Seanad Éireann debate -
Wednesday, 3 Dec 2008

Vol. 192 No. 11

Shoppers Task Force: Motion.

Senator Dominic Hannigan

I move:

Seanad Éireann notes that:

the cost of food sold by retailers in Northern Ireland is at least 20% cheaper than the same retailers charge in the Republic of Ireland;

the recent reduction of VAT in the North to 15%, whereas it is to increase to 21.5% in this State;

the cost of mobile telephone usage in Ireland is among the highest in Europe;

there is a significant disparity between the price of clothes here and in the UK; and

there are many instances where Irish consumers face large price differentials as between here and abroad.

Seanad Éireann condemns the Government for its inaction on this issue and calls on the Minister for Enterprise, Trade and Employment to establish a shoppers task force to examine and report on the reasons for these price differentials, to identify clearly to the public, where relevant, the differential cost base issues involved, to expose unacceptable profiteering by retailers where same exists, and to bring all possible pressure to bear to ensure that prices are maintained at an affordable level, and reduced where possible.

I speak on behalf of the Labour Party Senators about the price of goods for Irish shoppers. This issue affects small businesses as well as the public. Last month alone, high prices cost the Exchequer €400 million, the amount of money that should have been raised in value added tax, VAT, in November but was not. There are a number of reasons for the shortfall in VAT yield, which is €2.1 billion down on projections at the start of this year. The Government blames the situation on the global collapse of the financial markets and on currency and exchange rate fluctuations. We accept that this played a part but it is not the only reason. The result is that consumers are still paying way over the odds for goods and services, which is encouraging them to go elsewhere to shop, with potentially calamitous effects on the economy.

The Green Party Leader, the Minister, Deputy John Gormley, appears to recognise this. He declared a few days ago that something would have to be done to stem the flow of shoppers from the Republic to the North. He suggested that the response of Ireland and the UK to the international problems should be synchronised. It is almost as if the budget introduced by the Minister for Finance, Deputy Brian Lenihan, had nothing to do with the Minister, Deputy Gormley. However, he might be on to something when he says we should look to what the UK has done. One of the actions taken by the British Prime Minister, Mr. Gordon Brown, was the introduction of an economic stimulus for the economy. That stimulus package included a 2.5% reduction in the VAT rate. Our Government has increased VAT, which will make a bad situation worse. It is a shame the Minister, Deputy Gormley, did not speak up when the Minister for Finance, Deputy Brian Lenihan, framed his budget. It is a little late to come to the party now with suggestions.

The Labour Party Senators are attempting to take the initiative. The Seanad is due to hold a full day of debate on the economy next Friday but we must do more than debate the issue. The lack of consumer confidence and tight credit lines are being felt keenly throughout the retail sector. A bad Christmas and new year in this part of the economy could stimulate the type of domino effect in unemployment that we all fear. We therefore must act as urgently as possible. We must find out why prices in the South are so high.

Why are prices so high in the communications sector? I can give examples. A few weeks ago I mentioned in the Seanad that if one wishes to buy the new BlackBerry Storm, which will become part and parcel of conducting business in the future, one can get it free in Newry but in Navan it costs €110 just for the telephone. The contracts are higher too. Why is this the case and who is to blame? We must find out. The public is concerned about this. I received an e-mail this morning from somebody named Heather who is infuriated by what she calls the "vampiric" behaviour of companies in the communications sector. She seeks specific answers as to why she must pay more for her mobile telephone communications than people in other countries. Unfortunately, the Government just pays lip service when answering such questions.

I have read the Government's proposed amendment to the motion. It states: "... retailers and telecommunications providers have a duty and a responsibility to justify to their customers and the economy the reasons for charging significantly higher prices to their customers in Ireland as compared to the prices charged to customers in other jurisdictions". In other words, the Government is saying no action should be taken and we should expect those people who are probably under suspicion of over-charging to make some admission. This approach does not tally with the claim in the proposed amendment that the Minister for Enterprise, Trade and Employment is determined to ensure customers receive a fair deal. We are paying some of the highest mobile telephone charges in Europe and there is no sign that the Minister's determination is converting into action. The National Consumer Agency will not be able to address this problem because it appears across the sector and occurs in other areas as well.

I did a price comparison last month between London and Ashbourne, which is my base. A Big Mac in London costs £2.09 compared to €3.70 in Ashbourne. The cost is 50% higher in this jurisdiction. In the Subway outlet in Ashbourne the "Sub of the Day" costs €2.99 while in London it costs £1.99, a difference of approximately 25%. The prices in other stores were also higher. Prices in Tesco in the UK were approximately 20% cheaper than in Tesco in Ashbourne. Prices in the clothing store New Look and in Argos are also between 20% and 25% cheaper in the UK. That is after taking account of currency fluctuations. I commend Senator Ó Domhnaill for the example he gave this morning on the Order of Business when he mentioned the lady being charged different prices in Donegal and in the North.

These differences are not simply due to exchange rate fluctuations or currency differentials. Something else is causing them and until we find the definitive reason, we cannot address the issue. The mechanism we propose for doing that is a shoppers task force. Such a task force would examine and report on the reasons for these price differentials and identify the costs and processes involved. In the process it would, I hope, expose profiteering if it exists. The cost of living has always been bad for consumers but it is becoming particularly bad for retailers as well. Representation on the shoppers task force, therefore, should involve not just consumer groups but also retailers and relevant business representatives, service providers, economists and public representatives. It must bring together not just the knowledge but also the will to identify the dynamics at play, and this must be done urgently.

Over the next two months shoppers in many parts of Ireland will have to pay more than they should for goods. As a result, retailers will lose business to other parts of the island or other countries. We are familiar not just with the flight to Newry on the M1 but also with the Aer Lingus flights taking shoppers to New York. Serious amounts of money are at issue. Take the example of the motor industry in this country. The motor trade is waiting with bated breath for the January sales but it expects to be disappointed. Some 2,000 people in the industry have already been laid off while others are now on reduced working hours. In some cases new and second-hand cars can be bought for 30% less in the North. Dealers in Northern Ireland are linking their websites to currency converters and the Revenue Commissioners' VRT calculator. They are clearly aware of from where some of their business is coming. Sales of cars in this jurisdiction are likely to be down by more than 20% this year and the reduction for commercial vehicles is 30% for the same period. Millions of euro which should be spent here will not now be spent because consumers either cannot afford to buy goods and services here or choose to buy elsewhere.

The problem has already spread beyond the retail sector into the broader economy. There have been reports in the newspapers recently that large retailers here are now buying through the North and the UK rather than through distribution channels in this country. If they are doing so, I sincerely hope they pass on any savings to consumers and do not engage in profiteering. This matter should also be examined by the task force. There is a wide range of issues that should be addressed. Since many of these problems are induced, in part at least, by a Government malfunction in respect of the economy, it is the responsibility of the Department of Enterprise, Trade and Employment to act with urgency. The Labour Party Senators call on the Minister to create a shoppers task force to examine urgently the matter thoroughly. The economy simply cannot be sustained with existing prices in the coming year.

Senator Michael McCarthy

I second the motion. I welcome the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Billy Kelleher, to the House. I hope the debate will generate views from all sides of the House. We all represent people and we come from constituencies, however far apart they may be geographically, in which consumer trends are the same. People will feel the pinch equally in Cork, Mayo and Donegal. In this case the matter of shopping in the North forms part of the motion. As public representatives, we bring a wide variety of views to the House and these should be fully debated.

The motion reflects what has been a very serious situation for some time. It has been flagged in various elements of the media. It is no surprise that this is firmly on the agenda of everyone as Christmas approaches. Various articles have appeared in newspapers in the past six months highlighting an exodus of shoppers from the South to the North. We do not begrudge the North our customers. Politics in this part of Ireland for the past 20 or 30 years has focused on strengthening ties between North and South. It aggravates some people to refer to the Twenty-six Counties. This is a country of Thirty-two Counties and on that basis we must encourage links.

I stress we do not begrudge the North our custom. However, there are ways to facilitate cross-Border ties without retailers here losing out heavily. We benefit from those in the North who travel south for holidays. This is especially the case in west Cork, as the Minister of State, Deputy Kelleher, is aware. We depend largely on such tourism and it is very important. The evidence suggests that the number of tourists from the United Kingdom and the United States of America will fall. There is a strong base of those in the North who travel south on holidays. We must ensure we do more to encourage shoppers from the North. This is a serious challenge, but it also represents an opportunity. Let us seriously consider a scheme based on the shoppers task force, the membership of which should be all-encompassing. Let us turn this economic challenge into an opportunity. Let us start to encourage shoppers from the North to travel south.

The different VAT rates form a significant part of the debate. It was madness to increase our VAT rate from 21% to 21.5% when the exchequer in the United Kingdom reduced its VAT rate from 17.5% to 15% with the obvious knock-on effects in Northern Ireland. This is a very significant issue. The Minister for Finance and the Government must seriously examine that part of the problem, much of which is of our own doing. We must ensure fewer people travel to the North, and addressing the VAT discrepancy is one way to do so. The slashing of the VAT rate in the UK shows imagination on the part of the Government there in attempting to solve the economic crisis and to reboot its economy. It requires imagination to do so.

We must tackle the high prices charged by UK retail chains here. Senator Hannigan referred to the significant price disparity in take-out foods. Consider the high street chains. Using the currency converter it is possible to see they are making a fortune here. They are not passing on the sterling prices which would obviously be of benefit to customers in Ireland. That must be tackled seriously from the highest level of Government. Why is it a company can make a profit on a product in the UK, apply the currency conversion rate and still charge more than it should in this country? Whatever about being immoral, the matter should be discussed between the Governments to ensure the system is fair.

I refer to the general credit crunch. Hard-working families find it more and more difficult to pay for medicines and general price increases in groceries. The 1% levy is hurting people, which we should not forget. It is another form of taxation which is unfair. I welcome the fact that the Government decided to exclude those on the minimum wage from the 1% levy. However, it is unfair that someone earning slightly more than the minimum wage pays proportionally the same as someone earning slightly less than €100,000 per year. We must remain conscious of this. All these difficulties have dented consumer confidence. Since the introduction of the budget on 14 October and the publication of recent figures on tax receipts, the situation has become more challenging and daunting. Consumer confidence is at an all-time low. A strategy is needed from the Government, as is an impetus which reflects imagination and returns money to consumers and inspires confidence in the market.

The European Central Bank, ECB, interest rate is expected to be reduced again tomorrow. Following the initial rate reduction at the beginning of November, I wrote to the Minister for Finance, Deputy Brian Lenihan. It angered me and many in the House and throughout the country that the ECB rate reduction would automatically be passed on to those with tracker mortgages, but would not necessarily be passed on to those with other types of mortgages. The options of passing on the reduction was left largely to the discretion of the banks. I raised this issue in the House and I wrote to the Minister for Finance on the matter. In fairness to the Minister, he replied. He referred in his correspondence to comments he made in the Dáil on 11 November in which he welcomed the Central Bank's announcement on 6 November to pass on the reduction in key interest rates. There is a difference between welcoming and encouraging on the one hand and obliging financial institutions to pass on the reductions on the other hand.

The State, the Government and the country bailed out the banks and provided them with a guarantee. The least we expect in return is that the Government would ensure that commercial banks would pass on the reductions. If it is left to the discretion of the banks it will not happen. The banks are concerned about making money and profit, not about the people who must go to court and face foreclosures and repossessions.

Those circumstances are all the more daunting when one considers that many people face this Christmas without a guaranteed job in the beginning of 2009. Anyone who knows anything about the 1980s will remember the job insecurity of that time. If one had a job one was lucky and if one had a secure job one was part of a rare breed. We are returning to the mindset whereby people are no longer guaranteed safe jobs in the future, which is a matter of great concern. Everyone fears losing a job, but those on the margins also fear losing their houses, which is an awful and appalling vista.

I refer to mobile phone roaming charges. Senator Hannigan referred to an example of a phone available free of charge in the North and the corresponding cost of the same product here. Mobile phone companies have been making a fortune on the backs of Irish consumers for a long time. I remember ten years ago in London, if one was a Vodafone bill-paying customer the phone would be registered to one's address. At the time Vodafone allowed customers free calls after 6 p.m. and before 8 a.m. the following morning to landlines in that area. That service is still not readily available here, ten years later. That is the same company which bought out Eircell. Unfortunately, it did not bring some of the discount schemes from the UK, which is another example of why the motion must be passed in the House.

The cost of sending a text message is so small that it is almost scientifically impossible to calculate. Millions of text messages are sent and this practice is encouraged by mobile phone companies. If one sends SMS messages saying "How are you?", "I am fine.", "Any news?", the cost is 9 cent each time. Before one reaches the third sentence of a small conversation the cost can be as high as 60 cent.

Senator Paul Bradford

The Senator is a one sentence man.

Senator Michael McCarthy

I am sure the Senator will not charge me for the luxury of that.

The Oireachtas Joint Committee on Communications, Energy and Natural Resources, which comprises Members from all sides, has looked at roaming charges as well as the cost of text messages and the general prices charged by mobile telephone companies in Ireland. In terms of roaming, it would almost be cheaper to take out a mortgage and buy a property abroad than to pay one's mobile telephone bill on returning to Ireland. It is absolutely unbelievable. The European Union, Commission and Members of the European Parliament have paid particular attention to this issue. We all know there is overcharging and we know what needs to be done. I ask the Minister of State, Deputy Kelleher, to ensure that those at the highest levels in Government show some imagination in this area.

The Government must lead the way and create a shoppers task force. A group of people, somewhat like "An Bord Snip", must be tasked with looking at all the issues affecting the hard-pressed consumers, especially bearing in mind that the budget was most severe on those who have the least. If consumer confidence is to return and the market is to be rebooted, measures like this, which may seem insignificant, are very important. People's disposable incomes are under pressure and thousands will find this Christmas the most difficult in 25 years.

I hope the Minister of State will give serious consideration to this motion, acknowledge the spirit in which it is tabled and ensure that this Christmas is not as difficult as it could be. The Government can lead the way and we will support it.

Senator John Carty

I move amendment No. 1:

To delete all words after "Seanad Éireann" and substitute the following:

"recognises:

the economic impact of the significant decline in value of sterling against the euro in terms of exports and the effect on the price of consumer goods;

that around half the value of goods and services purchased in the State, including the majority of foodstuffs, oral medicines, books and children's clothes and shoes, are not subject to the standard rate of VAT and therefore are unaffected by the change in the standard rate;

that Ireland continues to be a low taxation economy in comparison with other competing economies;

that overall inflation in Ireland continues to decrease and is less than the Euro area average and is lower than the comparable index in the UK;

that retailers and telecommunications providers have a duty and a responsibility to justify to their customers and the economy the reasons for charging significantly higher prices to their customers in Ireland as compared to the prices charged to customers in other jurisdictions;

supports:

the actions of the Tánaiste and Minister for Enterprise, Trade and Employment in pursuing the retail trade to explain the reasons for these price differentials;

the Tánaiste's determination to ensure that consumers receive a fair deal and that retailers do not engage in unacceptable profiteering; and

the ongoing work of the National Consumer Agency to inform consumers through its Price Comparison Surveys of the choices available in the marketplace."

I welcome the Minister of State to the House and thank the Labour Party for tabling this motion this evening. It is a worthy motion at this time, given the current media attention on the number of Irish people travelling to Northern Ireland and spending money that should well be spent in our own economy. Such people believe they are getting good bargains, which must be the case, given the numbers involved, but I appeal to them to think twice about the amount of money they are spending in Northern Ireland, especially given the current state of our economy. In the coming months we will see the result of this cross-Border shopping, with many jobs being lost here. I appeal to people to consider the situation carefully, even though they may be getting bargains.

It appears that most of the bargains to be found in Northern Ireland are in food and alcohol. However, last week a supermarket in the Republic advertised enormous reductions in the price of various drinks and foodstuffs. One could purchase a bottle of Jameson whiskey for €18.99 and 24 bottles of beer for €17.99, and striploin steaks were reduced to half price. I do not know how people could make any savings by travelling to Northern Ireland for such goods. I appeal to people to consider carefully what they are doing.

The fact that the standard rate of VAT does not apply to many items in the Republic of Ireland, including most foodstuffs, oral medicines, books and children's clothing and shoes means that retailers must be creaming off a considerable amount of money in profit on such goods. That is an area on which any task force should focus.

Much has been said by Labour Party representatives about telecommunications providers. Senator Hannigan referred to the fact that a new model of BlackBerry costs €121 in the Republic but is free in Newry. I find that difficult to believe but I am sure that the Minister of State has taken a note of that point and will investigate it further to determine why that might be the case. It is not right and it should not happen, given that a single company supplies such goods north and south of the Border.

I have alluded to the fact that there has been a reduction in food prices in the Republic, especially since certain multiples have entered the market. Two in particular, when they set up in an area, appear to force the other multiples to drop their prices. Housewives are also a lot more discerning than in the past and do not mind shopping in two or three different supermarkets and picking up what they want in each because, by doing so, they can make enormous savings. It is to be welcomed that housewives have come around to that way of thinking because 12 or 18 months ago they did all their shopping in one supermarket. Now that they have seen the full-page advertisements in the newspapers from certain multiples, they are opting to buy item A in supermarket X, item B in supermarket Y and so forth.

I am a member of the British-Irish interparliamentary group and have heard my counterparts from England describing how entire areas of that country have been denuded of shops, requiring that people travel 15 to 25 miles to buy petrol and so forth. Irish people should be concerned about the possibility of the same happening here and should support their local shops and petrol stations as much as possible. If such local businesses close, people will be at a loss. I can see this happening in my own village. There is no petrol station there anymore but once, at a time when there were far fewer cars, there were four. Villagers now have to travel up to seven miles to get petrol. However, in the town to which we travel, I am delighted to say there is enormous competition. In recent weeks a supermarket there has made an arrangement with a local filling station whereby customers who spend €60 in the supermarket will be given a voucher for petrol entitling them to 10 cent off per litre, up to a maximum of 60 litres. That is welcome and indicates that some retailers still understand the concept of competition.

I drive from the west to Dublin every week via Athlone. There is a shop near the Hudson Bay Hotel called the Hudson Bay Stores, which is the last shop one passes until one reaches Dublin, unless one takes a detour into one of the smaller towns along the route. That demonstrates progress in the sense that there is a dual carriageway all the way from Athlone to Dublin. However, at the same time it is regrettable that one cannot pull in along the route to buy a coffee or some petrol.

The United Kingdom, of which Northern Ireland is a part, has a population of over 60 million, which allows for far greater economies of scale than are possible in the Republic of Ireland, which has a population of only 4 million. We have heard quite a bit in the recent past from business people that the minimum wage in the Republic is €8.65 but the minimum wage in Northern Ireland is £5.73, which is the equivalent of about €6.70. Thus, staff costs are higher in the Republic, and that is the way it should be. The young people — or any kind of people — working in those shops should be paid a decent basic wage. I thoroughly agree with that. I also agree with Senator McCarthy regarding the conversion rate between sterling and euro. If one goes into a store in Dublin or anywhere products will have a price up in sterling and one in euro, but there will be a huge difference between the two. If one brings it to the attention of the staff they will look at one and ask what they can do about it. They have no answer. We should be more vigilant in this regard and challenge those figures.

Senator Paul Bradford

I welcome the Minister of State to the House and commend the Labour Party on this motion, which provides, if Members will excuse the phrase, significant food for thought. It is an appropriate time of year and point in the economic cycle of the country to discuss this issue because consumer habits have changed very dramatically, through necessity, in recent months. Every retailer, shopkeeper or taxi driver we meet will talk about the downturn and the amazing reduction in spending. This will obviously have a major impact on the Government's finances and on jobs in our smaller shops, supermarkets and retail stores. It must be addressed and, as far as possible, it must be reversed.

We must recognise that there are two sides to this debate. On one side we have the issue of consumer confidence and what we and the Government can do to try to make progress in that regard, while on the other side of the economic equation is the issue of price control and value for money. I, as much as anybody in this House, regret the fact that the Celtic tiger era has come to an official end and that the past 15 or 16 years of ongoing significant economic growth have now ended. Every economic boom has many positive points — we all welcomed the increase in jobs and wealth in the country — but there are also negatives. From the point of view of the consumer, when money was more freely available and when people were better off in material terms, the idea of value for money and of the consumer watching in great detail what he or she was spending went out the door. People went into supermarkets, drapery stores or other retail outlets and purchased without even checking the price. Money was being spent like confetti. It is great that people had such money to spend, but many people now regret some of their purchases and the fact that they drove inflation because retailers were willing to charge anything if consumers were willing to pay whatever price was being demanded. Value for money went out the door.

Inflation was a serious problem 12, 18 and 24 months ago, but that problem has dimmed to a degree because of the drop in consumer spending. We failed as a society to preach the basic economic principle of demanding value for money. That is part of the problem we now face. We all want to ensure that the consumer — namely, you and I — has money in his or her pocket to spend and that growth will continue. However, in the future we will have to demand much greater value for money and consumers will need to be much more cautious. The economic climate has changed quite dramatically and even those consumers who have certain discretionary income available for spending are cautious in how they will use their money. We now see stores having pre-Christmas sales, which may never before have been on the agenda. Consumers with spare cash are still unwilling to spend because they feel prices will drop further. Perhaps they are correct; perhaps they are not. We cannot predict the future. There is now an onus on the Government to try to restore confidence to the consumer and thereby to the economy and to try to ensure the maximum possible amount of money is available for spending in the retail sector, particularly over the next few crucial pre-Christmas weeks.

The budget in October was regressive from an economic perspective in the sense that it took money out of the economy. I appreciate that we have to live within our means as a society but some of the budget decisions were unhelpful with regard to consumer confidence. If we look at any of the barometers of public opinion — not political opinion but consumer opinion — it appears consumers are fearful about the future and unwilling to spend their hard-earned cash. Our colleagues in the Labour Party spoke about the initiatives taken by the British Government. An interesting initiative was taken by Gordon Brown and Alistair Darling with regard to reducing VAT, which was seen as a dramatic and strong proposal. However, there appears to be a suggestion already — I am not sure whether it is from leaked memos or leaked reports — that the British Government proposes not just to reintroduce the original VAT rate in 12 or 18 months' time but to increase it substantially. Perhaps there is a benefit to this very short-term proposal from the perspective of the British Government, but it does not appear to be a long-term policy position. The Labour Party Government is also proposing to increase income tax for a significant number of taxpayers, which will certainly take money out of the economy.

I recognise the difficulties being caused to the Border communities due to cross-Border shopping, but there is a certain degree of political déjà vu, because this is something that happened in reverse when many Northern consumers came south of the Border to shop and spend, and we certainly did not put up any barriers. We have an island economy and I would be sad to see any measures which would discourage Southern people from going North or vice versa. Mentally and financially we must try to remove the Border as far as we can. We must deal with the situation caused by the British amendment to the tax rates but we can in no way discourage people from being mobile in their shopping habits. We certainly cannot declare that people who go to Northern Ireland for shopping purposes are unpatriotic.

The first thing the Government must do is to consider its own taxation policies. Fine Gael put forward as part of our pre-budget package of suggestions the concept of a 1% cut in VAT funded by a windfall tax on energy generators. The Minister is aware of that proposal and how well thought out it was. It was based on the fact that approximately €300 million per annum in carbon levies is being extracted from consumers by power companies. This block of money, which is not being passed on to the Government, should be utilised to reduce VAT by 1%.

There is much more that needs to be done. The idea of a shoppers task force is one with which I am comfortable. However, at a time at which we are looking at every quango and every suggestion for a new agency, we had better tread carefully. We have so many Departments, Ministers, groupings and agencies that if they were all doing their jobs even half properly, we might not need any new agency. However, I welcome the debate. It is no harm to put the idea of price control and value for money back at the top of the agenda. It slipped off during the time when people were throwing money around like confetti at a wedding but now that we have finished with that era, there is much we can do to turn the economy around.

Fine Gael is demanding pay restraint and certain pay decisions to be taken in the public sector but we must also try to ensure prices are kept under control. This policy needs to be centre stage in Government economic thinking. I thank the Acting Chairman for his discretion.

Senator Cecilia Keaveney

I do not know if I am the first speaker to be more than directly affected by this issue. I will start where Senator Bradford finished. There was a time when consumers were not aware of pricing and paid whatever happened to be the price at the till or went to whichever petrol station was the handiest and did not look at the price. I have spent many years being a little annoyed at some of the petrol stations which were exploiting the customer. I remember when petrol stations in Muff, Bridgend, Burnfoot and other places in Donegal were closed down. I remember the trauma for the families involved. I remember seeing the dilapidated buildings when the petrol was cheaper on the other side of the Border.

There are very few Members of this House who live in a Border mentality, north of the North, as it were. When I say I am geographically North and politically South, people do not understand. When I go abroad people do not understand that there is a place north of the North. In Donegal and Inishowen in particular we have always had to deal with the pluses and minuses, the swings and roundabouts of that situation. The 0.5% increase in the Irish VAT rate might not have been a problem had it not linked in to the 2% decrease in the UK VAT rate and the change in the exchange rates. The exchange rates have been very significant in the recent months.

We have watched the petrol going from being a good price on our side and everyone buying it to everyone going North and those north of the Border buying it locally again. The sale of petrol provides significant employment but this still relates to the VAT take and that could change. While acknowledging the bigger picture, I still say to those providing services not to take profit unduly just because there is someone on the other side of the Border who will come and buy because it is a lot cheaper here. The locals are being penalised as well as everyone else. On the other side of the equation, people have come from the North to County Donegal for weddings and we did not say "No" to them. I question what is the problem with the price of food. If County Donegal is attractive for wedding receptions — which is all about food — how are we so unattractive for shopping for food? It does not add up.

As Senator Carty said earlier, we need to be careful in this debate. We can point to real issues and difficulties. I can point to my own constituency and to constituents who are in serious trouble with regard to employment. We also need to be careful in talking about this issue not to concentrate solely on the negative aspects. In my area there is more competition between the shops in Carndonagh and Buncrana and good bargains can be found. Senator Carty was correct when he said that people are discerning. They are buying one item in one shop and another item in another shop because they know what is cheaper in what shop.

We are asking for a level playing field. We are living in a Borderless area. We are surrounded by either the ocean or the rest of the North. Our mentality is fluid. The closest hospital to my area is in Derry. It is 18 miles from my house to Derry but it is 37 miles to Letterkenny. Crossing the Border is a daily occurrence for us. The earlier discussion focused on the busloads going from Cork or Galway but these are one-off occasions and a form of social occasion which cannot be stopped. It is a daily occurrence for any of us living in the Border region and it is the problem of the daily occurrence that makes places such as Donegal different. We must focus on supporting existing industries and businesses so that they can be as competitive as possible. We also need to send out the good message that there are bargains to be had. If we keep talking things down, we are only talking other people into going North and exploring what is there.

I will give examples which may be trite. I was going back through Belfast to Donegal last weekend. In the Spar shop here — I should not be advertising particular shops — I bought two bars of chocolate for €1. When I reached Belfast I saw the bargain of two bars of chocolate for £1. The two bars of chocolate for €1 was a much better deal. People complained about the airport tax being imposed on regional airports but we always had the tax because Derry Airport always imposed the UK tax on the flight from Derry to Dublin. I refer to the issue of the all-Ireland roaming charges for mobile phones. My phone subscription package will allow a certain number of minutes but these will not include the roaming minutes. If I leave my phone on the TV and leave it on in automatic signal finder mode, it will find the signal from the North. It has cost me many hundreds of punts.

I have too many thoughts but I want to bring one to the notice of the Minister of State. Last week I called for an all-Ireland VAT level on alcohol. Everyone is travelling North to buy alcohol and we know that low prices and easy access leads to more consumption. It is as much an issue for us in the Republic as it is for the Six Counties. The regional task force has been dealing with it as a north-west issue and not as an issue in the North or South. I was on a radio programme with Jeffrey Donaldson last Thursday and he agreed it was an issue that needed to be examined. The interviewer was very excited that I might be telling the UK Government what to do with regard to its tax policy. We led the way on the smoking ban and on the plastic bags regulations. I am trying to be patriotic and republican by asking for a Thirty-two County approach to VAT on alcohol. If VAT rates were equal, we might have a more level playing field and people might not be making the mad dash for the €13 cheaper bottle of whiskey and they might buy other things locally as well.

The exchange rate is very annoying. When goods were £50 in the North they were automatically €75 here. When the prices were the wrong way round, there was no problem and we were expected to pay the €75. Now, according to Senator Ó Domhnaill and others, because that exchange rate has changed the other way and people are asked to pay the difference, it shows that people are exploiting the exchange rate. I said today that consumers should not be fooled and that they should vote with their feet regarding consumer goods and vote with their wheels regarding prices. We are very aware of it. I know that Forfás is also inquiring into the reason there is a 31% price differential between the same goods on either side of the Border. We just want a level playing field because we believe we can be as competitive as anywhere else.

There is a massive potential for the consumers here to play a part. There is no doubt that some issues are problematic. It may be better to bring issues to the attention of people who can address them rather than through this suggested forum. For example, if the Enterprise train journey between Dublin and Belfast is delayed by over half an hour, passengers receive a voucher. For a time the voucher would not be accepted in Belfast because it was in euro, even though Northern Ireland Railways provided it. As it happened to me on one occasion, I brought it to the attention of the company when it attended the Good Friday Agreement committee and it was subsequently resolved. Much of this is about bringing matters to the attention of those who can address them. Consumers should bring prices to the attention of their shops and fight their corner. I accept several difficulties are created by the fact that there are two jurisdictions on the island. The Minister of State is well aware that what needs to be done, particularly in the Border areas, is to protect jobs.

Acting Chairman (Senator Labhrás Ó Murchú)

I welcome those in the Visitors Gallery from Bailieborough, County Cavan, guests of Senator Joe O'Reilly.

Senator Feargal Quinn

I welcome the Minister of State, Deputy Billy Kelleher, and our guests from County Cavan. I must declare an interest inasmuch as I started my first business in Dundalk, 10 km from the Border, in 1960. What a competitive marketplace it was then. It was no different than it is now. Sometimes, items were cheaper south of the Border, sometimes north of the Border. These were the days when there were customs posts on the Border. It is much easier and open now to travel between the two than it was in the 1960s when I started off.

I welcome the Labour Party's motion. It is topical and exactly what we should be debating in the House. While I welcome the motion, I do not accept that the answer is to establish another quango. The answer is competition. I do not believe we can ask the Government to solve this problem. It can solve it in certain ways by making the marketplace more competitive.

Several questions arise in this debate. As Senator Cecilia Keaveney asked, why are items dearer in the South than in the North? For example, a large scale soap manufacturer in Birmingham sells its products in Great Britain and Northern Ireland at the one price as it would be unacceptable to have two different prices. Regardless of whether a retailer is in Inverness, Scotland, Derry or Newry, while it costs a lot to transport them there, the manufacturer will charge the same price as it would for a retailer in Coventry or Manchester. The shop in Dundalk, however, is part of a different system. Retailers, be they in Dundalk or Belgium, will be told by the soap manufacturer that there will be charges for transporting the product to Belgium or across the Irish Sea to Ireland.

Since the Border no longer exists in a customs sense, it is possible to overcome this. The retailer in Dundalk can travel to the North and bring goods back to the South. It is not healthy from our economic point of view, however, to have those jobs in wholesaling and distribution take place north of the Border.

I am concerned about the use of the term "unpatriotic" to describe those who shop across the Border. I do not accept it. My mother came from County Armagh, my father from County Down and I was born in Dublin. I would hate anyone to think that it is being unpatriotic to regard someone from north of the Border as not one of us. We spent many years trying to get our independence. We were very upset when we did not get the Six Counties as part of the Republic. To insinuate that it is unpatriotic to travel north of the Border to shop is not acceptable. The farther one lives from the Border, the more one regards the North as "them" rather than "us". Senator Cecilia Keaveney will be aware that the closer one lives to the Border, the more likely one will regard it as one. I recall going with an assistant from Limerick to buy a wedding present when I said we should buy some linen from Northern Ireland. My assistant asked would I not support our own. We should not allow that thinking.

The answer to this issue is competition. If we are to have a competitive marketplace for those who live south of the Border, we must ensure our costs are competitive. In a way, I might be making excuses for retailers, but rents and rates are higher. Just this week Dublin City Council increased its rates at the time it should not do so. Public sector spending must be tackled. In 1985 we got scared when we almost lost control of our currency. Then we managed to make those uncomfortable cuts which we were not willing to accept before. We must recognise that Government spending must come down. We have high waste disposal charges and expensive energy costs, combined with the new problem of sterling rates being much more attractive.

It is interesting that people in the North come to the South for entertainment such as holding weddings in hotels. That is not about price, it is about value. The hotels in the South seem to be able to do a better job and give a better service. It is not just a matter of price. If we are going to compete, it will have to be in so many other ways. The cost of parking in Dublin has gone up by 20 cent per hour while Newry offers free car parking. These are examples of how we can introduce better service to shoppers.

I am concerned that the Government and the media do not differentiate between price and value. One recent survey compared the Irish supermarket price of a top quality chicken with the cheapest chicken in a discounter. That is not comparing like with like. Last week, I got annoyed with a headline in The Irish Times which asked, “Why is Kerry Gold butter twice the price in the South than in the North?”. Yesterday, down in the bottom right-hand corner of page 15 of The Irish Times was an apology that the newspaper had measured a 450g pack of butter in the South against a 250g pack in the North. There is a certain hysteria and belief that the position is far worse than it is. The answer is in our own hands. It includes Government and county council action in reducing costs to ensure a competitive marketplace. There are more shops in the South per head and per square area than in other part of Europe. Let us ensure we encourage competition but let us ensure also we remind people that it is not just a question of price, it is a question of value as well.

Senator Fiona O’Malley

Listening to Senator Quinn, as a cross-Border product myself, with a mother from Omagh and a father from Limerick, I agree that as a united Ireland we should not recognise trading on one side or other of the Border as being unpatriotic. I recognise the challenges it brings to people trying to conduct business in the Border area where price sensitivity will make commercial transactions especially difficult.

I refer to the motion and the question of VAT, which is slightly misleading. It is an easy thing to hit the Government with at the moment because the UK is reducing VAT rates. The motion refers to food sold here but food is not subject to VAT in Ireland or the UK. The issue of VAT is slightly misleading in this way. It is an easy headline to show an example of how it is more difficult to conduct business because costs are higher in the South with the higher VAT rate. This goes to the core of trying to keep taxes low and costs as low as possible. That is where we can entice business to our country. I heard someone on the radio this morning refer to the one positive aspect of the current economic situation, that prices are coming down. The price of oil has come down and there will not be the increase in electricity costs we had anticipated. The high cost of electricity is a major problem for businesses in Ireland. It worries me greatly because it is a major cost for big industry. We must try to contain it to keep our costs low. It shows that competitive forces work. Nowhere has that shown itself more than in aviation and buses. Where there is competition on bus routes, there are better services and prices, whether intercity or to and from the airport. This drives prices down and we have a much better service. This is what we must examine.

Everyone who gets a Sunday newspaper knows that the newspaper is full of advertisements for big supermarkets trying to attract our business. We can now see what they have been doing for a while. They are killed trying to entice us in, bringing costs down and comparing costs.

A criticism I have of the motion is the reference to the shoppers task force. I am sorry if it was explained how this would be funded. What would worry me about a shoppers task force is whether it would add to costs. How will it be funded if this is to be established? We have the National Consumer Agency and it is better to have an independent body such as that.

We are consumers and we go where there is value. If we believe we are being ripped off or are not getting a good service, we will do our business elsewhere. That is the best safeguard for anyone in business.

Senator Quinn referred to price and value. Price is not everything. Oscar Wilde said that a cynic is someone who knows the price of everything but the value of nothing. We must keep this in mind. In my local area, Dalkey, I do business in the butcher shop and the greengrocer. I prefer to do business with these small shops because of the old adage about keeping your money in the town. This refers to the sense of community solidarity and looking after the people who look after you. We need to have smaller businesses in our communities. How will they survive if we do not support them? In doing so, one often gets a much better service from these people because there is a bit of banter with them and they know who you are. In a lovely delicatessen in Dalkey, I saw that one woman knew the other woman and said that she would drop something in on the way home at night. That service is so charming. A supermarket cannot operate in that way but it is so much more pleasant to do business in that environment.

It is not necessarily more expensive. With vegetables, one finds that they are competitively priced. One notices that the prices of vegetables in bigger supermarkets are much higher. They make savings in other areas and people must be conscious of the total shopping basket. Regarding people who are travelling across the Border and not supporting businesses in their towns and communities, if businesses close down because they are not getting services, it is these people's neighbours, friends and colleagues who will lose jobs. I am a great believer in keeping the business within the local community as much as possible. Towns have thrived as a result of this and this is where we must keep an eye on matters.

People will get the best value going in that sense. I read an article in the newspaper last week about someone bartering, which we have lost habit of when doing business. I do not know if Senators are aware of the responses. Some shops were horrified that one could negotiate the price but it is a great way to do business. The customer is king at the moment and people must remember that. A business will survive if people give a good service. That is where we must focus.

A shoppers task force is not the answer. A higher awareness of the National Consumer Agency is what we must think of.

Senator Joe O’Reilly

Mo bhuíochas duit, a Leas-Chathaoirligh, as ucht an fháilte a chur roimh muintir Coill an Chollaigh atá mar mo chuairteoirí anseo inniu. Cuirim fáilte roimh an Aire Stáit. I congratulate the Labour Party on tabling this motion. It is apt, timely and a prescient response to a real problem. This is a major problem. People are going in massive numbers and we have heard stories of tailbacks in Newry, of shops being emptied of people for health and safety reasons over recent weeks and, in the Sunday newspapers, of lists of number plates of people going shopping in a shopping centre in Newry. If this is happening on a widespread scale in a northern direction, there is a consequent issue for local towns in Cavan and Monaghan — my area. It is a real issue that threatens businesses and jobs. When one considers the costs we are prepared to spend to create jobs, surely we should invest in keeping the jobs we have. It would be much cheaper. There must be support for these shops, such as supports in their rates bills and free parking in the towns. Initiatives must be taken to support the shops. A number of small businesses are on the brink of extinction. I had occasion to visit a number of small businesses in the past few weeks and met people literally in tears about the future. It is of great concern.

The greatest of this Government's many failures has been its failure over years to get a handle on price control. This Government has never got to grips with price control or put the issue on the agenda. It is a serious matter that we get control and a watch on prices. The fact that a packet of Pampers nappies would cost €11.23 in the North but €14.99 in the same type of shop in the Republic is a startling figure, but it repeats itself. There is a 20% differential in prices. Unwitting consumers are tricked in that they do not realise the quality is not as good in many of the products they purchase. I also understand the issues Senator Quinn raised regarding distance, however the cost of transport from the UK to here should not necessitate that price differential. I take his point that they could travel and source the materials in Northern Ireland for similar multiple stores here in so far as they were manufactured in England. However we must become more aggressive and watchful on price control and price fixing.

We were unfortunate to increase the VAT rate in this country while it was reduced in the UK. The two compound each other and that is a major difficulty. There is an issue around the VAT rate and the cost differentials in terms of the Anglo-Irish Agreement. Part of the Anglo-Irish Agreement was the goal of achieving a harmonisation between the Republic and Northern Ireland. The different VAT rates fly in the face of the harmonisation in the Anglo-Irish Agreement and we must begin to work towards harmonisation. Earlier, Senator Keaveney said we should begin by trying to achieve a harmonisation of VAT rates and costs of alcohol on the north and south of the Border. This is a major issue.

The Government mismanaged the public finances over an 11-year period and wasted the public finances in areas such as the PPARS computers, the electronic voting machines, the Red Cow roundabout and in smaller ways at lower levels, which has arisen recently regarding FÁS. That has left us without the necessary resources to support our Border shops and local industries properly. We do not have the kind of slush fund we might have had and we are not able to input satisfactorily into the economy. I commend to the Minister of State Fine Gael's recent proposition that the energy windfall tax be used to lower the VAT rate; it should be done instantly. To lower the VAT rate by 1% would be a move towards harmonisation of taxes and a resolution of the problem. The problem must be solved by price control, a movement towards harmonisation of taxes and supports for the shops and individual traders through this crisis, where absolutely necessary.

Consumers need more information. Our consumer people should monitor prices and quality. Without going into individual items, I have information that in a shop such as ASDA in Enniskillen people buy different products in bulk, but I am reliably informed that products are not of the same quality as corresponding products in the mainstream shops. They do not have the same durability and shelf life. This is an anomaly. On one level people are paying less money but there may not be that significant a difference because of the quality of the goods. Information should go out on these issues.

This is a serious matter and will take a multitude of solutions. The Government must accept it as a problem and get to grips with it. I hope this debate could be a starting point. Tonight I hope we accept the problem, examine some of the solutions and begin work on it. It merits an immediate response. It will make ghost towns of the towns of Cavan and Monaghan if we do not do something about it immediately. There is a mass exodus of people and we must take steps, whether free car parking, some action on rates, price control, more consumer information or encouraging the community concept, although this Government cannot openly do that.

Senator O'Malley raised this point about community and the concept of interdependence, and I agree with it. I believe we should support our communities as a first step. This is not necessarily a partitionist stance. No matter where our community is, that should be the first area we support. We support our families and work out from that to the community. I appeal to the Minister to take this as a very serious, urgent matter. It will lose jobs all along the Border. We are talking about dislocation of jobs, subsequent social welfare bills and an enormous cost to recreate these jobs. We will have to get a handle on it and act on it. I am sorry to say that so far the matter has not been seriously dealt with.

Senator Dan Boyle

There is a famous quote, although I cannot remember who said it, "Patriotism is the last refuge of a scoundrel." There are individuals who promote themselves and their love of country as being superior to that of other individuals, whereas real patriotism is about collective action in the face of adversity. There has been much misunderstanding and misreporting in how that term has been used in recent times. I would not blame some of our political figures who have used that word in certain contexts in the recent past, but it has had a certain unfortunate ring regarding the price differentials between the North and the Republic of Ireland. We have reached a sorry pass when somebody such as Mr. Jeffrey Donaldson of the Democratic Unionist Party, DUP, can sound more patriotic about the existence of the Border than anybody in the Republic of Ireland's political system.

This is not only a case of the current situation between price differentials between Northern Ireland and the Republic, which is cyclical and applies the other way around, particularly with products such as petrol. It is a constant problem we have had regarding denuded economic communities throughout this island and how people are led towards other economic centres. The problem we are experiencing with Northern Ireland could equally be said at any time of our history about counties such as Mayo, Longford or Offaly vis-à-vis Dublin, as our capital city.

Senator Jerry Buttimer

Senator Boyle should not forget Cork.

Senator Dan Boyle

I rarely forget Cork.

Senator Fiona O’Malley

It is an independent republic.

Senator Jerry Buttimer

He often forgets Cork in Government.

Senator John Carty

He thinks he is in the real republic.

Senator Dan Boyle

I am glad to tell Senator Buttimer that Cork is utterly self-sustainable.

Deputy John McGuinness

Except in hurling.

Senator Dan Boyle

If we are discussing sustainable economies as a rule, it is not just the nation State but sustainable communities and community economics. Encouraging people at every opportunity to spend their money in their immediate vicinity strengthens local and, ultimately, national economies. We have lost sight of this in recent years in trying to meet consumer desire to find what, on the surface, seems to be the cheapest possible cost at the earliest possible time.

In identifying the nature of the problem there is much to recommend in the Labour Party motion. I disagree, however, with many of its suggested solutions. The idea of establishing a task force in an era when we are questioning the existence of many superfluous public bodies must be rejected.

Senator Brendan Ryan

Did we mention a public body?

Senator Dan Boyle

In terms of the way Government is already structured, there are bodies that can do this job equally well.

Senator Brendan Ryan

We did not call for the establishment of a public body.

Senator Dan Boyle

I am just making a mild criticism, Senator. Making that minor point does not undermine anyone's political credibility.

Senator Jerry Buttimer

The Green Party no longer has any credibility.

Senator Dan Boyle

The current price differential is predicated on the differences in VAT. The reality is that Irish VAT rates do not apply to food or children's clothing. The VAT increase in the recent budget applies largely to white goods, and even luxury goods and services, and is unchanged for most goods and services in this country. The real price differential comes about as a result of the strength of sterling. Sterling is 86p or 87p to the euro currently, which is way above the value at which the Irish punt entered the euro mechanism. Short of trying to encourage the United Kingdom to become part of the eurozone, that is not a problem we will solve in the immediate future.

My party colleague, a local representative in the Border region, Councillor Mark Deery, made a suggestion on "Morning Ireland" which reflects the reality of many people who are trading and consuming in the Border region. The suggestion has some merit but will be difficult to implement. As part of an overall co-ordinated plan, however, particularly in the short term, it may work. This is a crucial time of the year for retailers. It is when maximum turnover occurs and, as a result, maximum profit is achieved in enterprises. Councillor Deery, without consulting me, his party spokesperson on finance, made a suggestion that a VAT rate of 15% should be introduced for three months. That cannot be applied in a regional context; it would have to be applied nationally.

I would go further and say that any measure of that type would also have to be encouraged with a unified purpose on the part of everyone involved in economic activity in this country. Retailers would have to ensure that the goods and services they were selling were at minimum profit margin. There would have to be co-ordinated activity to ensure that consumers spent the maximum amount of money in their local communities. We are a long way from doing that but that is the road we must travel.

I was listening to a woman who was tempted by the experience of shopping in Newry in the past week. She described the traffic jams on the main Dublin to Belfast road, which was grid-locked for hours on end. She eventually made her way into one of the major shopping centres, The Quays in Newry, only to find that all the parking spaces were full. She drove around that particular shopping centre six times before driving back to where she came from without purchasing anything. An imbalance can be created in terms of what appears to be a gilded opportunity. I suspect that woman spent untold amounts in petrol in trying to achieve savings that were not apparent.

The petrol price differential is significant. The price per litre is 20 cent more here than that in Northern Ireland and the United Kingdom in general. People referred to our retail petrol prices but despite the recent increase in the budget, people would be surprised to learn that our excise duties on petrol are among the lowest in Europe, although the retail prices appear to be higher than those in other countries. That is the reason we have these price differentials.

While I understand the spirit of the Labour Party motion, there is a lack of practicality in dealing with the immediate problem. I accept there is a need for a co-ordinated, cohesive approach from all in the political system to come up with responses to what is a very serious problem. There is also a need to support those who find themselves in regional economies affected by circumstances beyond their control. I hope that there are voices being listened to at Government level that will determine differences of approach that need to be undertaken now. Otherwise, there are communities whose existence economically will be threatened by the lack of appropriate action.

Acting Chairman

I call Senator Brendan Ryan.

Senator Brendan Ryan

As it is a Labour Party motion my contribution will conclude the debate.

Acting Chairman

I call Senator Buttimer.

Senator Jerry Buttimer

Cuirim fáilte roimh an Aire Stáit. I commend Páirtí an Lucht Oibre on tabling the motion. I was intrigued by the commentary from many speakers on the Government side of the House because the reality is simple. Whether we like it, our consumers are being ripped off. We can talk about competition and the groceries order but we are living in a society in which it is very difficult to sell and buy.

I challenge any Senator, and the Minister, to come shopping with me next Saturday morning in Cork city. In many shopping centres and shops the price differential is outrageous compared with the price of products in shops in Northern Ireland and the UK. The reality is that Irish people pay more for their diesel and petrol, despite what Senator Boyle said. They also pay more for their groceries. We have increased our VAT rate. Why did we do that at a time when there is a downturn in the economy? We have an obligation to look after the small and medium-sized enterprises and retail businesses in our country.

Small businesses are in jeopardy as we speak. I am not talking down the economy but outlining the facts. A woman called to see me on Monday in tears because she had spent approximately €100,000 on renovating her premises. The banks will not lend money, the Government has been slow to act and owing to bad fiscal management by Government, councils must consider increasing the commercial rate. What signal does that send to small retailers? I am not talking about the big conglomerates but the people who have small shops and restaurants in the heart of Cork city. I am not talking about chain stores but family-owned businesses that are being put to the pin of their collars. That is not talking down the economy but stating the facts.

Government must show leadership. The Minister of State was one of the first Ministers off the blocks in speaking about pubic service reform. I admire him for that, but we have seen nothing from Government since other than the creation of another quango last week. We need leadership. Senator Boyle, who in opposition was fast to be seen to be on the side of the consumer, has abdicated responsibility, together with his colleagues in government. He has let the people down.

We should have a debate based on reality for the Irish people. Tesco products, for example, are 28% higher here than in the North. Their own brand products are 17% higher in the South than in the North. Dunnes Stores products are 31% higher here than in the North and their own brand products are 11% higher here. Lidl products are 16% more expensive here than in the North. Can somebody explain the reason for that? I do not want to hear about the euro-sterling differential because that does not wash any more.

What has the Tánaiste and Minister for Enterprise, Trade and Employment, Deputy Coughlan, done since the Taoiseach infamously asked her to call in the gurus in his off-the-cuff remark in the Dáil? Higher grocery prices have an impact on ordinary people and families making choices when they go shopping. I welcome competition but the biggest mistake made by Government was the increase in the VAT rate. It was a quick-fix solution to address an income deficit and there was no need for it. We should look at what happened in the UK. In the United States President-elect Obama has promised an economic stimulus which will not see taxes increased. The Progressive Democrats' mantra of a low tax Ireland is gone because indirect taxation has spiralled upwards. Fianna Fáil has a great line, which is the call to patriotism. Senator Boyle referred to RTE's coverage of the line of cars heading North last Saturday. It is difficult to blame people when they are being overcharged and ripped off and it is also difficult to tell families that are struggling and trying to make savings to stay put and be patriotic by supporting their own. However, as the Minister of State is well aware given his background, this is about pounds, pennies and pence and struggling families want to save money.

Let us be real. Petrol costs 24% more than the EU average; diesel, 18%; home heating oil, 19%; and an 8% increase in excise duty has not helped. It was introduced as a quick fix solution by a Government that has no plan or vision and that is making it up as it goes along. When the Minister of State went on a solo run recently about the public service, I thought there would be action but, alas, he was on his own and he has been left behind. He is like a cyclist out in front in a race with whom the peloton has not caught up.

All the Green Party secured in the budget was a few bicycles and light bulbs and nothing else. The people of Cork were let down by Senator Boyle's party again when a promise was made regarding Cork docklands but nothing happened. A line issued about Seveso sites, which cost the party nothing.

Senator Dan Boyle

I am deeply ashamed.

Senator Jerry Buttimer

The Senator should be because his party went into government on a platform of reform but it has done nothing and is in denial.

Senator Dan Boyle

That is utter nonsense. The Senator has made four mistakes with his economic figures.

Senator Jerry Buttimer

As a consequence of the Government's decisions, the average family will pay almost €2,500 more in taxes next year.

Senator Dan Boyle

That is not true.

Senator Jerry Buttimer

I challenge the Senator to prove otherwise.

Senator Dan Boyle

The amount will be less than that.

Senator Jerry Buttimer

The purchasing power of the consumer is diminishing. The motion is timely and I congratulate the Labour Party on tabling it. We must have action rather than soundbites from the Government and not indifference to the people who are being forced to pay more. It is not their fault we are in a recession. They did not blow the boom and squander billions of euro in Exchequer surpluses. The Government splurged and the gnáth-dhuine, the ordinary person, must bail it out. That is not good enough.

Senator John Carty

The Senator's party has no solution either.

Senator Jerry Buttimer

People matter and we do not look on them as a statistic or a commodity. They are living individuals who are struggling. I challenge Members on the Government side to go shopping next Saturday to establish the cost of doing business in Ireland and to witness how ordinary citizens must survive.

Minister of State at the Department of Enterprise, Trade and Employment (Deputy John McGuinness)

I thank the Labour Party for tabling this timely and worthwhile motion. I have listened carefully to the contributions of Members on this topic which is close to my own heart and background. I come from the retail sector as I worked as a grocer in my own corner shop trying to make a living following in the footsteps of my parents. I witnessed significant changes in the shopping patterns of my community, which in turn changed because of the disappearance of corner shops. It is interesting to reflect on how those shops conducted their business. Shopkeepers sold butter by the quarter pound, rashers and sausages individually and cut thin slices of ham. People shopped like this in order that they would have just enough to do them for the day. Those were different and tough times unlike the times we have come through.

I do not accept Senator O'Reilly's comments about us squandering the boom. This mantra is uttered constantly by all and sundry, including the Opposition, yet they choose to ignore how much has been constructed and the dramatic changes in urban centres. The other complaint is society and communities have changed dramatically because of the wealth we created but that has had a positive impact on how society has evolved. An element of growing up took place during that period, when we handled billions of euro instead of millions. We were not just protecting our pennies. We were spending billions and the system, to a degree, was not able to cater for the rapid change that occurred.

I refer to the issue raised by Senator Quinn which is more relevant to what is happening. In that context, regarding the remarks of Senators Buttimer and O'Reilly, this situation will not be resolved by an agency or task force. A combination of factors is involved. Local authorities are currently striking rates, although Senator O'Toole implied the Government was striking rates in every county, which is not the case.

Senator Jerry Buttimer

The Government gives local authorities the funding to do so.

Senator John Carty

Fine Gael has a majority in local government.

Deputy John McGuinness

Local authorities should be acutely aware of what is going on in their communities and businesses.

Senator Jerry Buttimer

Councils are given money by central government.

Deputy John McGuinness

Local authorities should heed the constant call by public representatives, who are sensitive and understanding about this issue, to freeze their rates and examine their planning mechanisms to ensure reasonable planning applications relating to change of use and so on, which are not contentious, are approved expeditiously to enable economic activity. The fees and charges applied to planning permissions should be frozen, thereby not adding to costs.

I agree with the issues raised about wages and free parking. This is related to us passing decision making down the line to local authorities. They should contribute with local chambers of commerce to establishing a vibrant commercial centre of activity which attracts people to shop and do business. That is what is required of local authorities and they must step up to the plate in the same way as there is a role for the Government, agencies and the consumer. That needs to be acknowledged.

The new charges affecting business, such as for water in, water out, refuse collection and so on, are applied locally and they need to be examined and understood because a number of local authorities have money and they have the capacity to engage with the local economy to do the best they can for the businesses they represent and, ultimately, the consumers living there. Not everyone is going to the North shopping and I recognise the difficulty faced by the necklace of towns along the Border. I addressed a conference there last week and witnessed at first hand what is happening.

Regardless of how painful it might be for the Opposition and those of us involved in politics and business, we are being impacted upon by what is happening internationally. No one could have anticipated what happened in America and how quickly it would take off. The price of oil, which is at $50 a barrel now, peaked at almost $150 a barrel a few months ago. No one could have anticipated the movement in the markets of stocks, shares and bonds, which would frighten the living daylights out of any businessman or government because governments cannot find the money to fund business. Alastair Darling owns three banks in the UK and he still cannot free up the cash necessary to fund business.

Opposition Members have posed the question about what the Government is doing in this regard. Senior bank representatives are being brought in. I met National Treasury Management Agency officials regarding my Department and I met the banks' representatives whom I will meet them again in the coming months. Even when the banks are recapitalised, how sure are we businesses will be given the funding they require? There needs to be an absolute guarantee with regard to how that might happen given that taxpayers' money might have to be used to ensure business can be conducted.

I would hold the banks to account over how they are calling in their clients. This is not just hearsay; it is a fact. The facts are taken from chambers of commerce and business people throughout the country who are being called in willy-nilly to have their accounts gone through. Business people have walked back out of the bank with half their original overdraft, with new charges being applied and with less time to pay back their loans. That is simply not recognising the reality of business as we face it in this country. It is not all about Government action. A partnership approach needs to be taken by everyone involved in this situation. We should take the position that we are all in this together — Government, business, those who represent business, local authorities and others.

On the other side of this coin, regardless of what the Tánaiste and Minister for Enterprise, Trade and Employment would do, and she has done much, there is the question of competition. I have heard Ben Dunne say we should examine how supermarkets equal the prices and that the prices should be beaten. Why is there such an acceptance of price from supermarkets, whether for own brand goods or otherwise, so that across the board one gets an accepted price across a number of lines? That is not acceptable and it is not competition. Questions need to be asked as to how this is achieved by the supermarkets and other businesses, because they are making it happen. Real competition must be introduced in some way, shape or form into the marketplace to provide consumers with what they want, the choice they want, the value for money they want and the range of prices and products for which they will go shopping. More needs to be done in this regard.

As we move along in this debate, the question of the consumer arises. What should we do for the consumer and how do we keep the consumer advised? It is true consumers are confronted in their homes every single day with making a choice between buying or not buying and between one product or another, or with regard to keeping the household budget afloat. It is a problem. We need to ensure consumers play a role in this process and are informed as to what they are buying, where they are buying and so on.

There is also the issue of the difference in sterling and the reason that difference is not being passed on. The sooner we get information from Forfás or some of the other Government agencies with which we are currently engaged, the sooner we can take action against these supermarkets and those businesses that are not passing on value for money to the consumer, and the better the value that will be given down the line as we approach this in a constructive way.

We are not coming at this problem from the same platform. Our taxation system is quite different in that we are a low tax economy. We cannot have it every way. We cannot cut back taxes to 15% and have the same range of services. There is a balance to be struck and a choice to be made. It is the Government which makes that choice and which will have to stand over it. This is the backdrop to any debate we would have on this issue.

We must consider also an issue mentioned several times during the debate, namely, how we approach VAT. In so far as the effect of the recent budget decisions in the area of VAT is concerned and their effect on cross-Border trade, which is specific in the motion, the reduction in the UK standard VAT rate clearly will have an impact on the price differential on some goods between this jurisdiction and Northern Ireland. However, the UK has increased excise on alcohol, cigarettes, petrol and diesel to offset its 2.5% reduction in VAT on those items. Consequently, there will be no reduction in the price of those products in Northern Ireland as a result of the reduction in the UK VAT rate to 15%.

Approximately half of the value of goods and services purchased in the State are not subject to the standard rate of VAT and, therefore, are unaffected by the change in the standard rate. For example, all Government services, local authorities, hospitals and schools are exempt from VAT. The majority of foodstuffs, oral medicines, books, children's clothes and shoes are also at the zero VAT rate. Housing, electricity, gas, domestic fuels, restaurant services and labour intensive services, such as hairdressing and shoe repair, have the reduced VAT rate of 13.5% applied to them.

The UK Government decided as part of a fiscal stimulus package to reduce its standard VAT rate from 17.5% to 15% on a temporary basis with effect from 1 December 2008 to 31 December 2009. There are no plans to make a similar reduction in the standard VAT rate in Ireland to the UK level. As I said, it must be recognised that our starting point is very different from that of the UK. We already have a low taxation rate, especially in the area of direct taxation — both income tax and corporation tax — which has a direct impact on all employment in the State. This lower starting position for direct taxation makes it more difficult to reduce taxes even further.

Already, as has been stated by the Taoiseach and the Minister for Finance, we are borrowing 10% of all our day-to-day spending on public services. This is unsustainable and we face difficult choices in bringing forward corrective measures. In the recent budget, the Government introduced a general package of revenue raising measures to fund key public services and in this regard one measure was to increase the VAT rate by 0.5%. Each percentage point reduction in our standard VAT rate would cost €450 million in a full year and for Ireland to reduce the standard VAT rate by 2.5 percentage points would cost some €1.25 billion in a full year. For Ireland to reduce the standard VAT rate to the UK level of 15%, which would mean a reduction in the standard VAT rate of 6.5 percentage points, would cost almost €3 billion in a full year. This is equivalent to approximately 2.5 times the amount of the revenues to be raised in a full year through the new income levy. There are stark choices to be made.

Senator Buttimer referred to what he called my solo run on the public sector. It was not a solo run. It was my view expressed in as constructive a way as I could express it. I put it out there and believe it was worthwhile to do so. It was my view on how things could be changed. It was a view I believe is absolutely necessary if we are to look at both sides of this balance sheet, which dictates we must spend less. If we are spending less, the public sector must create greater efficiencies and must deliver in the same real time as business does. I see nothing wrong with that.

The Senator made the accusation that Government did nothing and that another quango was appointed. If one considers all of the OECD report, one will see there were negatives and positives within it. I acted and explained what I felt that report was about. If one considers what is being done currently by Government, one will see there is a focus on the need for a more efficient public sector and, as the Taoiseach said, the need to do more with less, which must be achieved.

The appointment of those key people to ensure this happens is not to create another quango. As I understand it, that body will provide bi-monthly reports. Businesspeople who asked for this in the context of this debate are now engaged with the Department of Finance to ensure there is oversight in regard to the necessary changes and reforms. It is good they are involved. There is a timeframe involved and engagement is taking place with the various Departments.

I have no illusions about this process. It is a huge undertaking. It is a major attempt to modernise the public sector but it is a demand that is being made not just by me on a solo run but also by those who are working within the public sector. The greatest response I received to what I said was from a number of people working within the public sector itself, in one case asking that they would be saved from themselves. It is the system and culture that needs to be changed.

The crude tool used to define what should be done, such as cutting 10,000 staff or whatever might be suggested, is one that needs to be considered. However, regardless of how many are taken out of the public sector to save on costs and create greater efficiencies, we are still faced with the problem of having the same culture and system in place. Anyone in business will know we need to change the system and the culture where it is not working. There are people who will say exactly that. As this debate rolled on over recent months I heard little from Fine Gael, and my compliments to Deputy Bruton in the other House who articulated a stern point of view on this. If we are to bring about change, we must do it collectively and understand what needs to be done. A considerable amount of work needs to be done on this and I wish well those who have been appointed.

As part of its statutory mandate, the National Consumer Agency, NCA, is charged with promoting public awareness and information. It has dedicated significant resources to raise consumer awareness on the various prices and choices available in the marketplace, especially in groceries. Through regular grocery price comparison surveys, the agency has sought to enable consumers to inform themselves as to where they might get the best value for money.

The agency published the results of its first survey in February 2008. The key findings of the survey were that there was virtually no price difference between the multiples on branded goods, a point I made earlier, but greater value was available from some retailers in meat, fruit and vegetables and other products. Following this survey, the NCA urged consumers to be more strategic in how they shop and suggested they should consider splitting their shopping among various retailers to achieve the best value for money. I have noticed that shoppers in my home city of Kilkenny identify where they can get the best choice and value. This needs to be encouraged.

This brings me back to my opening remarks when I spoke about the agencies, the Government, the local authorities and the consumer. We are all in this together and we all have work to do. This will not be achieved overnight. I understand the difficulties which exist with regard to cross-Border shopping and I understand what needs to be done. Those in this House need to be reassured that the Tánaiste, my Department and the Government generally not only are aware of it but are engaged directly in trying to ensure a resolution is found to all the issues raised. However, it is a complex matter which will take time.

Senator Paddy Burke

I welcome and support the motion tabled by the Labour Party. I listened with great interest to the Minister of State who expressed a view on the public sector some time ago. However, he did not seem to get support from his ministerial colleagues on it. He stated he has not heard a great deal from the Opposition. I do not know what he is listening to if he has not heard what the Opposition has being stating over recent months.

Why are we so expensive? I have not seen any Minister put his or her finger on why everything is so expensive in this country. It is not only with regard to one item. One can visit various countries and each of them will have an item that is extremely cheap, whether it is wine in Spain or Portugal or a tourism product. In this country we do not have a single item that is cheap, not even water and rain pours down on us every day of the week. We have probably the most expensive water in the world. I have not heard any Minister explain why we have such an expensive economy.

I did not hear the Minister of State allude to double time for the service industry in this country. This will close many businesses. We are a tourism country but we have not seen that many tourists here during the past year or two. We should have a major tourism product. Over recent years, Fáilte Ireland has left a lot to be desired with regard to the promotion of this country. As a tourist destination, if we go down the road we are going with regard to the service industry, we will have no services at weekends, especially Sundays.

Whether the Minister of State likes it or not, there is no leadership. In Northern Ireland, irrespective of groceries and clothes, cars and tyres are also cheap. This is why people go there and they will not be stopped. I appreciate that the Minister of State pointed out that €3 billion would be lost if the VAT rate was reduced to 15%. This is a great deal of money, but a great deal of money will also be lost by shoppers going to Northern Ireland. The Minister of State should have proposals on why this economy is so expensive compared with other economies in Europe.

Senator Brendan Ryan

I thank the contributors to the debate, namely, Senators Carty, Bradford, Keaveney, Quinn, O'Malley, O'Reilly, Boyle, Buttimer and Burke and the Minister of State, Deputy McGuinness. Based on price surveys, even before the recent reduction in the VAT rate in the UK, the price of grocery items was approximately 30% lower there than here. The VAT rate change in the UK will make matters worse although, as contributors pointed out, food items will not be affected. The increase in the VAT rate here was a mistake and counterproductive. It will not achieve its objective. The weakness of the pound versus the euro is an exacerbating factor which is contributing to the problem.

These factors explain some of the differences but do not explain them all. Speakers referred to the fact that in July the Tánaiste asked Forfás to conduct a comparative study on the operating costs of running a retail business in this country versus other jurisdictions. As Labour spokesperson on consumer affairs, I welcomed this move as this involved important information which we needed to learn. However, it is now December and I am bitterly disappointed that the report has not yet been completed. This was supposed to be done with urgency. I have contacted Forfás on several occasions since July to see what progress has been made. On each occasion, I have been told that the report is a number of weeks away. Today, I was told it is due for delivery next week and I hope this is the case.

I understand the study examined retail businesses in eight cities, namely, Dublin, Cork, Galway, and Limerick in the Republic, Belfast in the North, Manchester and London in Britain and Maastricht in Holland. They examined items such as rates, telecoms, labour, transport, distribution, electricity, water, property prices and rental costs. These are all factors in the day to day running costs of any business. I understand the delay is due to the fact that some retailers did not co-operate fully with the process and I was disappointed to hear this. If this is the case, I suggest that legislation is required to compel all retail companies to co-operate with Government and or State body surveys when requested to do so. This is important research which will help us understand what is going on, and I look forward to its findings.

When British retailers are questioned and challenged about the overly high prices they charge in this country compared with their stores either on the other side of the Border or in Britain, they usually respond by stating it is due to the far higher operating costs here. The study should tell us whether this is the case. If differences in operating costs exist, we need to understand the extent of them, we must quantify them and set about closing any gaps that exist. If operating costs are ruled out as a factor or if they are insignificant, then the price differentials cannot be justified. I believe that in many cases they cannot be justified. As I stated, price surveys have shown that price differences of up to 30% exist. This study must establish whether the differences in operating costs justify the high prices that recent surveys show are being charged. If retail business costs are higher, this must be addressed so that we can remain competitive.

With regard to what we call for in this motion, the Minister of State responded that while some of the issues are in the control of the Government, others are in the control of other bodies such as local authorities. We need local and national government to work together to bring about the solutions that may be required. The Government must then show leadership on this matter with some urgency.

Several speakers referred to the National Consumer Agency. Its work in carrying out grocery price surveys has been useful in highlighting the issues and in encouraging shoppers to spread their shopping basket across several stores and give some of their grocery spend to the cost-cutting stores such as Aldi and Lidl. We must give credit where it is due in this regard. The effect has been to drive price competition in the grocery trade, with the result that prices have come down.

However, from conversations I have had with suppliers to the grocery trade in my constituency of Dublin North, it seems some vegetable growers are being pressed to take lower prices for their produce to offset any margin loss as a result of price reductions. This is unacceptable. Irish suppliers must not be put out of business to preserve the margins of the British retail giants.

Although the Labour Party motion condemns the Government for lack of action on this issue, something about which Members on the Government side may be sensitive, our call for a shoppers task force, as explained by my colleagues, is reasonable, innovative and deserving of support from all Members. I was disappointed to hear Senator Quinn describe it as a quango. That is not what is intended. We are not proposing the establishment of a public body. Rather, what is envisaged is akin to the type of project team that might have been put together by Senator Quinn when he was in charge at Superquinn to examine certain issues. It is worth putting the task force together to provide a much needed focus on this important matter. The Forfás report commissioned by the Tánaiste and Minister for Enterprise, Trade and Employment, when it is finally delivered, might be the first item on its agenda. I commend the motion to the House and thank speakers on all sides for their contributions.

Amendment put.

The Seanad divided: Tá, 26; Níl, 16.

Tá

• Boyle, Dan.
• Brady, Martin.
• Butler, Larry.
• Callanan, Peter.
• Carty, John.
• Cassidy, Donie.
• Corrigan, Maria.
• Daly, Mark.
• Ellis, John.
• Feeney, Geraldine.
• Glynn, Camillus.
• Keaveney, Cecilia.
• Leyden, Terry.
• MacSharry, Marc.
• McDonald, Lisa.
• Ó Domhnaill, Brian.
• Ó Murchú, Labhrás.
• O’Brien, Francis.
• O’Donovan, Denis.
• O’Malley, Fiona.
• O’Sullivan, Ned.
• Ormonde, Ann.
• Phelan, Kieran.
• Quinn, Feargal.
• Walsh, Jim.
• Wilson, Diarmuid.

Níl

• Bacik, Ivana.
• Bradford, Paul.
• Burke, Paddy.
• Buttimer, Jerry.
• Coffey, Paudie.
• Coghlan, Paul.
• Cummins, Maurice.
• Hannigan, Dominic.
• Healy Eames, Fidelma.
• Mullen, Rónán.
• O’Reilly, Joe.
• O’Toole, Joe.
• Phelan, John Paul.
• Prendergast, Phil.
• Ryan, Brendan.
• Twomey, Liam.

Tellers: Tá, Senators Camillus Glynn and Diarmuid Wilson; Níl, Senators Dominic Hannigan and Brendan Ryan.

Amendment declared carried.

Motion, as amended, put and declared carried.

An Cathaoirleach

When is it proposed to sit again?

Senator Donie Cassidy

Ag 10.30 maidin amárach.