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:
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.