Forfás Consumer Pricing Report 2003: Statements.

It should be noted that the Forfás report studied the inflation figures to the end of the year in January 2003 when the annual inflation rate was 4.8%. The latest figures from the Central Statistics Office for May show a sharp fall in inflation to 3.7%, down from 4.3% in April. Notwithstanding this welcome downward trend, the Taoiseach and the Tánaiste have clearly indicated that the Government's target is to reduce inflation to 2%. An anti-inflation group, chaired by the Department of the Taoiseach, has been convened under the new national agreement, Sustaining Progress, and will draw up and monitor progress on a detailed action plan on inflation. One of my officials is actively participating in this group which has met three times and is due to meet shortly.

The Government is committed to bringing about more competitive pricing throughout the economy by facilitating increased competition. To this end, the powers of the Competition Authority to investigate price fixing and other anti-competitive practices have been strengthened. The authority is conducting extensive examinations of the insurance and banking industries as well as many professional services, including the legal and medical professions.

For competition to be effective, I am aware that consumers must be given sufficient information to enable them to compare prices. In this regard, new price display regulations came into operation this spring, namely, the European Communities (Requirement to Indicate Product Prices) Regulations 2002, SI 639 of 2002, which clarify and underline the obligations of retailers and other traders to display legible and transparent information on prices to consumers.

I also see a key role for the consumer lobby in Ireland. I urge consumers to raise their concerns regarding prices directly with retailers and suppliers and to be prepared to be assertive in shopping elsewhere if they are unhappy with the prices they pay. To assist the consumer lobby, as provided for in the 2001 budget, my Department oversees payment of an Exchequer grant to the Consumers Association of Ireland of €63,000 per annum, the purpose of which is to enhance the capacity of the association to act as a consumer watchdog and advisory body and represent consumers.

Commentators have referred to Government charges constituting a large portion of the increases identified in the report. Some say such increases amounted to 50% of the total increase. Government charges did not account for more than 50% of inflation in the past year. As the Forfás report clearly states, the Government influenced category includes excisable products where price increases have occurred without an increase in excise duties. A significant proportion of the contribution was due to increased tobacco duties, which were more than justified.

I accept that inflation is a problem and that all businesses are affected by inflationary pressures. The disequilibrium between our inflation level and levels elsewhere in Europe has the potential to undermine our internationally traded sectors, in particular, and put at risk employment and growth. I, therefore, welcome the sharp decrease in annual inflation to 3.7% in May.

The key to reducing inflation is to improve competitiveness. The Government is already taking measures to improve our competitiveness in key areas. These include strengthening competition throughout the economy, implementing specific measures to tackle cost pressures in key areas such as insurance, increasing investment in research, technology and innovation which will provide the basis for future growth in productivity, and continuing to invest in key infrastructure such as broadband telecommunications. On the specific issue of enterprise competitiveness, Enterprise Ireland has recently introduced a special competitiveness fund designed to help firms improve productivity and strengthen their overall competitiveness.

All economic stakeholders have their responsibilities in tackling inflationary pressures. The Government, for its part, will meet its responsibilities and its actions will be informed by advice from, for example, the National Competitiveness Council, as manifested in its recent statement on inflation, and by the anti-inflation initiative provided for under the national agreement, Sustaining Progress.

The Government is dealing with the important issue of high insurance premia. The Tánaiste is undertaking specific measures to address the issue, such as the implementation of the recommendations in the Motor Insurance Advisory Board action plan within a target timeframe and the establishment of the personal injuries assessment board. The chairperson and ordinary members of an interim PIAB board were appointed on 27 November 2002. The Government recently approved the drafting of the general scheme of the Bill to place the PIAB on a statutory footing and it is hoped to enact the legislation by the end of the year.

My Department, in conjunction with the Competition Authority, is undertaking a study into insurance. The study will identify and analyse barriers to entry and limitations on rivalry in the insurance marketplace. It is envisaged that the bulk of the work will be completed this year and that a report will be produced in the early part of 2004. The Government is also taking action in a number of other areas to help tackle the high cost of insurance. This includes action in the areas of road safety and driver behaviour, reform of the law in relation to personal injury claims, including supporting of claims by sworn affidavits, and in the area of advertising by solicitors.

The Forfás report is a valuable contribution to public debate on issues relating to inflation. It underlines the importance of the commitment of the Government and the social partners to tackling inflation and monitoring our competitiveness. I assure the House that the Government will meet its commitments under the social partnership agreement in all the policy areas concerned.

I welcome the Minister of State to the House. He is a well-meaning man but he is on a sticky wicket today.

I was glad to hear the Minister of State refer to recent comments. Sadly for him, comments about Government charges constituting a large proportion of the increases identified in the Forfás report are true. I welcome the fact, however, that the Minister of State recognises the problems inflation is causing for businesses across the State. The days of the economic boom are sadly gone and we are slipping in the competitiveness rankings.

The private sector wants the Government inflation monkey off its back. I wish the Minister of State well in the measures he is putting in place to tackle it, but this is an appalling situation. The National Competitiveness Council has identified the Government contribution to the inflation figure as the largest single factor driving high prices. It contributes between five and six times the share of the inflation figure compared to other EU governments. Across the European Union, the average government contribution to inflation figures is 0.4% while in Ireland stealth taxes and increases in charges add more than 2% to the figure. The private sector is hamstrung by these charges and consumers are being made to pay the increased prices. If Government increases were removed, Irish inflation would be below the EU average.

The Government increases are undermining our competitiveness on a daily basis and the slide must be halted. Those increases have had a major impact on jobs. Each week since the Government entered office, 600 people have been added to the live register and each day we hear of more job losses, the causes of which can be traced back to reckless inflationary Government policy. None of the factors that brought about a reduction in inflation stemmed from Government action. Any fall in the costs of goods or mortgages has only served to highlight the stark contrasts with the impact created by the Government. The CSO has confirmed that the contribution to the May inflation rate by the Government is over 60% of the entire increase. Increases in indirect taxes alone account for almost 40% of the rise in inflation over the past 12 months.

The impact of other Government decisions on pricing policy has also been clearly illustrated. The cost of third level education has risen by 12.1%, bus fares are up by 13.3%, rail fares by 11%, motor tax by 11.9% and health insurance by 18.7% – it was announced on Monday that is to increase further – while dental services have risen in cost by 11.4%, electricity by 13.7% and water and sewerage charges by nearly 20%. The traded sector is suffering a severe squeeze. The prices Irish manufacturers are getting for their products fell by 7.5% in the last 12 months. By contrast, almost all their costs have increased, particularly those costs imposed by Government. The implication is clear – the Government must get its house in order.

That is why I said this well-meaning Minister of State is on a sticky wicket. He has a difficult position to defend today and I hope some good comes from his well-intentioned actions. It behoves us all to wish him well in that regard. However, the Government has clearly failed to deliver services efficiently at a competitive cost – there is no denying that. It has lost sight of the crucial requirements for price competitiveness. There are continuing concerns about the extent to which cuts in prices at the factory gates are being passed on in shops. Manufacturers are clearly protecting their margins by not giving the price reduction on sales in the domestic market that they apply to their export sales. Export prices fell by 10% while prices in the home market increased by 1.4% in the last year.

The Government is responsible for more than half the current inflation figure. Too much money was squandered before the election last year and economic indicators of the approaching downturn sadly were ignored. The Minister for Finance gave assurances that all was well and that no cut backs were planned. We know what has happened since. The Government did nothing to ensure value for money and, as a result, it has nothing to show for its reckless indulgence. No attempt was made to reform the public service when the funds were available and now we are facing the consequences. We lack the infrastructure to attract and sustain foreign investment and congestion brings our towns and cities to a standstill each day.

Does the Minister of State have something to say? This is like speaking on the Order of Business.

We are still getting a disproportionate share of foreign direct investment.

An Leas-Chathaoirleach

The Senator should address his questions through the Chair.

It is good to see the Minister of State smiling, in spite of the adverse circumstances.

I am an optimist.

I hope his optimism bears some fruit.

We have been proved right in the past and we will be proved right again.

Another major problem for us is that we do not have an adequate waste management system and our broadband facilities are below those of other countries. We have a huge problem across the board with competitiveness. Strengthening this area will be difficult. We are out of line with all our trading partners and very much behind with regard to the improvements that are necessary in infrastructure, regulation and taxation, education, innovation, entrepreneurship and management development. Because of the huge imposition of costs on everyone involved in business, productivity is proving very difficult but it is an area we have to support.

I welcome what the Minister of State said and hope it will work. However, because of what we have witnessed, it is difficult to have confidence in the measures, although I wish them well. Indirect Government taxes are contributing 1.4% to the consumer price index. Government administered price increases are adding an additional 1.3%. If the Government was not pursuing these policies, inflation would now be at 1.6%, which would put us comfortably below the EU average. Instead, the latest comparisons show that Ireland's inflation rate is over double the average EU rate.

We acknowledge that the Celtic tiger economy is over. Irish competitiveness is very much under pressure. We have also had pressure from the OECD. Most of the problems undermining Irish competitiveness come from Government or Government related sectors. Value for money was the first casualty of the Government's spending frenzy, which saw a surplus of €5 billion blown away in 2000. The OECD illustrates how basic systems of public expenditure management were allowed to rust. The sheer simplicity of its recommendations illustrates just how much damage was done without financial prudence in those heady spending years. As we know, grandiose projects were not properly evaluated. Outcomes matter as much as inputs, an area to which we did not pay attention. Costings should be accurate and properly controlled but, sadly, they were not. We have been creating layer upon layer of administration that does not and has not delivered quality services.

Concern has been expressed regarding inflation in food products but on a current monthly basis the rate of inflation in food products remains much lower than the general rate of inflation. That has been a consistent trend over recent months, with inflation in food prices at 1.6%. Most commentators expect retail food prices to reduce even further as a stronger euro impacts on exchange rates with sterling, which is to be welcomed. The low level of inflation in food prices is indicative of a sector that enjoys a real competitive dynamic. We are fortunate that every town and village in the country, unlike parts of Britain, has a food shop, which is to be welcomed. The emphasis on price competition in the sector is palpable, clear to consumers and can be seen at every level in the retail grocery sector. I very much welcome this. The rate of inflation in food products, at 1.6%, remains lower than the general rate of inflation and has been a consistent trend.

I do not agree with all the criticisms of the groceries order. The problem has been in the non-traded sector, as the Minister of State admitted. I fully support this. Whatever the inflationary pressures in the economy, the retail grocery sector has not contributed to them.

I wish the efforts the Minister of State has outlined well and hope they are not too late, given the bad practice we have witnessed on the part of the Government in all these areas.

I welcome the Minister of State, Deputy Michael Ahern, and express my appreciation to the Leader of the House for providing time today to debate the Forfás consumer pricing report, 2003, a PricewaterhouseCoopers report to Forfás published in May. It is both current and excellent and I thank those who prepared it.

I wish to inform Senator Coghlan that I initiated this debate. To clarify, it was not initiated from the Fine Gael, Labour Party or Independent benches. We are prepared to face up to—

Unfortunately, I only heard about it an hour ago.

We were looking for time to discuss this matter before the end of the session. I thank the Minister of State.

I am not being critical.

I accept that. I express my thanks to the Minister of State and his officials for coming into the House at very short notice to discuss the matter. We do not run away from issues that are important.

I readily acknowledge the fair-mindedness of the Minister of State.

The Senator could also accept the fair-mindedness of the Government. It is time for consumers to vote with their feet and end the rip-off culture.

That is slightly more difficult to swallow.

Complacency has set in. People are unwilling to complain or shop around. We should consider setting up a national rip-off hotline to report those who are overcharging who should be named and shamed. That is the opportunity I intend to take here today. The media should take a lead in making consumers aware of their rights with more programmes like "Checkout" or others similar to the "Watchdog" on the BBC. I commend theIrish Independent for running a series on comparative pricing.

The evidence that we are being ripped off is overwhelming. We are being robbed in the shops. A recentSunday Independent shopping basket survey by business correspondent, Martin Fitzpatrick, found that a basket of household goods which cost €16.41 in January 2002 now cost €21.70, a 32.2% increase. In another excellent article in the business supplement of last week's Sunday Independent, 29 June, he described how he went on a shopping trip. I would not like to name or shame any particular supermarket but he does name the supermarket in question in the article. The supermarket chain involved, Superquinn, has an excellent reputation. I dealt with it when I was Minister of State with responsibility for trade. Its supermarkets sell quality Irish food and in that sense are not comparable with any others. If Martin Fitzpatrick was to check all of the other supermarket chains, he would find that Superquinn is one of the most competitive. I am delighted Senator Quinn is present in the House and that he will have an opportunity of discussing these issues because he, more than anyone, would know what is happening. While it is unfair to compare different products in a shopping basket, I hope the Senator, wearing his other hat, will respond to the article by Martin Fitzpatrick in last Sunday's Sunday Independent.Ireland's rapid rise towards the top of the European pricing league could pose a significant threat to maintaining the economic success of recent years. As a nation, we are far too complacent. As consumers, we never exercise our right to make complaints, which is vital. When I launched my name and shame, price-busting campaign in May, I said we would choose the month of June to examine prices in shops and services.

The Consumers' Association of Ireland has kindly leant its support to this campaign and I thank Dermott Jewell, the chief executive. I also express my thanks to the Minister for providing funding in his Estimates for the Consumers' Association of Ireland. The amount allocated is over €60,000 per annum. This organisation is working under extreme pressure and I believe the Minister should strengthen the association so that it is in a better position to work with his Department in highlighting rip-off situations.

My own research throughout the country over the past four weeks, in so far as it was possible – I ask people to contact me or other public representatives in this regard – focused on petrol and diesel prices. The lowest petrol price in Ireland this morning is available at Colman Neville's, Midleton, County Cork, where a litre of unleaded petrol is 79.9 cents. He does not come first for diesel, which is 71.9 cents, a price that applies throughout Midleton. Mr. Neville, to whom I spoke this morning, said the fact that the terminal is close to the refinery possibly helps to make him more competitive while another factor is that he is not aligned to any big company. Therefore, he has freedom of movement as far as supplies are concerned.

The lowest diesel price in Ireland today is available at Anthony Browne's Texaco station in Moate, where he is quoting 70.9 cents per litre of diesel. The higher prices today are running at 89.9 cents per litre for petrol and 79.9 cents per litre for diesel. I will not list the highest because that would require a more extensive survey. I hope there will be an opportunity during the summer to review the situation.

Is the Senator going to do a nationwide tour?

I will certainly note prices wherever I go. I also call on my colleagues in the Seanad and my councillor friends throughout Ireland to supply information on the price of products such as petrol or diesel. The fact that the Government insists on the price being displayed at the forecourt is the reason I am in a position to get that kind of information. This type of information is not always easily available, but is now required by Carmel Foley, the Director of Consumer Affairs, to be displayed in shops, supermarkets and elsewhere. Therefore, it is easy for anyone to see the price of diesel and petrol and it really helps to bring prices down. It is noticeable in any town that generally prices are the same at all forecourts. In Midleton, for example, there are queues outside Neville's because it is so competitive. The other forecourts in the town are also very competitive as a result. It should be emphasised, however, that it is difficult to compare a small filling station in a rural area, given its volume of trade, to a town-based forecourt which can offer a whole range of other facilities.

In certain localities, for instance, shops are open from 7 a.m. to 11 p.m. The price of groceries in a store such as this cannot be compared to supermarkets such as Tesco and Dunnes because they have a different type of market. Nevertheless, they provide a good service and they can help to keep prices down.

As far as drink prices are concerned, I have discovered that probably the cheapest pint is in Charlestown, County Mayo. I understand the price quoted there is approximately €3 per pint of Guinness. In the town of Roscommon, the price is running at around €3.20 for Guinness, €3.21 for whiskey and €3.50 for lager, which is quite competitive. Those are prices that could, perhaps, be equalled elsewhere. The prices in Dublin are extraordinarily high. The same may be said for cities such as Cork and elsewhere. Bars in cities are charging too much for drinks, but, again, this is a matter for their own judgment because, unfortunately, there is no price control in this industry. I appeal to consumers to check the prices and ensure that publicans are alerted if they are too high. This would ensure that those who overcharge are unlikely to be supported. There are reports in Dublin of enormous prices, such as up to €3.80 for a pint of Guinness. In Cork some of the major hotels charge very high prices as well, but they retort that the price of insurance has gone up.

In relation to the Electricity Supply Board, a strange situation exists where the standing charge in rural areas is €10.57 compared to €6.12 in urban centres. There should be an equalisation in relation to the standing charge. The charge relates to infrastructure, such as poles which were installed during the rural electrification period, and it is extremely high. There is also a public service obligation levy of €1.92 on the bill.

For the benefit of Senator Coghlan, the price of petrol at the Tesco filling station in Killarney is 81.50 cents per litre.

It is the same price at every filling station in the area. Killarney is very competitive.

I agree and I compliment the Senator on that point.

I have to confess that I do not deserve the credit for it. I am very glad, however, and concur with what the Senator is saying.

The Senator is from Killarney—

I am very proud of that fact.

In relation to the letter sent by RGDATA, I agree with it regarding the minimum grocery order issued by the Minister. Removing it would not assist smaller grocery outlets. Loss leaders were a major problem some years ago and that is why the order was introduced. Also, I believe the current size of supermarkets is at the maximum that should be allowed. There are no grounds for increasing supermarket sizes beyond current limits. This was supported by the Joint Committee on Enterprise and Small Business in a previous Parliament on both grounds. I know that it is not before the Government at present, but I believe the Minister is aware of the situation in rural areas. RGDATA has put forward a reasonable argument. The order was only changed in 2001 in relation to retail space.

During the summer months I hope there will be an opportunity for further analysis of prices. Inflation, as the Minister said, is being well fought at present and his Department is doing its utmost to keep the situation under control. I would like further strengthening of the Consumers' Association of Ireland. It is a voluntary organisation, dependent on contributions, and does not have the same clout as the major companies in relation to prices.

In relation to the price of petrol and diesel, theIrish Independent of 10 June highlighted that it costs about €270 per year in rip-offs in relation to two different prices. Newspapers and local radio stations in particular should have consumer programmes, the latter because they are aware of the situation on the ground in their respective areas.

In relation to airlines and competition, Ryanair has played a particularly important role. Further to a discussion yesterday on the Order of Business, where I brought to the attention of the House the outrageous attacks by Michael O'Leary, chief executive of Ryanair, on the Taoiseach, the report has been suppressed inThe Irish Times today. I am appalled that the editor, Geraldine Kennedy, would suppress a report from this House because I attacked Michael O'Leary. I know there is enormous clout in so far as advertising is concerned. This advertisement in the Irish Independent cost in the region of €50,000. I assure the House that Ryanair shareholders – I am not one – are deeply concerned about the abuse of Mr. O'Leary's power and the spending of money in a wrong fashion. I hope the Revenue Commissioners will not allow this type of advertisement to be charged against the profits of the company. The advertisements being placed in relation to the second terminal at Dublin Airport constitute an appalling attack on the Taoiseach and democracy. The use of bully-boy tactics to try to blackmail the Government into granting the second terminal to Ryanair will not achieve results.

I highlight this issue because we have reached a strange position when the power of advertisers is sufficiently strong that one of our finest newspapers,The Irish Times, which, I am aware, has financial difficulties, will suppress a report. In fairness to the Irish Independent, it published today the statements made in the House yesterday by the Leader and me, despite continuing to feature the advertisements in question. Furthermore, the Advertising Standards Authority for Ireland has informed me it cannot do anything about this type of advertising. New legislation should be introduced to strengthen the right of consumers in respect of advertising.

I thank the Minister of State for coming before the House and the Leader for her willingness to allocate time for this debate. It may be unusual that these kinds of requests are emanating from the Government side of the House as opposed to the Opposition benches, but we are here to speak up on behalf of our constituents, the people, and highlight issues which arise.

Is the Senator implying that the Opposition has not done this repeatedly on the Order of Business?

As the Government spokesman on consumer affairs in the House, it is my responsibility—

An Leas-Chathaoirleach

The Senator's time has concluded.

I am delighted to raise this issue. I want to give the people a voice in the Oireachtas to raise issues on prices and empower them to take on the major companies regarding the ongoing rip-off. We must fight back and I intend to use the Oireachtas as a platform to name, shame and, if merited, praise. I thank the Leas-Chathaoirleach for his tolerance in allowing me to place the names I mentioned on the record. If I find a rip-off which can be proven conclusively, I will have no hesitation in using my parliamentary privilege as I have done. It is a significant privilege to use but not abuse.

The Senator will let rip.

As we have full parliamentary privilege, anything said here today can be broadcast by all media, includingThe Irish Times, if it had the guts to use material from the House.

I congratulate everybody involved in the debate and welcome the Minister of State. Having been unaware the debate would take place until I arrived this morning, I have not prepared.

I wish to relate a story about the Japanese owner of a large chain of supermarkets who visited me several years ago and left a lasting impression on me. When I asked him how many stores he had, he replied he had 14,000 outlets worldwide. When I then asked what made him different from others in the business – I opened my first shop in the same year he opened his and I was rather proud of having 19 shops by this time – he told me he would think over the answer. On arriving at our destination, my home, he replied that the reason for his success lay in self-belief. One will be proved right, he said, whether one believes one has a chance against an opponent – he was a tennis player – or has no chance. Senators will wonder where this story is leading. His response impressed me because he had built up a huge supermarket chain.

A similar question will be asked of the Government in the context of inflation. If it decides dealing with inflation is a priority, of which there is little doubt in light of the figures in the Forfás report, it will have to make a number of decisions, many of which will be uncomfortable. Ireland, according to the various measurements in the report, is in the upper range of the inflation league, either first, second or fifth depending on the heading. The report states at the outset that the Government is responsible for between 30% and 40% of inflation. It could, therefore, take immediate steps to reduce inflation, but these may not be in the best interests of the State as a whole.

Senators Leyden and Coghlan touched on some of the decisions which had to be made. Let me address one of the drivers of inflation raised every time inflation is discussed, namely, the high cost of doing business here. We have some decisions to make in this regard, one of which will be on insurance, a heavy cost to all businesses, not only the grocery or restaurant trades. I understand our insurance costs are the highest in Europe.

Whatever decisions the Government takes – the Minister for Enterprise, Trade and Employment is currently grappling with the issue – they will impinge on individual freedoms. It is now possible to take a claim to court where a judge decides on compensation. The Government is free to try to stipulate amounts claimants will receive for various injuries such as a broken leg or arm, but it may have to change the Constitution to do so, as such a system would possibly interfere with rights and freedoms afforded under the Constitution.

I now turn to the issue of health, specifically as it is affected by tobacco. Yesterday, I referred to a British company which had decided to target this country to bring down the price of tobacco. Having asked whether the company would sell tobacco to under age children, given that other retailers must avoid breaking the law, I returned to my office to discover an e-mail from the company in question, which I will not name as I do not wish to give it publicity. As the message was also sent to other Senators, including the Leader, the company is clearly mailing it to as many addresses as it can find. It stated:

Dear Sir/Madam

With the price of cigarettes in the UK and Ireland costing up to £5 and as much as 7 Euros a packet don't be ripped off by the government anymore!

We can send you legally, by registered airmail direct to your UK or Irish address, 800 cigarettes – all your favourite brands and whatever brand you smoke we charge from 170 Euros fully inclusive of postage, packing and all taxes – this equates to 4.25 Euros per packet and at current exchange rates this works out at approximately £3!

We also sell all your favourite brands of rolling tobacco, again from 170 Euros for 30x50g pouches – that works out at less than 6 Euros per pouch or approximately £4 (about half price!)

To find out more and to order securely visit our website . . . .

Do you really want to pay more?

Kind regards[The company's name follows]If you are not a smoker, and find this e-mail offensive, we sincerely apologise! We will be only too happy to take you off our mailing list. To remove yourself from our mailing list, please go to . . . .

I mention this solely because while there are ways to reduce prices, a decision will be required in each individual case. Some decisions have already been taken, for example, on the deregulation of the airline industry discussed by Senator Leyden. At that time, certain vested interests argued that the Government's proposals would lead to job losses. Deregulation in that sector resulted in many more people travelling, while the forces of competition caused air fares to decline. It has, therefore, had clear benefits, perhaps even to those working in the airlines concerned.

The same applies in many other areas. However, when deregulating the telecommunications sector, instead of appointing a regulator charged with ensuring fairness and competition, the Minister, as I argued at the time, should have retained powers for the State to encourage greater competition. One of the reasons access to the Internet is relatively expensive here is our failure to gain the required acceptance or usage of broadband. This can be done by encouraging competition rather than providing that the regulator must ensure fairness.

There is little doubt that decisions must be taken regarding the grocery business. I have believed in competition all my life. I started my business in the 1960s when the Fair Trade Commission was in place. I gave evidence to the commission and strongly argued that below cost selling should be allowed and that customers should have the right to avail of it. I continue to believe in open competition, although I am aware that many of the interests involved would not welcome it. It would have to be in the interests of consumers if, for example, a supermarket decided to sell below cost instead of spending money on fancy advertisements. Nevertheless, it would be unfair to some traders who would argue that big traders would take their business. The Government would be required to make a decision in such circumstances.

There are ways it can address the issue, one of which is to insist that there be no limit on what could be purchased. This means that a trader selling below cost to generate publicity could not prevent another trader from buying his stock and reselling it at a slightly increased price. No matter what happens, some traders will argue there is unfair competition. In view of this, a Government decision to abolish the groceries order would create many other problems.

Another aspect of the groceries order deals with attempts by firms to bargain, cajole and bully their suppliers. Such an approach would not be in the interests of indigenous suppliers because purchases can be made elsewhere. In making a decision on this, the Government must balance the long-term interest to the State of lower prices against the likelihood that such an approach will mean the loss of indigenous suppliers.

Senators Coghlan and Leyden referred to the cap on the size of stores. I believe in open competition and have argued that there should be no such cap. There is little doubt that if competition allowed for the creation of super-stores and hypermarkets, it would reduce inflation. However, it is also argued that it would lead to the closure of smaller stores, which would discriminate against those who are unable to travel. Senator Coghlan referred to this. Having visited the United States, France and other countries where super-stores and hypermarkets are allowed, I have seen towns with no shops left in them. As legislators, we must make decisions that are in the best interests of citizens.

The Government has decided that a cap on the size of stores – 3,500 sq.m. in Dublin and 3,000 sq.m. beyond Dublin – is the most balanced approach. These limits probably reflect the size of existing stores in Ireland and are probably acceptable in the light of the balance the Government wishes to strike. However, in taking this approach it is indicating that the balance of its decision favours those who are less fortunate, have less ability to travel, may not have their own means of transport and live in towns that would be denuded of shops and supermarkets were large hypermarkets allowed to develop. Decisions of this kind will have to be made.

Senator Leyden correctly indicated that the best way to deal with competition was to allow for open publicity. Gay Byrne was a great driver of competition in the 1970s and 1980s. On Wednesday or Thursday mornings he published a list of prices on his radio show. All those involved in the business listened to this item to ensure they were not charging the highest prices and if they detected the products to be surveyed, they made sure to respond accordingly. It was a great game but it acted in the public interest and those companies which were unable to survive went out of business.

This approach is also open to criticism, however. Last year the Director of Consumer Affairs published a list of prices for the top selling grocery items which were identical among the three major supermarkets referred to by Senator Leyden. That is what happens in competition, because none in our business can afford for our competitors to charge lower prices. My first supermarket in Dublin in the 1960s was located in Finglas where two other supermarkets were also located. In those days the vast majority of shoppers were full-time mothers at home. They would leave their children to school and, before attending 9.30 a.m. mass, check the prices displayed in the shop windows. We watched each others' prices. If, for example, a competitor advertised a pound of tomatoes for one shilling and nine pence, we reduced our price to one shilling and eight pence before mass was over. It was open competition and activity of that kind continues today. When last year the Director of Consumer Affairs expressed concern because the supermarkets were selling at the same price, they did so for that reason. Nobody can afford to have their competitors charging lower prices for identical products, be it butter, milk, bread or whatever. It was very difficult to explain to the director that this kind of outcome would be the result of competition.

I am delighted with what has happened regarding the price of petrol and was even more impressed with Senator Leyden's survey. Another survey has been undertaken by a newspaper of the price of a cup of coffee while others are being done of the prices of other items. Openness, transparency and publicity are vital, as long as it is done fairly.

The grocery business is being subject to new entrants from non-Irish companies. There is a problem because the groceries order legislation, which inhibits Irish companies, is practically unenforceable against companies based outside the State. This create unfairness. Many of the products sold by the foreign companies are not Irish based, nor are they are Irish brands. While they are probably of very good quality, the public must decide what products to buy.

The answer is to create and encourage competition. In doing so the State must make decisions which will have consequences. For example, in the area of health I was stunned to discover that the VHI was sending people abroad – Spain, France or even South Africa – to have operations because it was cheaper to have them done there than here. These are the kinds of decisions we will have to make if we are to have open competition. I am a great believer in competition which we must encourage. In doing so we will have to balance the benefits to the State against the costs. In doing so it may be decided that the benefit of low inflation is not worth the other consequences of deciding to take a course of action. For example, there is little doubt that it is State policy to have a high price for alcohol and tobacco products, which we would all agree is acceptable, but when we blame the State for being a major cause of inflation, we must recognise that we, as legislators, have made such a decision. We must ensure we strike the right balance when making future decisions.

I welcome the Minister of State and his officials. The reduction of the annualised rate of inflation to 3.7% is good news that the trend is positive. Much of this is due to outside factors such as the fall in international oil prices once the uncertainty over the Middle East situation was clarified and also the strength of the euro. The matter was discussed this morning on the Order of Business. The paradox is that the strength of the euro is bad news for indigenous companies, but good news for the multinationals which translate their profits into dollars.

It has not yet been mentioned in this debate that last autumn, when it framed its budget and took part in social partnership negotiations, the Government judged correctly that the rate of inflation would reduce despite increases in indirect taxation and charges. There were those in the markets who said we were failing to get inflation under control and who predicted a 5% rate. Low inflation growth is essential given that we are in the euro zone. For many of the Celtic tiger years, up to and including 1999, the rate of inflation was kept at the 1.5% to 3% level. While subsequently the rate went considerably above that, it never achieved – if that is the right word – anything like the heights inflation went to in the 1970s and early 1980s.

Part of the problem has been too much demand in the economy. In future budgetary management, we must pay more attention to managing demand to prevent pressures building up. Such pressures were particularly obvious in the construction industry where tremendous demand to develop infrastructure drove up prices and resulted in less bang for our buck. We have discussed in this House over the last few days the different estimates of the cost of a metro system. Differing estimates are part of an era in which a sum considered sufficient one month would be too low compared to a few months later. We must get away from that mentality and leave this era behind.

House prices remain high and it is entirely unclear whether they are stabilising, rising or, as some have suggested, about to fall. The Government must find ways to take the heat out of the house price market. I am not concerned about the builders, the developers and the landlords, but about the accessibility of houses to those on what are, by today's standards, relatively modest incomes.

Competition is important. As the report points out, many price increases have occurred in the sheltered, less trade-intensive areas of the economy. It has been a source of frustration to successive Ministers for Finance that while for many years there was no increase in the excise duty on alcohol, it did not prevent an increase in its price. When a modest excise imposition was made in one or two out of every four or five years, it was used as an opportunity to ratchet up the price considerably more. The point that the rise in the price of drink is not even mainly due to the Government is entirely well taken.

Most of us have plenty of experience of having our hair cut and will have found that the price of the service has escalated enormously over the past five years. The insurance industry has used 11 September 2001 to ratchet up prices in a wholly unacceptable manner. I cited earlier the 600% increase in the profits of Irish Life in 2002. The Department of Enterprise, Trade and Employment should examine this matter closely and publicise the actions of insurers. A committee of the Oireachtas is to discuss banking soon. We focus very much on the mortgage interest rate while paying little attention to the fact that interest rates for business and farming have hardly altered despite the steady reduction in base rates.

The Houses of the Oireachtas have been debating problems which have arisen in the context of the resignation of Mr. Justice Flood, but most of the problems are actually the result of exorbitant legal fees. Exorbitant legal fees must be due to lack of sufficient competition and restrictive practices.

Hear, hear.

It is high time we stopped it. While various parties have had cosy relationships with lawyers in the past, we must consider the public interest. I cannot see how the public interest is served where the law is, in effect, inaccessible to anyone other than the big battalions, be they individuals or firms.

Mention was made by my colleague, Senator Leyden, of the advertisements of a person whose name we are not supposed to mention in this House. I am not sure why we are prevented from naming him. The reason we do not name the officials sitting behind the Minister is that they cannot answer back and defend themselves, but no one could accuse the person we are not allowed to name as being incapable of answering back and defending himself. However, colleagues should note that the more we splutter with outrage, the more we please and encourage the gentleman in question. It is his trademark. I have seen German magazines in which he takes on Lufthansa. He loves to take people on and the more we splutter, the more he feels he is hitting home. I would be inclined to be a little more thick skinned and to ignore such behaviour. That is what it merits.

Competition has been very beneficial in telecommunications and airlines, but we need to be careful. There has been a great deal of talk about privatising the ESB, but if increasing competition in this area is to mean much higher energy prices, we should question what we are doing. I do not worship competition and privatisation as forms of divinity. The question must be what effect acting in a certain manner will have. If it is a question of pushing up prices to provide a return to the shareholder, I would rather the shareholder was the State. Later this afternoon, the House will discuss the Common Agricultural Policy reform package which is certain to have a positive impact on food prices.

I pay tribute to the social partners. In concluding their agreement in quite difficult and uncertain circumstances, they acted in a very statesmanlike fashion. They are being rewarded by the fact that the rate of inflation will almost certainly be below the wage increases they will receive, although it was not obvious this would be the case when the agreement was being concluded. They will have made a fine deal.

The euro constitutes a very tight framework and we cannot allow inflation to get out of control as it has done in the past. This is a very important point. I hope the reduction we have seen in the rate of inflation is reflective of the soft landing we are achieving for the economy.

I am suffering from the fact that I have organised myself to say too much. The Chair will forgive me. There are two ways of approaching this debate and, as usual, I will try to take both and probably get confused in the process. One way is to look at useful examples that are hard to understand. I accept everything Senator Mansergh said about insurance companies. It is worth noting that the highest inflation identified in the report was in financial services. It was higher than in expenditure on waste charges and the like. The financial services category experienced the biggest increase of 23%. It obviously includes the insurance industry.

Some of the issues connected with insurance in this country are peculiarly Irish matters. In the case of compensation for personal injuries, for example, we tend to look at the wrong end of the spectrum, the spectacular awards occasionally made to those who have been seriously injured. However, that is not the reason for high insurance costs. One reason is the declining level of competition in the market. How many competing insurance companies are there, as distinct from front organisations? There are three or four, possibly fewer. Once there is a duopoly or its equivalent, competition rapidly declines, as is evident in the banking sector.

There appears to be a trend to move towards consolidation and rationalisation. Old fashioned Marxists would say it is a move towards global monopolies, a direction in which we are moving. The number of automobile manufacturers is decreasing, as is the number of oil companies. Ultimately, in spite of all the grandiose talk about consolidation, consumers will be the victims of declining competition. That is not to say the solution to every problem is an irrational pursuit of competition. There is a statement on the Competition Authority's website which states, without qualification, that competition always produces lower prices and better services for the consumer. That is rubbish and when I get an opportunity to meet the chairman of the authority, I will tell him as much.

Competition is a useful but not necessarily always the best instrument. I am sceptical about its role in the provision of health services, for example. The nearest thing to a free market in health services is in the United States and its health service is highly expensive. Roughly $1 in $7 of gross national product in the United States is spent on health services. The equivalent figure for Ireland is $1 in $11 while the European average is about $1 in $11 or $12. Close to 15% of GNP in the United States is spent on health care. Despite this, the United States has one of the highest infant mortality rates in the developed world.

I have no patience with ideological agendas being inserted into this debate, even if it is the ideological agenda of, for example, public sector transport employees. I recently attended my first Labour Party national conference. At the time I was the party's transport spokesperson in this House. During the conference I had the usual meeting with the CIE group of unions. I have a strongly developed view on public transport and was looking forward to a dialogue with them. They told me, however, that the first thing they needed was a price increase. They could only say that because they knew they had an effective monopoly. If they were involved in Senator Quinn's business, for example, and demanding an increase in prices, the immediate response would have been that Dunnes would undercut them and they would lose their jobs.

The fundamental problem with public transport is not that workers are overpaid but that we are trying to do the impossible, make public transport operate as a commercial service. No country in the world has ever succeeded in doing this. The only debate is about how to quantify the public good of public transport and how to put prices on its benefit to the environment and other benefits. That is a difficult area about which I know a little. Environmental accounting is extremely difficult and dubious. The justification for subsidising public transport is overwhelmingly environmental. In order to quantify the benefit, therefore, one must be able to quantify the environmental benefits. We know they are real and tangible but whether it is possible to put a cash value on them at this stage in an underdeveloped science like environmental economics is doubtful.

We will not get to grips with our public transport costs by introducing more competition. There is not a scrap of evidence throughout the world that quasi privatisation or any of the other experiments being mentioned will do much to change the cost of public transport. The only way to do it is through a deliberate public policy of keeping the prices at levels which will attract consumers to use it. We are in danger of pricing public transport out of the market. Whether public transport is provided directly by State owned companies or by franchise private companies is a secondary issue. I am sceptical about competition because I do not believe it is possible to have real competition in this area.

I agree with Senator Quinn that the maximum quality and quantity of information should be available in an easy form to consumers. Car dealers can take a half or quarter page advertisement in a newspaper advertising the cars they have for sale without mentioning a price anywhere. If one cannot tell one's customers the price one is expecting for something, one is immediately involved in a little deception. Imagine Senator Quinn taking a full page advertisement in theSunday Independent, for example, showing all his products but not including the prices. Car dealers do this on a regular basis. In the motoring supplements there are many pages of advertisements which do not display any prices.

The most important issue is that people know the prices. The second is to identify the sectors where there is manifest and unjustifiably rapid inflation. It is clear from the report that the restaurant and bar business is another sector of extraordinarily high inflation. Nobody has yet explained how it is possible that the price of eating out in Germany is lower than in Ireland, given the fact that wages per hour in Germany are higher and the employer's social costs in addition to those wages are the highest in Europe. Nevertheless, one can still eat out in most countries in Europe for a price considerably lower than in Ireland.

It is not enough to claim it is related to the cost of insurance, which is a recent additional cost. I have every sympathy with small businesses with regard to the way the insurance burden has been landed on them but do not believe the increase is risk related. As Senator Mansergh said, it was an opportunistic misuse of the events of 11 September 2001. The margins expected by many at the middle level of the pub and restaurant industry and the lifestyles they have from the business in which they are involved have lost all relation to reality.

I recall a few years ago being in an expensive restaurant in the south west – those who know my holiday habits and my preferences will easily guess where – and I happened to overhear the proprietor in conversation. He was moaning about the difficulties of making a living from what is a well-known restaurant. The restaurant opened in May and closed in October and, as the conversation developed, it emerged that from October to May the proprietor lived in the Canaries off the proceeds of the previous five months. His only child was attending the most prestigious and expensive boarding school, but he was able to convince himself, and moan to his friends who were also customers, of the difficulties of "making a living" out of the business.

I am convinced that every builder now believes that if he or she is not driving a 2003 registered Mercedes, he or she is not making a living out of the building industry. Are there aspirations and expectations of a quality of life, and a return on business, that are out of tune with how the rest of us live? I am not by any means badly off but there is a question about the presumption of what one is entitled to as a return for running a business.

The third issue that arises from the Forfás report is the comparative cost of rented housing in the eurozone countries. With Ireland at 100, for example, the cost of rented housing in Luxembourg is 79% of the rate here. It is the richest country in the world and must therefore have what we would regard as high property prices, but its rate is 79%. Finland, which is a notoriously expensive country, is 74% of our rental cost. The nearest to us is Luxembourg. In Portugal it is 19% so if one pays €100 a week in Ireland, one would pay €19 a week in Portugal. Italy, which I would have regarded as comparatively expensive, is 43% of our cost. We need to do two things. First, we must get intelligent, objective analysis separate from ideology. I am tired of the Competition Authority saying repeatedly that more competition will solve the problem. If we allow some of the plans for the ESB to be carried through, we will end up with more expensive electricity. If one reads the reports one discovers that it cannot get entrants because it cannot get a price for electricity that would justify the investment. Somehow that is because the ESB is abusing its position. I do not understand that logic but ideology can cloud people's judgment. Second, we need to maximise information to people. My daughter in Italy tells me that she can buy contact lens cleaning fluid for one third of its cost here. She noticed immediately how expensive it was because when she was home I was paying for it and over there she is paying for it.

Many of the agencies which are supposed to protect consumers, in particular the Director of Consumer Affairs and her office, let this country down during the transition to the euro because she was convinced by the banks of a scale of charges that turned out to be both unnecessary and a rip-off. She accepted their argument and it took the European Commission's intervention and effective dawn raids on the Bank of Ireland and AIB to "persuade" them that they were ripping us all off. I have reservations about the capacity of the Office of the Director of Consumer Affairs to really let consumers know what is happening, to inform them and to ensure that they know what is happening, what prices are and therefore have some influence over how they spend.

The finding of Forfás on inflation can be attributed to several conditions that prevailed in the economy for recent years. The first is the fact that we imported much of our inflation and the second is demand. There was a demand in the legal sector because we have established many tribunals of inquiry. There have been other causes of our compensation culture that have led to demands on the legal profession and, sadly, that has meant that there has been plenty of work to go around. The effect of the terrorist attack on New York on 11 September 2001, and the subsequent cost of reinsurance, has been a major factor in the insurance business, as has been the demand in building which can be attributed in part to the growth in the economy. The last and most important aspects are greed and opportunism, which have manifested themselves in many different ways and are traits we need to tackle. The inflationary effects from abroad may be easing because we are now paying less for oil, the exchange rate has turned around and we are buying more with our euros in the world markets than previously. This has a knock-on effect on indigenous industry.

Notwithstanding that, if the high euro continues, we could see over the next few months and years a deflationary effect which will be carried into the Irish economy. I would like to see the deflationary effect passed on immediately. I want to see the price of oil, which was $32 a barrel during the Gulf War, the price of oil today and the expected price of oil over the next few months and years passed on. It seems to be difficult for prices to come down. I would also like to ensure that when we take measures, for example, in the insurance industry if we begin with the PIAB and ensure that there is less fraud, and give effect to regulations to make road safety a feature and there are fewer accidents, that the benefits do not go to the bottom lines of the companies but are passed on to the consumer.

It is worth noting the key findings of the Forfás consumer pricing report. It states that "increases in consumer prices over the past five years have sharply outpaced those of our European neighbours." They also imported inflation so why have we gone so far ahead?

This has resulted in an estimated overall consumer price level which is 12% above the euro area average. The strong inflation differential has continued into 2003, resulting in a further divergence in consumer price levels, adding to already high competitiveness risks.

Ireland is now estimated to have been the second most expensive country in the eurozone in 2002 for consumer prices, marginally behind Finland. It is likely that Ireland will become the most expensive country in the eurozone during 2003. The non-internationally traded sectors were the primary drivers of consumer price inflation in Ireland in 2002. Among individual expenditure categories, "pubs and restaurants", [to which I will refer again later] were the most important drivers of national inflation – accounting for nearly 30% of the increase in the price of the standard basket of consumer goods-services in the year to end January 2003. Combined with alcoholic beverages and tobacco, 19% increase, transport, 16%, and miscellaneous goods and services, 15%, these non-internationally traded sectors accounted for 80% of national inflation in 2002.

Ireland was the most expensive country in the eurozone for foodstuffs from low-priced outlets in 2002, the second most expensive for foodstuffs from mid-priced outlets and the third most expensive for foodstuffs from high-priced outlets. It was also found to be the second most expensive country in which to buy non-food consumables in the eurozone across all retail types.

We are about to become the most expensive country in the eurozone. Why as shoppers do we not complain more? If people thought Ireland was an expensive place to live, this report from Forfás has proved them right. We are now the second most expensive country in the eurozone, marginally behind Finland.

The report also predicts that we will become the most expensive eurozone country later in the year. Eating out, drinking out and groceries are the items that hit the wallet hardest. As a nation we probably do not complain enough. We are too laid back. We notice groceries getting more expensive all the time. Every week something seems to go up, but we are a dead loss at complaining. Eating out and socialising are the worst value for money. One expects to pay high prices at the top restaurants but one is badly served in middle range restaurants. One ends up paying above premium prices for an average return but nothing ever happens for we are not a nation of complainers.

People are being overcharged constantly and we whinge about it but do not complain. At work, we complain all the time to each other about how expensive everything is – eating out, property, the pub – but do not complain in shops or restaurants. I do not know the reason for this. It appears that Irish consumers do not like to complain; they find it unpleasant. The message is, therefore, that if one believes one is not getting value for money, one should tell the restaurant owner or the shopkeeper instead of one's friends, complaining to the source. It will not ruin one's night or day out, and will make a difference. Furthermore, one should complain to the Director of Consumer Affairs. We must use that office more efficiently and give it more teeth.

There are many areas over which we have no control but there are some. We should bring control back into our lives by ensuring those who need to know – the greedy ones who are overcharging – are made aware. Much of what Senator Leyden is doing is correct.

I thank all the Senators who have contributed to this very important debate, especially Senator Leyden for initiating it. A few points were raised to which I would like to refer but the general consensus from all sides of the House was that our prices had increased substantially in recent years. The question of who was to blame was raised by Senator Coghlan, especially on foot of the report in which Government influence on inflation was mentioned. However, it is important to point out that there are many areas where the Government influenced category includes products subject to excise duty where price increases have occurred without any increase in duties, especially tobacco, which have contributed a significant amount to the inflation increase in the past year or so. An increase in the cost of tobacco, in particular, can be of relevance, especially to health. We have all become much more aware in recent years of the knock-on costs to health care of people smoking.

Senator Leyden raised the question of consumer assertiveness, as did Senator Hanafin. I suppose it is a trait of our nation that we do not complain when we get bad service, be it in shops, restaurants or anywhere else. We should do so. The anti-inflation group is examining the question of greater consumer assertiveness, which will be considered in the new initiative to stimulate greater price sensitivity among consumers. Senator Leyden also raised the question of supporting the Consumers Association of Ireland to which a grant of €63,000 was made. How we can move forward will be considered in due course in consultation with it.

Senator Quinn asked whether inflation was a Government priority. I assure him that it is. The programme, Sustaining Progress, highlights it as such for the nation. The Senator also raised the question of insurance. The Tánaiste has made a reduction in insurance costs one of her top personal priorities. Senators will be aware that in the previous Government Deputy Noel Tracey was Minister of State responsible for insurance matters. He commissioned a report on motor insurance, known as the Motor Insurance Advisory Board report which was issued at the beginning of 2002. It set out 67 recommendations, many of which have now been put into operation. Many more still have to be implemented. Those decisions and recommendations have already had some success. Many of the conclusions and recommendations were applicable to such areas as employer and public liability insurance. There is an interim Personal Injuries Assessment Board. A statutory board will be set up by 1 January 2004 under legislation being prepared. Its establishment and the implementation of the recommendations will have a considerable impact on insurance costs. This is important.

Senator Quinn spoke about the need for competition. I took it from his statement that he was in favour of free trade andlaissez-faire in that area. While we must have competition, we must also take note of the social impact, if we leave matters completely free, on small towns and villages, especially their grocery shops.

I again thank all Senators for their enlightening and valuable contributions. It has opened up discussion on a subject with a wide impact. We hope more people from every walk of life will take note of how they can influence prices in every part of trade. They should not hide their light under a bushel but speak out when they believe they are being wronged.

In thanking the Minister of State for his presence and contribution today I also pay tribute to his officials, Mr. Carey and his colleagues, for their input.

I thank the Minister of State for his great assistance in the House over the last year. In this regard Midleton, in particular, has been taken off its pedestal straightaway. I received a telephone call during the discussions to say the price per litre of petrol in Cosgraves of Castlebar is down to 78.9 cent, although I have to say that the price of diesel in Midleton is also very low. During the recess I will be taking the opportunity of contacting the public and local representatives all over Ireland to try to maintain the momentum and create an awareness of prices. The position can change very quickly. A week is a long time in politics but an hour is sometimes even longer. I thank the Minister of State's officials for coming here at very short notice and the Leader for allowing the debate.

Sitting suspended at 1 p.m. and resumed at 2 p.m.