I move:
That Dáil Éireann, aware of the extent to which the major price increases in food items have caused grave hardship to the most disadvantaged sections of the community, calls on the Government to restore and increase price subsidies on certain food items and furthermore gravely concerned about the current "price war" between certain retailers in the grocery retailing trade and the prospect of bankruptcies, take-overs and uneployment in the Irish retailing sector with the consequence of higher retail prices imposed on the consumer, calls on the Minister for Industry, Commerce and Tourism to make an Order to prevent the distortion of competition under present practices and to prohibit the limitations of offers at retail level.
This motion is in two parts. It calls for the reintroduction of food subsidies and for the prohibition by the Government of below-cost selling.
As most Members will recall, it has been 12 months since this party tabled another motion for Private Members' Business on the question of price increases as they affect the weakest sections of the community. In that motion of February, 1980, we stressed the inflationary effect which the part abolition of food subsidies had on price increases and we make no apology for reiterating this fundamental issue in the debate this evening.
However, on this occasion we are much closer to a general election. While this party have no intention of competing in a general Dutch auction of election promises with Fianna Fáil we give an unequivocal assurance that any alternative administration will have a firm proposal before it to extend food subsidies on such basic items as bread and milk.
In January 1979 we tabled a motion also for Private Members' Business deploring the decision of the Government at that time to phase out the food subsidies, a decision which had the effect then of increasing the price of butter by 8p per pound, of increasing the price of milk by 2p per pint and of increasing the price of flour by 3p per kilo. At that time we pointed out that that policy would have an adverse inflationary impact on the living standards of the poor, the elderly, the unemployed, the underpriviliged and of large families. In January 1979 the annual rate of inflation was only 7.6 per cent. Today it is more than double that figure. We have tabled this motion so that public opinion generally and various social organisations outside this House such as the trade union movement and, above all, that large body of marginal Deputies — notably the Fianna Fáil backbenchers — should be under no illusion as to the need to impress on the Government the necessity for ending this regressive policy of gradually eliminating remaining food subsidies by reason of inflation.
Whatever views one might hold about the success or otherwise of the Coalition Government, we did take several important counter-inflation initiatives, particularly in respect of food. We removed VAT from food in the 1975 budget and we introduced what were then substantial food subsidies on flour, bread, butter, milk and town gas. The net effect of that action was a reduction in the consumer price index of 4 per cent. We extended these subsidies in 1976 and in 1977 and in that way we took what in retrospect can be regarded only as unprecedented steps to maintain and to improve the living standards of the unemployed, the elderly and other vunerable groups in our society.
At that time the inflation rate was relatively high but despite this the introduction of these subsidies had a considerable impact on the CPI. Today we have an inflation rate of 17 per cent and this could be higher by the end of the year. Our unemployment figure is at the high level of 125,000. These figures alone would warrant the approach we are advocating. But since we raised this matter last in the House other evidence has become available to us. For example, the National Prices Commission report which was published in June 1980 contains a section headed, "Grocery Surveys and Typical Consumption Patterns". This section analyses the six major food items ranked in order of importance for families of lowest gross income, for the head of household out of work and for the average of all household. It is wise to point out that for the lowest income person of an expenditure in 1980 of about £8 per week on important food items there was included £2.10 on bread, milk and butter. Therefore, it can be seen that for a person of quite low income the proportion of expenditure on these three items is substantial. Those of us who pay 76p for a pint in a lounge bar will realise how far removed such expenditure is from the type of expenditure I have been instancing in terms of food.
If we take another category from the National Prices Commission report, for the head of household out of work, of a similar expenditure of £23.50 per week on important food items £7.39 was spent on bread, milk and butter. The price of milk has gone up since then. For the average for all households with an expenditure of £23 per week on those items some £5.63p was spent on bread, milk and butter. Even the most casual perusal of the data in the commission's report makes it clear that the deprived and the income disadvantaged spend relatively more on these three basic commodities. Hence, the logic and justice inherent in our motion.
Our motion is in two parts, the first of which relates to food subsidies. It is a crying shame that when the Government can find so much money for so many admittedly important aspects of consumer expenditure but expenditure which generally pales into relative unimportance compared with the prices of basic food commodities, total inattention is paid to the need to introduce and maintain basic food subsidies for those in greatest need.
I now want to deal with the second part of our motion relating to the present current retail price war, as it is called, in the supermarkets and shops. I suggest there is urgent need for the Government to take decisive action in this area. There has been considerable structural change in the grocery trade in the past 25 years. The major elements have been a continuous decline in the number of small grocers and the concomitant decline in the number of wholesalers. There has been a sharp increase in the importance of just a few national supermarkets or multiples. We have had, of course, the infusion of the multinational grocery chains here. In addition, we have had the bonding together of numerous independent grocers into voluntary chains such as Mace and Spar which also organise much of the new cash and carry wholesale business.
In 1971 it was estimated that the multiples accounted for about half of the Dublin trade and about 30 per cent in the country as a whole. Estimates for 1978-79 showed that the multiples had increased their share of the Dublin market to about 70 per cent — that is the general assumption — and in the country as a whole their market is now said to be about 40 per cent. The multiples comprise only five companies. We have Tesco and Quinnsworth both of which are managed and owned outside Ireland with very large multinational financial reserves. We have Dunnes, Superquinn and Williams. The latter is the only public company and its accounts have shown losses for the last two years and I think the first half year accounts this year or some recent accounts showed further losses. We have also the voluntary chains, AVG Group and the independents, RGDATA. In the past two years they formed a joint trade association named the Irish Association of Distributive Trades. This group has become quite powerful and influential and I think the Minister and my colleague, Deputy O'Toole, would concede that this group is developing a fairly strong sense of political muscle and intends to exercise it in a very determined way. Therefore the situation is that the grocery retailing trade is dominated by the big five. We know they are working on fairly tight margins generally. I understand their margins may be even narrower than those in Northern Ireland or the UK. At present they are competing fiercely with one another and the remainder of the trade is controlled by the IADT group.
I do not know, from anything I have read or from people I have spoken to whenever I have gone abroad as a member of the Economic Affairs Committee of the Council of Europe, of any country where concentration in grocery retailing is as high as in Ireland with a market dominated by so few firms. I suggest that the impact of this structure on the food manufacturers and suppliers is very great. We know only too well that the food manufacturing sector is not terribly strong. It comprises roughly 60 individual firms employing about 45,000 people. A number of them are British subsidiaries and in several cases already there has been a loss of employment in those firms with the decision to cease production in Ireland and to import goods direct from Britain. Most of these firms serve only a few customers and even if they lose just one supermarket account even for a couple of weeks some of them face closure. The supermarkets have enormous buying power and can force suppliers to reduce prices with the threat of taking away their account. This happens very much during a price war.
If the suppliers do what the supermarkets ask, the counter balancing sector, the IADT group and the other supermarkets naturally demand similar price reductions, thus forcing the suppliers into a loss-making situation. This House must look very calmly and dispassionately at the situation. Nothing is easier in a price war than to whip up emotive reaction and in the process the extent to which the State might be in a position to intervene could become extremely difficult.
In 1978 there was a price war among the supermarkets. We know that the Restrictive Practices Commission and the Examiner — and I am being perhaps a bit harsh, but correct in saying this — made a rather confused situation somewhat worse on that occasion. Following this the Restrictive Practices Commission held a public inquiry into below cost selling in the grocery trade in December 1979 and the Minister for Industry, Commerce and Tourism, — and here I want to be harsh on him — promised quick action within six months. The publication of the RPC report and action by the Minister, if I recall rightly, were expected in October and then promised before Christmas. Then, three or four weeks ago they were promised within a month and in this motion tonight they are promised shortly. There is a limit to the extent to which vocabulary can encompass promises. I want to bring to the attention of the House the fact that the report has not yet been published and the action by the Minister is not yet entered. This is inexcusable.
On another aspect of the current situation, the present legislative position is that advertising goods for sale below cost is illegal, but selling goods below cost is legal. The manufacturers' suppliers are permitted to withhold supply from a retailer who is selling below cost. However, as I explained earlier, this does so much harm to the income of the suppliers that they could not keep it up for very long. I gather that the CII managed to get concerted action from all the major suppliers to withhold supply from the multiples who are selling below cost. As we well know, it is very difficult to maintain a united front because of possible loss of profits. Also, the income of individual suppliers without adequate reserves can dwindle.
At the moment, the big five are all using general advertising but are shedding goods in many instances on selected items below cost. This affects the small voluntary chains and especially the small independents who must pay much higher prices for their goods than the supermarkets and, therefore, become uncompetitive. It is quite clear that employment is being lost in the distributive sector at present and there are a number of reasons for this. There is, of course, the recession. We have the long running secular decline of small independent shops, caused partly by the rural-urban population shift and by the greater mobility of shoppers, the new housing estates, the new planning permissions and, of course, the supermarket price war. I want to stress that possibly a loss of employment is occurring in the food processing industry in the agricultural sector, in this situation. Any sizeable loss by firms in food processing will have a serious impact on the agricultural sector. There is an urgent need for action by the Minister, and an urgent need for the Cabinet to consider the matter. I do not know what internal policy decisions are being taken by the Department but, by reading between the lines, one gets the impression that the Department's view in the matter is to take a low profile. This is quite evident by the non-publication of the RPC's report and absence of any resulting order by the Minister.
The price war has gone on long enough. We have waited far too long for action from the Minister in this area. Unless he takes action some of the Irish supermarkets may be forced into a loss-making situation and will just not survive. Secondly, quite a large number of the smaller individuals will certainly go to the wall and suffer even more grievous harm. Thirdly, the same could happen to some of the firms in the food processing industry. The total employment effect, unless the Government take action, could be extremely severe.
It has been argued strongly that, if all the multi-nationals are at one another's throats and the supermarkets are tearing the guts out of one another on the prices front, this is great for the consumer. I want to stress that the benefits to the public of the multiples having a price war are exceptionally short-termed; they are purely ephemeral. In the long run the public will be far worse off. In the first instance, below cost selling is related to an extremely small range of items. They are important items, but confined to a particular group. The price margins on other commodities are jacked up to pay for the price war on other items. We must bear in mind, in respect of a price war, that the consumer does not benefit at all.
Of greater importance is that a price war causes so much instability in the distribution sector and the supplying industries that it causes bankruptcies, take-overs and a chaos of structural change internally in the industry. We now know, for example, that Tesco several weeks ago entered into this price war and once the big multi-nationals enter, there is an automatic substitution of imported products for Irish products. The imported products are brought in to this country and dumped in the context of a price war. This could result in firms like Williams, who have had two years of running losses, and Superquinn — I am not naming firms in any derogatory sense, but because I am worried — being literally taken over.
If the price war is allowed to continue, it could result in these firms being either taken over or going bankrupt and the Irish retailing scene will be dominated by foreign owned multinationals and multiples. That is a worrying situation. If the present price war continues, within the next six months', the big five could become the big three — Williams and Superquinn will be gone for their tea. I have not mentioned Dunnes because, in my opinion, they have sufficient financial strength to survive but they would still have problems.
It would also mean that there would be a demise of a substantial part of the food processing industry internally, with the result that grocery retailing would be dominated by two multinational firms who would probably rationalise, reduce the number of their branches and retail mainly imported products. That is a serious situation. The Minister should take immediate action to ban the below cost selling syndrome which is at present in operation. I know he intends taking action some time in the future but it should not be beyond the ability of the Department to take action now. What is needed is to put a lower limit on the present damaging price cutting. This would not prevent price competition. I am as much in favour of price competition as the next person and I fully believe consumers should get the best possible deal but, in the long run, price wars benefit nobody; suppliers will go out of business, Irish supermarkets and small traders will be crucified and the scene will be dominated by Tesco, Quinnsworth and one or two other firms.
The Minister should introduce an order to ban below cost selling. He should try to do something about the limitation of special offers at retail level. At present a retailer can make a special cheap offer where his customers buy two or three packets of a certain commodity cheaply. A lot of that would stop if there was a limitation on sales to customers. At present enterprising people can buy six dozen or the dozen items in these special offers.
There is an urgency to control and prohibit below cost selling. I suggest that there are plenty of examples of competition in prices in the EEC and even Australia. In the United States, the bastion of free enterprise, if one were to indulge in below cost selling, one would land oneself in the courts. Therefore, I ask the Minister to make an immediate statement on this question and to take immediate action.
A further major political issue facing the Minister is the extent to which the multinational retailing groups, particularly Tesco or the group owned by Westons, should be permitted to set up shop in any part of the country without restriction. In 1966 there were about 17,000 small independent retailers throughout the country; today there are 7,000 or 8,000. The number of these retailers has been halved largely because of the development of the multinational and domestic supermarkets.
At present there are current major local authority planning and development disputes in, for example, Mallow and Galway, highlighting this serious problem. I appreciate that this is a very complex and difficult problem. There is no way of reconciling the demands of consumers who want a supermarket in their own estate and large shopping centre facilities, and the demands of local established traders who want to protect their interests, which is understandable. The Minister is caught between them. He should make a greater effort to try to control the situation under the mergers and monopolies legislation. It is possible to influence this situation.
The Minister should ask his colleague, the Minister for the Environment to urge local authorities to include in their draft development plans revised specific criteria relating to the intensification of retail trading in their areas of jurisdiction. There are many examples in Europe — in France, Italy and Germany — where that legislative approach operates quite effectively. In those countries it is not very easy to set up shop, buy a supermarket and take over. The rules of competition, location and development are quite complex and much more restrictive than in this country. Therefore, it should be possible for the Minister to take action in this area.
I do not want to be unduly harsh on the Department but the culture and philosophy of this Department are that if a problem is causing trouble at first they do not do anything about it until the hullaballoo stops and when the fuss is over they might do something about it. In my view the fuss about the price war and multinational operations in the retailing sector is becoming a major political issue which will not go away. The Minister, Deputy O'Malley, has great insensitivity. He bristles at this situation and is not prepared to do much about it. He gets people's backs up. I have had representations about his approach. They were so bad that I was taken aback. I am normally a moderate and I am a supporter of many of the industrial development attitudes of the Minister and the total honesty of the man in many areas, but I urge him to shed his bristling insensitivity in this area, publish the report, take action — he will not satisfy everybody — make the order prohibiting below cost selling then meet the retail trade, consult with the major groupings in the trade — the people in the supermarkets whose interests are very considerable — and try to assist the parties in this area. This is possible.
I make that plea because I am gravely concerned about the 45,000 jobs in the Irish food industry, a number of which are concerned with exports. Up to 20,000 jobs could go because we must have some domestic selling base in order to have effective exports and profitable outlets. I am also concerned about a large number of jobs in the retail and distributive areas. Ireland could become just another relatively small market conurbation for a large retailing multinational firm importing between 600 and 800 items here, thus causing considerable suffering to domestic industries.
While I appreciate that there are no easy political solutions to this, more could be done than at present. I would ask the Minister of State to convey our views directly to the Minister and the Government.
