexity of tax paper work represents a time-consuming diversion for the small business man from running his enterprise. This leads to frustration, bad relations and a gap in understanding between the retailer and the tax officials.
In compiling our report the committee were very much aware of the anger and frustration felt by small traders at the immense amount of paperwork involved with PAYE, PRSI and VAT. I acknowledge that the Minister for Finance has taken a significant step in rationalising the VAT system by reducing the number of VAT rates from five to three. This rationalisation is causing problems in some sectors such as the construction sector. With regard to VAT we also ask that a full investigation be carried out into a major reform of the VAT system to alleviate the paper work and administrative burden on the retail sector. This would be done by making VAT payable only at supplier and wholesale level, the net effect of which would make retailers' margin not liable to VAT. This loss of revenue could be offset by a proportionate increase in VAT rates. A system such as this would greatly reduce the cost of collection and I believe would be acceptable to almost every retailer in this country.
I realise that there could be difficulties at EC level with this proposal, but it should be pursued as its implementation would greatly ease the burden of paper work on the independent trader who would have to live with the high burden of taxation for some time. There are some measures that can be taken now to reduce the frustration for business caused by our present system.
With regard to the legal and administrative environment, in this chapter the committee considered issues such as crime and vandalism, malicious damage and the burden of rules and regulations that a small businessman has to comply with today. The figures for recorded crime in the areas of robbery and aggravated burglary and arson and malicious damage doubled during the five years to 1983. The detection rate in solving these crimes is a low 31 per cent. Apart from the financial losses due to stolen goods, a shopkeeper has to suffer the annoyance of damaged premises, disrupted trade, increased insurance premiums and, as our report says, the final ignominy for the legitimate trader is when he has to compete with recycled stolen goods.
On the question of malicious damages we feel that there will have to be a continuing State involvement in this matter in view of the scale of the damage involved, notwithstanding the Government's decision to repeal the Malicious Damages Act, 1861. We recommend specifically that a malicious damages fund should be established from which claims for damages exceeding the level covered by agreed maxima would be met. The fund would be operated by the insurance companies, which would be obliged to give malicious damages cover. Claims from the fund would be confined to damage to premises, equipment and merchandise. Fund deficits could be met from court funds and State subvention. Negotiations should take place between the Department of Justice, the Department of Industry, Trade, Commerce and Tourism, retailers and insurance companies to devise a suitable scheme. Local authorities should be flexible in their development plans to facilitate security precautions of retailers.
While we fear that crime will continue at a high level we also make a number of recommendations involving the garda rostering system and court rules and the regulation of private security services to increase the level of security offered to business premises.
I now come to the question of prices and consumer regulations. Nobody seriously argues against the need for effective consumer legislation, but I would question the need for all the inspectors who deal with the retail trade today. With regard to the prices inspectorate, it is difficult to see much justification in these days for price inspectors running around the country checking the prices of items such as cans of beans, baby food and soda bread mixes. Competition in the grocery trade is now very intense; indeed I would say it is cut-throat. Against this background, it is reasonable to ask if the inspectorate really have any role to play. I understand that there are 40 price inspectors attached to the Department of Industry, Trade, Commerce and Tourism. I would like to ask the Minister if he could give us an estimate of the cost of the prices inspectorate, to include the salary of the inspectorate, their supervisors, travelling expenses, office overheads and the expenses of legal proceedings.
With regard to prosecutions the courts have enough to be occupied with these days without having to deal with trivial matters of this sort.
It is not uncommon to read in the local newspaper where some family grocer who had not time to recheck his prices had been hauled to the courts because he overcharged a half-penny on soda bread mix or a can of baby food. I think the day has come when that type of thing should stop. Contrary to what the Minister did mention in his speech I know for a fact that first time offenders have been prosecuted. It has caused grave annoyance to people who had too many items at cut sale price, as they say, to be caught out on some little defect. There are special little lines that these inspectors check on where there are price changes at regular intervals. Many a retailer has not time to keep up with or does not know of these price changes. It might only be a couple of pence — it was in one case a half-penny — and prosecutions did take place and it was very humiliating for the conscientious businessman to be hauled before the courts just because he made a mistake.
The abolition of price inspectors would represent a useful saving in the cost of the public sector. I fully accept that there is a role for the National Prices Commission to deal with monopolies like CIE and the ESB, but that is an entirely different matter. With regard to all the regulations and form filling there is a recommendation in the report that I like, and I quote:
Small businessmen should be provided with a single publication which outlines in simple terms all of the regulations with which he must comply in this particular trade. While there presently exist many good explanatory documents on individual pieces of legislation, there is no all embracing manual available.
If that recommendation could be implemented many retailers would be much happier people.
Earlier, when discussing multiples versus the independent trader, I mentioned that there was a responsibility on independent retailers to improve their own management performance. I also mentioned towards the beginning of my contribution that we are not recommending major State intervention or financial investments in the retail and distribution sector. This is very much the attitude within the sector. It neither seeks nor receives State services but only wishes not to be unduly penalised. We are, however, satisfied that there is a need for management training in this whole area. To quote from the report once again:
Managers and proprietors in retailing need to have a heightened awareness of basic standards of performance in the areas of courtesy, hygiene, basic merchandise presentation, stock control, staff training and development and operating costs. The availability of management training programmes needs to be considerably widened to attract rural managers and proprietors.
Adaptation, modernisation and training have been carried out in an unplanned and unco-ordinated way with no overall policy or standards. The Industrial Training Authority has provided a limited Training and Advisory Service, but has allocated disproportionately little funds and manpower into this important section of the economy. For example, there are no more than 12 training advisers for the 32,000 businesses in this sector.
Too many managers are unable to control stock losses, staff wastage and operating costs. They do not know how to make the best and most efficient use of space, to determine optimum stock level and mix or to anticipate demand and regular supply. Management generally has rarely been trained in modern training techniques or taught how to deal effectively with staff resources.
Therefore, we recommend a retail and distributive training committee within the AnCO structure and with EC involvement to co-ordinate and implement a comprehensive training programme for the retail trade. The programme should operate on a local basis and respond to the time pressures on individual owner-managers. Funding of this proposed programme could be on the basis of charges for services and European Social Fund finance.
We also looked at the financial problems of the sector and apart from retained profits the main source of funds for expansion is from the banking system. Our feeling here is that the traditional term loan of from three to five years is excessively restrictive and a poor response to funding the acquisition of fixed assets that have a working life considerably in excess of five years. We ask that the banks extend the term of these loans, particularly to firms with up to 50 employees.
We would like the banks to review their handling charges and their method of dealing with bad and void cheques. The present system is excessively harsh on the retailer. If I put in a cheque with my lodgment as a businessman and that cheque bounces, as well as being out the price of the cheque I am charged a handling fee of £3 because the bank returns that cheque. This is a very unfair system. It is bad enough to have to handle a bad cheque without being charged by the bank for handling it.
Banking hours are a major irritant to the retailer. I will quote from the section of our report which deals extensively with this matter:
The average opening hours of the associated banks are 22 hours per week. This is less than half the weekly opening hours for retailers. The restrictive opening times are aggravated by their unsuitability — for example, banks are closed at lunch hours, Friday evenings etc. No arrangements are made during holiday periods or weekends to facilitate this sector. The night safe system is also most unsatisfactory. The combination of these factors forces the small businessman to attend to banking needs when he could profitably be attending to the business of retailing.
I hope that there will be an early move by the banks on this issue of opening hours.
Finally, Senators will agree that this is a very comprehensive report; however, it is not a complex report. Its recommendations are simple and capable of implementation and based firmly on commonsense. It is my own conviction that if our recommendations can be put into effect the morale of the sector will improve greatly and retailers and wholesalers will cease to feel that they are up against a wall of official indifference. It is worth noting that since this report was published members of the committee have received an unprecedented level of correspondence from wholesalers and retailers urging a response to the recommendations of the committee. I have a letter from one retailer which states very simply:
Unless a degree of stability is brought into the food trade more jobs are at risk.
God knows we have lost enough jobs in this sector. We have lost too many of our retail and wholesale outlets and, with due respect to the Minister, the Government's response, if I am to go by the Minister's speech, is very lukewarm, to say the least. We are very concerned about the whole sector of retail and distribution in this country. Our committee worked very, very hard under a very good Chairman, Deputy Ivan Yates, and a very good secretary, Mr. Shane McAuley with a very effective sub-committee working until 11.00 some nights. The committee itself is a good committee and take their job very seriously. We are very concerned at the end of six months hard work on this sector to find that here was a sector that has mainly been a tax gatherer for the State. Its only source for finance is the banking system, and they are not happy with it, their businesses have decimated over the years.
It will cost the State, irrespective of what the Minister says, almost nothing to implement our report. Changes have been made since our report was published but they were in the interest of the national economy, for example, the reduction in VAT. Too much money was being lost in cross-Border trading. The traditional family business will be wiped out completely. In today's papers we see that another big tycoon is returning to establish himself in Ireland again to make a quick fortune and probably sell out again as he did previously and go off with his millions of profit. That is at the expense of the retail trade here and ultimately — I warn the Minister — at the expense of the Irish consumer. Factories are working around the clock in England supplying these multiples and we are importing £700 million or £800 million worth of food every year. It is a national scandal. If we have a situation where the housewife has no option but to buy imported food, it is a sad day for Ireland. I would ask the Minister to take very seriously the views expressed by Senators on this report. Many Members of the Seanad are on this committee and I look forward with interest to hearing their speeches on this subject.
I would like to join with Senator Lynch in endorsing the tribute to the Chairman and Clerk of our committee and also to all the other parties in that committee because, as Senator Lynch has said, we have worked long hours; we have had a very good attendance from both Deputies and Senators and we have had complete harmony. It was a very good example of how people with different views can sit down and work together and talk over the same table.
I would hope that this was one of the things that resulted in at least influencing the Government in the reduction of the duties on televisions, radios, spirits and items of the cross-Border traffic. While that reduction was very good it does not go far enough, because there is still a big gap, but perhaps experience will show over a period when this scheme is monitored if it is costing the State too much money or is there any benefit to the State, apart from the traders. There has to be benefit, because if the articles are not attractive to the consumer they will not go across the Border to purchase them.
I believe, rightly or wrongly, that all this trouble was mainly caused in the North of Ireland by virtue of the price differential in petrol. When the price differential was there in petrol people were tempted, particularly if they were within 50 miles of the Border, to use any excuse to go to the North to fill their cars with petrol and when they saw the price of other articles they began to purchase them also. Under EC regulations a person is entitled to bring across the Border any item costing not more than £55, or items totalling £202. With the price of the liquor as it was, when each person crossing a land frontier was entitled to bring in two bottles of whiskey, if there were five adults in the car they could have brought in ten bottles of whiskey. To give an example of the petrol position in the North, I requested one company — and it was followed by other companies — to carry out research into the petrol position in the North and how it affected the Border stations. This letter is from BP (Ireland) Ltd. It is a letter I got today and it says that having examined stations located between a line drawn through the following towns and the Border including outlets located in the towns named, that is, Malin, Buncrana, Letterkenny, Donegal, Ballyshannon, Bundoran, Sligo, Cavan, Carrickmacross and Dundalk, the following statistics emerged: In 1981 they sold 14,576,000 litres; in 1982 they sold 12,576,000 litres, that was a drop of 13.7 per cent. In 1983 there was a drop to 7,961,000 litres which showed a drop of 7.1 per cent.
For the four years, the total drop was 49.3 per cent. In round figures the sale of petrol was halved. In the same Border area in 1981 four stations were closed. They sold 115,000 litres. These are small stations but nevertheless they were making their contribution. In 1982 two were sold, representing 59,500 litres. In 1983 — with 805,500 litres involved — eight stations were closed and a further six stations in 1984, with 567,500 litres. That was a total of 20 stations in all with 1,547,000 litres. Taking petrol at 45p per litre you are talking about £750,000 in round figures lost. That is only one company. That is not a survey of the whole of Northern Ireland. It was a survey of the Border counties because I was requested to get that for some Border Deputies who were interested in it. The petrol situation will have to be examined. If it is not, the benefits we were receiving from the reduction in the duties on spirits, radios, televisions and the other products to which the budget saw fit to give relief will be minimised.
While I am on the subject of the Border and smuggling, the greatest smugglers in this country — and it is a well known fact — are the itinerants, better known to some people as the tinkers. They can come down with a car and they can have ten items. They can pay the duty on them and as there are no longer serial numbers on televisions or radios they cannot be identified anymore. There was a time when they had serial numbers attached to the chassis, but there is no chassis in them any more and there is no way of identifying them. What they do is pay the duty on ten sets and they bring in 1,000 sets. They go around the country then and sell them. The amount of revenue that is lost to the State is important. We should all be concerned about it because it will affect our taxes eventually.
The people about whom I am more concerned are the traders who are being deprived of their living and who are being driven out of business by this kind of trade. These itinerants receive great sympathy in certain quarters but you see them driving around in Granadas and all the "litre" cars, some of the better known German cars that are not now known by their brand name any more but are called German "take-aways". These cars are being driven around the country. The itinerants have beautiful caravans and television sets in their caravans. They can pull up on the side of the road and start up their portable generators. They have all these facilities. Then they cover literally the whole countryside. They will come in to the town the following day and set up their stalls in the town. They will go into competition with people who are paying rates and who have overheads, staff, tax and everything else. These people are in direct competition with them. Something will have to be done about those people.
I have no evidence of what they do about the dole, but I believe they can draw the dole in the North of Ireland one day in the week and draw from the South of Ireland on another day of the week. They are doing all right, even if they never sold any smuggled articles. Another thing I would like to say — and I cannot let this occasion pass without mentioning it — relates to the strike of the customs officers. That was the most appalling thing that ever happened in the history of this country. These people are in a very responsible position and when the days on which they would not be on duty were advertised they left the country wide open to the smuggling of drugs. This was apart altogether from the loss of normal revenue on goods, and the damage done to traders, which was considerable.
The State has spent a lot of money on, and have a small force engaged in, drug detection and the country was thrown wide open to this danger. That was terrible and I hope that it will never happen again. That is enough about that. I already spoke about it before.
We have in the Department of Industry, Trade, Commerce and Tourism at the moment 40 inspectors going around the country. On my figures they are costing about £1 million per year at a time when we are told by other Departments when we look for certain services that they have a shortage of staff. There is no recruitment of staff and we are told they cannot give you any staff. We had that experience yesterday when we were trying to set up a compulsory motor testing station. Yet we have 40 of these people driving around the country calling on small shopkeepers. I would just say they are talking to people who might have been in business for 50 or 60 years through two or three generations and through an error or a mistake they could have overcharged a halfpenny or a penny on a price, and the next thing is that they are prosecuted. If that is all that these people can do then it is time that was stopped.
That may have been relevant during the war years when there was a shortage of supplies and it may have been relevant after the war before we had the supermarkets, but now we have the supermarkets and the prices they are selling their articles at is low. We had representatives of the supermarkets before our committee. There is below cost advertising. It is an offence to advertise below cost but it is not an offence to sell below cost. In other words, the supermarkets need not advertise it but they can put the articles on the shelf. That might not be too bad but then you listen to the radio and once a week you hear Gay Byrne with his "shopping basket" and he will give the prices of items in all the different supermarkets. The cost of yellow packs, green packs and blue packs are given and they are getting free advertising at the State's expense. They are in competition with people who have been in business all their lives. The supermarkets can sell their articles at below cost price. Some people might be naive to ask "How can you sell below cost and stay in business?" It is a well known fact that their average pay-out to their suppliers is anything from three to six months. Then they come along with a pious attitude saying that they would buy Irish if they could get Irish. They say the Irish are not competing and they are not prepared to supply them. How could people in small business wait six months for their money? These people with their big turnover for a completely cash trade can invest the money and the interest they get on the investment would allow them to sell the products at cost and in some cases below cost. They did say, when we put the question to them at the Small Business Committee, whether they were prepared to recommend a ban on below cost selling that they would be prepared to do so. So at least we made that much progress.
Senator Lynch has gone over much of the ground that I could go over so there is no point in going over it again. There is one other thing that I would like to speak about and that is our banks and their charges. Now we have a situation in this country where particularly the social welfare recipients are paid by cheque. People around this country in jobs where they take away £60, £70 or £80 a week bring their cheques to business people. We get them in our own business which is only a small business, but we get them because we are beside the factory and we know them. We change the cheques and we are very glad to change them. Number one, it brings a certain amount of business, but number two, it creates greater safety for us instead of carrying cash, particularly over weekends. We hold these cheques and if there was a raid the cheques would be no good to anybody. The trader can get back his money, so there is that advantage in it.
Under the new system introduced by the banks they charge for cashing cheques and therefore these people are being helped and obliged by traders around the country. This comes to a great deal of money. In some cases it could be as high as £100 a week. We are doing the banks' work, cashing cheques and creating a certain amount of safety by not leaving money around. What is the banks' attitude? They charge for it. That is a disgrace and it is something that should not be allowed. I do not know if the Minister's Department, through the prices section, would have control over that, but I would like to see the 40 inspectors taken off their trips to the traders around the country and sent to the banks for a week to see what is going on in the banks. They might have a different story to tell and there might be more return to the State for it.
Having said that about the banks, I will not go into the matter of the ICI. That has been covered before, but I will say that the banks are very unfair. They have no regard for the safety of money. If you go into any store in America with dollars they do not want to know about them but they ask "Have you any credit cards?" They look for credit cards, personal cheques and Euro-cheques. They would be glad to take all those. If we had a bit more of that in this country there would be fewer people from whom the raiders and the robbers could take money. I will conclude on that and I thank you very much for your attention.
I have just a few brief comments to make on this very excellent report. I would like to compliment all the Members of the Oireachtas who are members of this committee for the very detailed analysis of this whole sector. I think it is fair to say that the employment content in the services area is quite substantial and has been operating in quite a haphazard fashion without any real State involvement. A number of contributors already have highlighted the fact that particularly in the grocery area the multiples have been gaining very considerable ground in the outright control of this sector.
I was disappointed in the Minister's contribution where he stated that the committee exaggerated slightly in claiming that the degree of concentration in the Irish grocery industry by the multiples was higher than in most other countries in Europe. The committee went to some pains to elicit some statistics in relation to this matter and in their report they say that the multiples stores in Ireland have 58 per cent control of the grocery sales area, in the UK they have 70 per cent, in Belgium 23 per cent, Germany 8 per cent, Netherlands 28 per cent, France 69 per cent and Italy 24 per cent. The Minister picked out Denmark as one country where the position would appear to be similar to Ireland. Now the main concentration of what I want to say in the course of a few brief remarks is that comparing Ireland with Denmark in the context of groceries, is a very false premise on which to go. One has only to go to the Green Week in Berlin and see the range of food products, the specialisation, the amount of money that is spent on research and the overall capacity of that country to promote, sell, export and provide top-class food goods, to acknowledge how far we have to come in this country in an area where we have special advantages but at the same time have not been able to develop those in the way that we need to.
I want to support, in the strongest possible way, what Senator Daly said in relation to the morning programmes where people like Gay Byrne — I would say unwittingly — promote situations which lead to low cost selling, but more fundamentally lead very positively and progressively to an acceleration of food imports into this country. Over the past ten years they have grown from a little over £100 million to over £800 million. It is widely accepted that the variety varies and that as regards tea, bananas and other products there are areas where we cannot compete. There is possibly £200 million to £300 million worth of those which we are unable to produce. But there are £400 million to £500 million worth of products in the food area alone, not to talk of over £1,000 million of butter products, which we could produce ourselves, which are being imported onto the shelves of the multiples.
The point was made earlier that a huge concentration of the grocery trade falls into the lap of a very small percentage of these shops. Two of the major components in this area are internationally owned, and therefore are involved directly in selling food items from their parent countries. It is probably a condition of their involvement. This automatically forces the Irish-owned companies to try to compete in dumping of food produce on the market and in below-cost selling.
I just want to address Gay Byrne and other people who are involved. Gay Byrne would say that he has many letters from all over the country from people who are delighted to be able to buy these products at the level at which they are purchasing them. I would merely say to him that the cost in terms of job loss to this country is astronomical. The cost in terms of social welfare payments which have to be met by these very same people, through their taxes, to these thousands of people who are unemployed is running into billions of pounds. Some 10,000 jobs which could be found in that area are costing a cool £52 million in the year in social welfare, not to mention ancillary benefits which have to go to people who are unemployed. We should be able to develop the food sector in much more technological and scientific ways. Massive investment must be made in the next few years if we are to try to stem the tide which is running very much against us in regard to these imports.
I am disappointed in that the Minister's statement seems to be haphazard, let things develop as they are going; he appears to argue against every practical proposition that has been made in this report.
I know there is a climate of opinion which says that the State should not be involved, that it is already too much involved in so many areas and that perhaps there have been a number of failures. It is fairly clear that when the control of any sector begins to reach a stage when not only is it concentrated in too few hands but regardless of where these people come from, whether they are Irish people or not, it actually begins to move out of the country on a progressive scale. The rise in food imports is commensurate with the progression or control by the multinationals in that whole area. That is a very serious position. Anybody who can afford to look haphazardly at that is continuing to accept that we are going to have exceptionally high unemployment in this country and exceptional tax levels to try to keep paying those people who are unemployed.
In another part of the report we deal with criminality and burglaries and the rise in the graph each year in those areas. There have been break-ins in my own area in recent times. There is no way you can quantify the cost of all this. It is going to keep on increasing while thousands of people with all their energies have nothing to do and have no job opportunities. We would say to the Minister that we have to exercise more control in this whole area.
It is clear from the statistics which are produced in the report — I do not have them — that both the legal and the planning outlooks in other European countries have been used to try to ensure that excessive control will not pass into too few hands. I do not care whether it is control of land or whatever. When control moves into too few hands — it could be in the promotion of beef — it makes for a very dangerous situation in a country.
From that point of view, I am disappointed with the Minister's comments. Obviously there may be constraints on him. Perhaps there has been a long period during which successive Governments have not been able to hold back the momentum in all this development, but underneath it all there is a core, and the public may not fully accept the degree to which the control of our assets — or what should be our assets — is moving out of the country. That is substantially the point that I want to make to the Minister in my contribution.
In relation to the black economy, we have, by a plethora of different tax regimes, a complexity of bureaucracy which has developed in the over-centralisation of our services. As Senator Lynch said, the attitude which prevails in society that not disclosing full incomes or using the system to be on the dole and still working, or whatever systems that are used by people to manipulate systems, certainly seems to be a thriving area of abuse. It is producing a lot of cynicism. The genuine worker, whether he is in the PAYE sector or whether he is self-employed is becoming more cynical towards the authority of Government and individual politicians. They see situations developing among people in our society which are basically inequitable and go on uncorrected by the powers that be. It seems extraordinary that we do not have a notion about the extent of the black economy. Varying figures of gross domestic product of between 3 per cent and 8 per cent are given. One thing is certain, the way we have built up our tax code and the way we manage our business has encouraged the black economy in practically every area.
We have representations from builders who quote for the erection of a local school. That contract can be given to somebody on subcontract. It can be given to people who are obviously not playing the game as far as taxation is concerned. We need to try to produce a more simple, understandable, fairer, equitable system as far as this is concerned. We must root out vigorously people in any walk of business who are hiding under the umbrella of the black economy and reducing the opportunity that should be there for legitimate business.
I want to say one or two words in favour of the smaller wholesaler and retailer. We have had a number of representations from groups in that area with regard to the fact that they are used in many ways by the Government as tax gatherers. They have seen their incomes being depleted in recent times. They are now the only section of the community who are paying rates on their business premises. They are entitled to look to the Government, not for shelter, protection or anything of that nature, but for a system which would be fair to them. They should have an opportunity to make some kind of a reasonable and decent living in their own home areas. With these few comments I welcome this report very much. However, I am a little disappointed at the replies which we have received from the Minister. I hope his officials will take a serious look at the road they are travelling in relation to this whole question of food imports and the extent to which the multiplies and internationally owned stores are aggravating this situation and losing us a very considerable number of jobs. I fear for the future if the control of this industry is to fall more progressively into those international hands.
An Leas-Chathaoirleach
Would Senator Daly indicate to the House when it is proposed to sit again, before we take the last item on the clár?
I understand that we are sitting again on Wednesday and Thursday of next week.
Just before the motion is agreed, my party are not fully aware of what happens when we discuss a report of this nature. Is the Minister empowered to reply to some of the queries made? If that could be done we would appreciate a reply from the Minister.
An Leas-Chathaoirleach
The Minister of State, Deputy Collins, intervened and made his contribution.
I know that. But we were wondering, having discussed the report and pointed out various aspects of the report and brought out more problems as we see outlined in the report, if the Minister might make some further comment.
An Leas-Chathaoirleach
He indicated at the time that he wished to speak, Senator. He has the constitutional right to decide when he speaks. He did it at the time. He did not indicate to me that he would be here to come in again at this stage. Normally he does not come in a second time on this type of committee report that we are dealing with.
I know the report will go to the Dáil for further discussion but we are disappointed with the response in this House having regard to the hard work that has gone into this report.
I do not know if it is too late for me to exercise my right to reply as the mover of the motion but I should like to say a few words, including making a response to Senator Lynch. We have had a most useful debate on this report. We are still in the early stages of developing our way of handling these reports. There always has been a difficulty in regard to the question of when the main intervention of the Minister should take place. Sometimes the Minister intervenes early in order to give an immediate Government reaction to the proposals in the report. In the case of these reports from joint committees this has been done largely. On the other hand, there may be instances in which the Minister, or the members of the committee who are interested, would prefer that the Minister would delay his speech and would make a reply at the end of the debate. On other occasions it has been taken that this is handled rather like a Bill and that the Minister speaks at the beginning and again at the end, but there has been no real determination on this.
In regard to any particular motion dealing with the report of a joint committee if the view was expressed by Members interested in regard to the point of the Minister's intervention I would pass this on. Indeed, I have endeavoured in a number of cases to arrange that the Minister would speak in the debate at a time which would be most useful to the House from the point of view of the debate itself, and I think we can continue to do that. I am quite sure the Minister will not only read with care what has been said in the debate but will also, with regard to specific questions that have been raised, communicate in writing with the individual Senators. I know this is not as satisfactory as is giving the answer in fora populo but at least the questions will not go unanswered. Normally Ministers expect to speak only once during a debate of this type. If there is a special request for a Minister to speak I do not know whether he has a right to intervene more than once, but certainly if the House wishes to do so Ministers would be willing to do so.
We have had a good debate here. The points that have been raised are good, but I must express a regret that more Senators did not take part in the debate. We had good contributions from those who spoke, but it is a matter of very sincere regret that more Senators did not speak. We have the unfortunate position that not even all those Senators who are members of the joint committee thought it worth their while to take part in the debate.
I must give it as my opinion that this experiment of having joint committees and bringing their reports to the House for discussion will not succeed unless Senators are prepared to do more in regard to the debate on them. I certainly do not consider the work as completed when a joint committee have reported and that report has been circulated to Senators. It is only after that report has come before the House and has been thoroughly debated and the Government's response fully probed, as Senator Lynch has indicated, that the process is complete. I do not want to be misunderstood. I believe that the committee system is working well but I also believe it could work better. What I am saying now really applies not to those who are here but to those who are not here. We should endeavour individually and within our groups to try to ensure that there is a greater participation in these debates in future.
I thank the Leader of the House for his explanation. I join with him in expressing my regret that more Senators did not take part in this debate, because at this stage our work in the committee should not end with the production of a report. That has happened to too many reports down through the years. Our work at legislative level should commence with this debate.
Question put and agreed to.
An Leas-Chathaoirleach
When is it proposed to sit again?
It is proposed to meet on Wednesday next, 8 May, at 2.30 p.m.