We provided an opening statement which I will briefly outline. Effectively, the Vintners Federation of Ireland represents publicans in the 25 counties outside of Dublin. Our members range from rural publicans to bigger outlets in cities such as Cork, Limerick, Galway, etc. Our remit is to represent members' interests in every area of activity to ensure the best possible trading and general environment for their businesses.
There have been many regulatory changes affecting the business in recent years. The introduction of the smoking ban, the removal of the groceries order, in particular, and the introduction of mandatory breath testing have all had a serious effect. Side by side with these, there has been the effect of changing lifestyles, people being — perhaps I should use the word "were" — time poor and cash rich, something that probably will change, leading to significant closures of public houses and the resulting impact, not just on those who own public houses but also on the community and the tourism industry. One of the key issues affecting trade in recent years has been the removal of the groceries order in 2006. At the time it was pointed out by the federation that it would lead to significant irresponsible marketing and selling of alcohol in the supermarket trade.
The reason a licence is required to sell alcohol is that alcohol is a behaviour and mood changing product. It cannot be treated like any other product such as cornflakes, bananas, biscuits or oranges, but, unfortunately, that is what has happened with the multiples in recent years which have used it as bait to attract customers. Once customers are in the store, they fleece them in other areas. It is public knowledge that in 2007 a particular UK multiple admitted that it upped the price of basic foodstuffs to compensate for the lower price it was charging for alcohol in its UK stores. No doubt the same type of practice is followed here. There has been serious undercutting and below-cost selling of the product. This is compensated for by putting the price of other products up.
Allied to this is the marketing of the product. It is not unusual to see "buy one, get one free" on six packs and we have seen "buy 24, get 24 free". That is highly irresponsible marketing of the type of product we are dealing with. While there are exceptions to every rule, we see the pub as, by and large, a controlled environment. The publican generally knows his or her customer and treats him or her accordingly. In a major multiple there may be young, inexperienced people on the tills and they can be intimidated. We have plenty of evidence in certain areas of three or four people standing at the till and a young individual behind the till. A young girl of 18 or 19 can be quite intimidated by three or four guys who might be younger than 18 buying the product.
We recognise that this is not an easy problem to solve. There is a level of predatory pricing and cross-subsidisation of products. In our 2008 submission to the advisory body to the Minister for Justice, Equality and Law Reform, we proposed that a minimum price for alcohol based on the alcoholic content of the product be introduced. We put forward some suggestions on the Canadian model and it is gaining quite a foothold in the UK. There are moves in Scotland and England to introduce a minimum price. There was a detailed offering on how that might be implemented and it bears looking at again.
There has been a significant revenue loss to the Exchequer with the shift of product from the on trade, as we call the pub business, to the off trade. Economists reckon that for every 10% shift there is an approximate annual loss in VAT to the Exchequer of €35 million. If one takes it that there has been close to a 30% shift over the past six years from the on trade to the off trade, that is a revenue loss of approximately €100 million per year in VAT.
The ratio of jobs in the on trade to the off trade is approximately six to one. There have been considerable job losses. There have been approximately 1,500 pub closures in the past five years. On average we are talking about five to six employment positions in each of those, so that is a loss of approximately 6,000 to 8,000 jobs as a minimum over those years in the shift from the on trade to the off trade. Our business generates substantial Exchequer input. In 2008 the general drinks industry contributed more than €2 billion in VAT and excise duty to State coffers and there was approximately €1.25 billion in exports, all of which is very significant.
Last Christmas the supermarkets were selling product considerably cheaper than our members could buy it from wholesalers. Supermarkets were selling a bottle of vodka between €6 and €8 cheaper than our members could buy it from the wholesalers. That is a very significant issue. When one puts together the revenue and job losses it has a serious impact on the Exchequer.
In the opening statement I supplied I made a note on a separate issue. At the end of last year publicans faced very significant increases. They had already taken on board two increases from major suppliers during the year, one in March and one in September, and we anticipate another this March. This is against the background of very significantly increased rates, particularly water rates, and entertainment costs. People generally do not know that the cost of Sky, Setanta Sports, IMRO and PPI to a publican averages out to approximately €700 to €800 per month and can be as high as €1,100. People think publicans have Sky on the same basis as domestic users. If a publican wants a second Sky box in the pub the cost doubles.
Against the background of all those increases hitting publicans and the noises being made at the time that maximum prices might be introduced, the publicans decided to put a ceiling on prices for 12 months while making it very clear that people were free to compete below those prices. Because we did that we appear to have fallen seriously foul of the Competition Authority, which seems to think we were trying to maintain prices at a certain level and that it was anti-competitive. We are scratching our heads as to whether we were working for or against the consumer in that respect.
There is a serious problem with how alcohol is priced and marketed. There are options open to the Minister regarding implementation of measures in the 2008 Act that have not been commenced. We urge that the measures that centre around segregation, marketing and promotion should be examined as a matter or urgency and implemented.