Indeed. I share the Chairman's desire for them. I will go through the report with the committee and point out the places at which it conceded that point. Consumers in Ireland are feeling the pain of higher prices across all sectors. When one investigates deeper, it is clear that we have become the highest priced country in the European Union in terms of food and that our food price inflation, relative to other countries in Europe, sticks out as an anomaly. The Competition Authority's new data show it is groceries order items rather than non-groceries order items that have been driving this higher inflation.
The Central Statistics Office, when it appeared before this committee on 31 August 2005, validated entirely the Competition Authority's data, despite misrepresentation by vested interests. Ultimately, even the vested interests' myths about predatory pricing agree that the effect of removing the groceries order would be to lead to lower prices. I do not believe there is any doubt that this would lead to lower prices. The question revolves around the extent to which it would do so and whether it would have a significant effect, that would be important in terms of policy consideration, or whether that effect would be small or insignificant. What our data have done is not just prove that these groceries order prices are driving higher food price inflation, rather it has enabled us to quantify and give an indication of the volume. Given that we spend €6 billion per year on food, the figure is very large.
This is a hidden tax on consumers. It is collected by RGDATA and IBEC members. No matter what way one parses the data or makes assumptions about starting data on including food and household necessities or excluding alcohol, the figure comes out as hundreds of millions of euro. This is because we spend so much money on food. What is even worse is that this is a regressive tax levied by shopkeepers and suppliers because it takes a higher proportion from the poorest and lowest income groups in society. Removing the groceries order would be the equivalent of giving the lowest 10% between one and two extra weeks' income each year.
In contrast to the authority's transparent approach in putting all of its data, assumptions and sources into the public domain, the numbers and figures given by the vested interests in this debate simply do not stack up. They have relied on a series of myths that they have constantly repeated like a mantra until people have almost accepted them as being true. However, nobody has questioned their sources. There are four of these myths, namely, that predatory pricing will happen, that costs are to blame for high prices, that we will see the advent of ghost town Britain and that suppliers are threatened. These four myths have one point in common, which is that there is not one shred of evidence behind any of them.
I will deal with predatory pricing first. The Competition Act 2002 is the right ban on below cost selling. The groceries order is not a ban on below cost selling but a ban on selling below the invoice price. It is not even what it says on the can. However, not one shred of evidence has been produced from the United Kingdom or anywhere else to show that intense competition has led to prices increasing and people being driven out of the market. It is easy for competitors to complain about the low prices of their rivals. They do it all the time. We routinely receive complaints about predatory pricing because other people are offering consumers a better deal. When we examine matters, what we discover, for the most part, is that this is just healthy competition. People always like to complain about their competitors selling at lower prices. We recently received a complaint from people about a pharmacy that had opened next door to them. They asked whether regulations could shut that shop down because two shops being in the area was confusing consumers. It is much easier for people to complain about lower prices but this is healthy competition. The fact is that Northern Irish and UK consumers have had permanently lower prices from higher competition. The prices have not gone back up.
Costs are a lame excuse. It is always those protected from competition that plead costs. Companies that operate in highly competitive markets do not do so. Aer Lingus pleaded high costs when it was faced with real competition. When it had to compete in the marketplace, knowing the taxpayer would not provide another tranche of State aid, it managed to reduce costs. It effected a remarkable transformation, which nobody could have predicted four years ago. The idea that high costs explain this matter must be challenged. Wages account for between half and two thirds of convenience store costs. High wage rates are not the same as wage costs because one must take account of productivity. Ireland wants to be a high wage, high productivity economy. Therefore, we cannot listen to people who complain that wages have gone up but who ignore productivity increases.
There have been productivity gains in the retail and distribution sectors. Real farm gate prices, a major cost for retailers about which we do not hear, have gone down. Telecom costs have also diminished. Therefore, not everything is increasing in cost. There are many positive pictures in the Irish economy which are ignored in this debate. Other sectors are not complaining about price and are passing through international price reductions.
The association representing distributors, such as Musgraves, and shopkeepers, RGDATA, has repeatedly claimed that 70% of UK villages have no shops. The employers' body, IBEC, made similar claims and these have been repeated so often that people believe them to be true. No reference has been produced to indicate the source of this data. The Competition Authority has searched for data supporting this claim at the Office of Fair Trading in London and at other places. It has found no data to support this claim and nothing has been put in the public domain. We have found a report by the Countryside Agency, concerning England rather than the United Kingdom. It paints a picture of rural households that are well served by grocery shops. The only evidence we can find supports the opposite of what is claimed.
I suggest that comparisons with the United Kingdom are unlikely to be meaningful. We have very different demographics, different transport and a different sense of community. Irish consumers are different, as Tesco discovered when trying to sell us spam and mashed potatoes. Our preferences are different to those of UK consumers and our retail environment is going to be different.
The fourth myth is that the abolition of the groceries order would wreak destruction and job losses on suppliers in the Irish food processing sector. The major threat is from international competition rather than domestic competition. We are part of an international trading community and a European trading community. We cannot opt our food processing sector out of it and we no longer have the option of giving State aid to companies that find it difficult in the international trading environment.
International competition is a serious long-term threat about which we cannot be complacent. Strong domestic competition is recognised as the most important ingredient to prepare a domestic sector to face international competition. We saw an example of this with Aer Lingus, which was protected from competition for many years. Four years ago it was forced to compete and it is now better placed to face challenges or a negative shock than almost any state owned airline in Europe.
The same cannot be said of our food processing industry. When the enterprise strategy group examined enterprise policy, it singled out this sector as one with low growth, low productivity growth and a lack of customer focus. We have a serious problem in our food-processing sector and while the comfortable thing to do would be to cushion it rather than lance the boil, there is a risk that this will delay a serious and important decision for the Irish economy. This is a matter about which we cannot afford to be complacent.
These four myths are little more than a smokescreen to hide the truth that the abolition of the groceries order would benefit every Irish household to the tune of hundreds of millions of euro each year. It is important that people listening to these myths know that no evidence has been produced to support them.
There has been some discussion on amending the groceries order. I am happy to take questions on this but it poses difficulties with regard to wording a specific ban on below cost selling in this sector and compliance with this ban. My major concern is that if one changes the order to allow shops to pass on off-invoice discounts, apart from the difficulties of enforcement and compliance, companies would take a long time to understand the new environment. The benefits to consumers probably would not arrive for two to three years, until the companies got used to the new regulatory environment, and these might be less than the benefits of removing the groceries order completely. If we think it is an important issue to deal with, that delay would be a concern.
We quantified the cost of the groceries order to consumers for the first time and showed that it is in the order of hundreds of millions of euro, which is hundreds of euro for each household each year. It is important that policy is based on sound and transparent data and I am happy to place that information in the public domain. We can choose to keep the groceries order, high prices for consumers and please the powerful vested interests of employers and shopkeepers who collect this tax on consumers.
The Competition Authority is the independent public agency set up by the Oireachtas to examine these issues and it is pro consumers in this debate. It is supported in this by a 1991 study by the Fair Trade Commission; the competition and mergers review group established by the former Minister for Enterprise and Employment, Deputy Richard Bruton, which reported in 2000; the OECD, an international organisation invited by the Government to examine competition and regulatory reform in 2001; the National Competitiveness Council; the Consumers Association of Ireland; the Consumer Strategy Group; and the National Consumer Agency. More than 2,500 people sent nappies to the Minister for Enterprise, Trade and Employment, 800,000 people watched Mr. Eddie Hobbs and many people telephoned chat shows, all of which demonstrates that we represent a substantial consumer view that has always been silent in policy.
