I thank the Chairman and members of the committee for giving us the opportunity to come and discuss what I consider to be a very important subject. The main reason I want to address the committee is to outline the background to the introduction of the retail planning guidelines to counter an impression that they were cobbled together in order to protect small retailers. That is not the case. Many years of study went into the guidelines before they came into effect and I would like to bring the committee through the process.
The original planning guidelines were introduced by the Government in January 2001 following concerns about the impact of large-scale retail developments in out of town locations. The Government's concerns about this were largely drawn from experiences in other countries, notably the United Kingdom, where there had been an experience of hyper-markets and superstore developments. This largely happened during the Thatcher years between 1977 and 1990, during which time over 550 superstores were developed, mainly on greenfield sites in out of town centres and close to major roads. The planning system was unprepared for such an onslaught of development and while it may have led the major retailers to gain market share quite quickly, they did so at enormous expense to the social and economic fabric of society in the United Kingdom, so much so that by the mid-1990s almost half of the towns and villages in the United Kingdom did not have a shop, which remains the case today.
Part of the original motivation for permitting such a growth in out of town developments was a perceived desire to ease the traffic pressure in town centres. However, in retrospect, both in the United Kingdom and other countries, the authorities realised that policy was misguided and dangerous and resulted in many more problems than solutions. In particular, it resulted in a reduction of shopping opportunities for the less mobile, it undermined the viability and vitality of town centres and led to the destruction of valuable countryside. It also had a serious impact on employment, an important point. When we hear of large multinational operators talking about developing new large stores, they tend to major on the employment they will bring. However, the experience in the United Kingdom in the early 1990s is interesting in this regard because while 10,500 jobs were created by a catchment of 93 new superstores, nearly 25,000 were lost as a direct consequence. When I hear retailers saying they will create new jobs in a new outlet, I point out that, at the very least, that is displaced employment because the people who will work there are working in other retail outlets now. The UK experience showed that not only was it displaced employment but that the net effect was a reduction in employment by almost double figures.
Only after considerable damage had been done to the town centres did the UK Government act. In 1996 it introduced planning controls but by then the damage had been done and 42% of towns and villages did not have a shop. They are still trying to recover from that position today. This has not just happened in the United Kingdom. In France there was a rapid development of hyper-markets in the 1970s and 1980s and there are now large parts of France where there is no local shopping and where, even to get the most basic item, people must get into their car and drive to the shop. That is all very well if one has access to a car. However, if one does not, it leaves one in a difficult position.
The concern in Ireland was that some retailers had indicated they wished to develop superstores and hyper-market formats here and the Government was justifiably concerned from two major points of view. A lot of investment has been put into the infrastructure of the country to try to ease traffic congestion and there was a concern that if these types of developments were allowed, they would clog up the infrastructure and lead to added congestion. The investment was not put in place to ferry shoppers from one end of the country or city to the other. In this regard, the M50 is a good example. The Government was also concerned with urban renewal in the context of the dispersed population in Ireland. County Monaghan is the same size as greater Manchester but the population of the former is about 53,000, whereas that of the latter is about 2.4 million. We are dealing with different circumstances.
Up until the late 1990s, there was nothing to stop any retail operator opening such a large format store anywhere in the country. They had carte blanche and clearly indicated that their intent was to grow market share by developing these superstores, which are normally located outside town and city centres and adjacent to bypasses. The guidelines were introduced following the implementation of a planning directive in 1998 which capped the size of retail grocery stores at 3,000 square metres. That was introduced as an interim measure while people took the opportunity to examine the situation properly.
Following a process of selection, a two stage process was adopted which included having five sets of independent consultants examine the whole area. The first stage of the process was that a leading firm of planning consultants, Roger Kinman Partners, was appointed and prepared a comprehensive study for Government together with draft guidelines in association with Jonathan Blackwell and Associates, an Irish planning company. The experts submitted the study and draft guidelines to the then Department of the Environment and Local Government in April 1999. The committee may be interested to learn that in the course of their study, Kinman and Blackwell sought submissions from over 120 groups, including the Competition Authority, Lidl, the German discounter, B&Q and the Irish Planning Institute. They also carried out a detailed review of the experience in other countries such as the United Kingdom, France, Germany and Denmark. The draft guidelines were published by the Department for public consultation.
The second stage of the process involved a working group drawn from the Departments of the Environment and Local Government and Enterprise, Trade and Employment. The group referred the guidelines to a further set of experts to assess their impact on competition, innovation and consumer choice. These additional consultants included Goodbody economic consultants, Paddy Lyons, a former chairman of the Competition Authority and Brian Meehan and Associates, planning consultants. The group reviewed the guidelines in the context of competition within the Irish retail sector, the supply of products to consumers at lower prices and the effect on the cost of living, consumer choice and the supply base. In the light of what is being said in the media in regard to these large stores, this is an important point to bear in mind.
The study took into account a wide range of views and perspectives, including that offered by the Competition Authority and vetted the guidelines to assess their impact on competition and consumers. The group reported to the Government in November 2000. Having reviewed the draft guidelines, the Goodbody study approved the guidelines formally issued by the Minister for the Environment and Local Government in January 2001. It was important to outline that process in order that the integrity of the process for the introduction of the guidelines can be seen. It is also vital that the role of the Goodbody study into the impact of the guidelines on competition can be clearly appreciated. Those who claim the guidelines are anti-competitive ignore the fact that they were specifically vetted on those competition grounds and one of the people charged with doing so was a former chairman of the Competition Authority.
At the time they were introduced, the Minister indicated the guidelines should address all the complex planning issues. He said "the guidelines will ensure that the future development of the retail sector in Ireland will accord with the principles of sustainable development while at the same time facilitating a competitive retail sector which can only benefit the consumer." There is a misconception that Ireland is the only country with this type of planning policy. That is not true. The main difference is that the other countries which now have planning policies in the retail sector similar to this have introduced these after devastation has been wrought. We were lucky enough in Ireland to see what might happen and put something in place to prevent it. There are similar retail planning regimes in France, Portugal, Belgium, Spain, Greece, Italy, Germany, Austria, Switzerland, Denmark, the United Kingdom and Luxembourg.
Now we come to implementation of the guidelines, which we must remember were only introduced in January 2001. The idea was that the local authorities would implement their own retail strategies, meaning that they could for the first time have a strategic plan for retail development rather than allowing it to be developer-led, as had previously been the experience. Of the 37 councils, so far 19 have implemented the guidelines, five are in the process of implementation and 13 have yet to finalise their local studies. What has been the impact of the guidelines to date? It is too early to tell because only about half of the local authorities have actually implemented the guidelines. Many of us would have expected a review of the guidelines in 2006, when the usual four to five year development cycle has been completed. The initial indications however are that the guidelines have had an enormously positive impact for all the stakeholders involved, including consumers.
Since 2000 there has been an unprecedented level of retail development in the State. This is because the guidelines have introduced certainty to the planning process where there were formerly inconsistencies - local authorities' concerns about rates yield, for example, plagued by developer-led planning. These inconsistencies have been taken out of the equation. Since the guidelines were first suggested we have witnessed the rapid growth of the German discount stores Aldi and Lidl - 40 stores have opened in the past three years. Tesco has continued to expand up and down the country, as have Dunnes and Superquinn, and in our own independent sector, local retailers have continued to invest in new outlets and develop new shops in many city and town centres throughout the State. We have also witnessed the rapid roll-out of Internet shopping in many parts of the State, certainly in the grocery sector.
There is more choice in the market for consumers and greater competition in the sector. Food inflation is low, about half the rate of general inflation at just 2.2%, and there is a range of offerings and prices for all consumers. It is important to note that the level and scale of development has been balanced and sustainable - we have not just seen development in the areas close to Dublin but in many of the smaller cities and large towns. It is now the norm to bring the shops to the people rather than forcing shoppers to drive out of town if they have a car. That is a positive development because it means that everybody has access to shops whether they are mobile.
One of the reasons I am here is that there have been suggestions that certain large-scale operators wish the Government to amend those retail planning guidelines. They claim the guidelines are anti-competitive and a barrier to entry. IKEA, the Swedish furniture retailer, has stated it wants to establish a store of about 30,000 sq. m., which our planning rules do not allow. It is threatening to locate its store in Northern Ireland unless the rules are changed. Personally, I do not see how any commercial enterprise should be allowed to put a gun to the head of a sovereign Government and tell it how it should make its planning rules. It is important to note that IKEA has developed smaller formats in some countries such as Finland, Sweden and Australia because those countries had good planning policy and laws and did not want huge stores. IKEA has been able to adapt its retailing format to suit this. Its claims that it can only locate here with one huge store must be handled with extreme caution.
Many of the large format operators did make submissions to both sets of studies which formed an integral part of the preparation of the retail planning guidelines. The five sets of independent experts which I mentioned, having taken account of their perspectives, concluded in each case that proper planning and development militated against sanctioning such large stores. The large operators have never been satisfied with that finding.
It is often contended that larger stores mean more efficiencies and therefore lower prices for consumers. Again, that was one of the core issues addressed by Goodbody in its study for Government. The conclusion was that at areas larger than 2,000 sq. m., there can be no further economies of scale that affect costs and prices. If a store is larger than that the operators will benefit because the profits are larger, but that does not translate into lower prices for consumers. The report concerned is not old and its conclusions are still true today. I looked at it the other day to see the economic predictions of Goodbody at the time and in terms of growth rates it was quite precise. While large stores allow retailers to gain increased market share quickly and minimise the inconvenience and expense involved in this, they can quickly lead to the development of local monopolies in key areas.
All the studies in an Irish context, in addition to international experience, confirm that it is not possible to accommodate the ambitions of large store operators and at the same time maintain a healthy, vibrant and dynamic retail and town centre hierarchy. Experience since the introduction of the retail planning guidelines has shown that large-format operators such as Tesco and B&Q will adapt their trading formats to suit the planning regime that applies. They might not like to be forced to do so and it may well affect their profits per square metre, but they can still trade and offer competition, selection and choice for consumers. They should not be permitted to nudge the State into changing the retail planning guidelines ahead of time.
RGDATA believes the retail planning guidelines have had a largely positive impact. They were expertly and independently prepared and have played a crucial role in ensuring that we do not make the same planning mistakes that continue to blight other EU states, particularly our nearest neighbour. They have facilitated rapid retail development, as in the cases of the discount stores Aldi and Lidl, which have opened 40 stores in the past three years. This example shows that the guidelines have not acted as a barrier to entry. RGDATA also believes any review of the guidelines at this stage is premature, on the basis that only half of the local authorities have actually implemented them, and that we should be slow to amend this regime purely to cater for the operational preferences of certain large retail players.
