Dáil Éireann díospóireacht -
Tuesday, 9 Dec 2003

Vol. 576 No. 5

Priority Questions. - Food Industry.

Gerard Murphy

Ceist:

61 Mr. Murphy asked the Tánaiste and Minister for Enterprise, Trade and Employment if her attention has been drawn to the recent report on food production and food prices published jointly by IBEC and RGDATA; if her attention has further been drawn to the findings of that report that high food prices are a factor of high business costs here, including insurance, energy, communications, professional fees and labour costs; her views on the fact that the Government has failed to tackle those costs and has added to the high cost of doing business here; the steps she is taking to reduce such costs; and if she will make a statement on the matter. [30058/03]

Ms Harney:

I am aware of the findings of the recently published analysis of the Irish food industry, entitled Food Production and Food Prices in Ireland, to which the Deputy refers. The report points to increases in business operating costs in the food manufacturing, distribution and retail sectors as having contributed significantly to food price inflation in Ireland since 1990. Notable among the business operating costs mentioned in the report are payroll, rent and property, transportation, insurance and professional fees. While the report relates primarily to the Irish food industry, the issues it raises extend to the whole national competitiveness agenda.

The National Competitiveness Council stated in both its recently published reports that Ireland's immediate priority must be to slow the growth of prices and costs. The Government is committed to enhancing Ireland's competitiveness status, and an essential component of that is to provide a business environment with low inflation. Low inflation will stabilise firms' costs and provide them with a solid competitive business environment from which they can successfully compete in both domestic and international markets. Ireland's inflation rate fell to 2.3% during October. However, we cannot afford to be complacent. We will continue to reduce our inflation rate, bringing it into line with our EU partners and other competitors. In that context, the 2004 budget demonstrated that keeping inflation low was a key priority.

The NCC presented us last week with a set of key priority areas on which we must monitor progress. At its meeting on 25 November, the Government discussed both reports of the National Competitiveness Council. It was agreed at that meeting that the Government should consider Ireland's competitiveness status every six months. That would also include discussing the recommendations of both National Competitiveness Council reports. The Government also agreed to set up a monitoring process to consider and track progress on the implementation of the council's recommendations.

Mr. Murphy:

I note that the Taoiseach has quite clearly stated that there is to be no change in the Restrictive Practices (Groceries) Order 1987 or the retail planning guidelines. On the broader issue, would the Tánaiste ask or instruct the Competition Authority to carry out a study to ascertain the wholesale and retail margins in all aspects of the food industry? It is very important now that the whole issue be transparent, since accusations are flying in all directions. Certain sectors are being blamed wrongly for high prices.

Ms Harney:

We carry out many official studies and analyses, and if I thought that more study or analysis would solve our problems, I would be very keen on that. However, ultimately we must enhance competition. As the report suggests, in sectors subject to international competition, prices are much lower than in those sectors that are sheltered here. Among the factors that have been identified as contributing to the higher operating costs is the minimum wage, yet no one is suggesting that we return to €4 an hour. Shortly we will move to €7 an hour. The high cost of insurance is also clearly a factor, and we are tackling that very effectively. A third issue is infrastructure, particularly transport, which is having an impact on businesses operating from this island.

Ultimately, having said all that, the thing that will drive down prices for business and regular consumers will be as much competition as possible, and we should embrace competition in all its aspects – not just the rhetoric but the practice. As a small country, we are sometimes not that good at doing so, as we can see from the views expressed by various lobby groups. I understand that the Taoiseach said last week that if we removed the Restrictive Practices (Groceries) Order 1987, it would substantially reduce prices.

Mr. Hogan:

He said more than that.

Ms Harney:

I read the record.

An Leas-Cheann Comhairle:

Order. Deputy Murphy, please.

Ms Harney:

Is the Deputy asking me to remove the Restrictive Practices (Groceries) Order 1987?

Mr. Hogan:

Absolutely not. I was asking for the Tánaiste's views.

Mr. Murphy:

Independent traders seem to have been taking a hit in this regard. The figures show that their net profit is just 2.13%. In the same context, they have had to deal with inflationary pressures in that period, with light, heat and power going up 36%, insurance 70%, and transport and motor expenses 27.9%. The large increase in foodstuff prices has more to do with the Government's failure to control inflation and stealth taxes in the area. For that reason, a request that the Competition Authority examine the issue, including how the multiples and independent traders operate, is essential so we may see clearly, once and for all, where the differences are.

Ms Harney:

As I said in response to the last question, the rapid growth of the discount stores Aldi and Lidl in the Republic shows that there is a place for those charging lower prices. One of the greatest acts of consumerism that I saw last week in the newspaper was the lobby in one of the Meath towns for planning permission to be granted to one such store. If I recall correctly, I read that 2,000 signatures had been collected. That is highly unusual. It is probably the most pro-consumer lobby I have seen emerge anywhere. We can have studies and analysis but in Northern Ireland both these stores charge less for their products and are still profitable. Therefore, when competition is enhanced, everyone benefits.

The most recent advertising campaign produced by the Director of Consumer Affairs, Ms Carmel Foley, is proving very successful. There has been much positive anecdotal feedback, although we do not yet have hard data. People are shopping around and are more vigilant and sensitive to the prices which are being charged. I hope retailers across all sectors will respond to that.

Mr. Hogan:

I can refer the Tánaiste to the website.

Ms Harney:

Will the Deputy tell me what needs to be done?

Mr. Hogan:

The Tánaiste is in her job long enough to know. She has held the post for seven years.