Mr. Paul Kelly:

Deputy Colreavy spoke about pricing and taxation. It is worth noting the complexities associated with the construction and transmission of price and the whole area of margin in the food chain. This has been evidenced in recent days by 20,000 farmers protesting outside the gates of Leinster House on Tuesday last and by some of the job losses in the last day or so. There are significant issues relating to the asymmetrical transmission of price along the supply chain, that is, the ability of different players in the chain to recover costs. Much of that has to do with increased volatility in commodity prices. That, in large part, has to do with the disappearance of the managed market scenario we have had in the EU for the last number of decades. Agriculture prices and food prices are normalising towards global levels and this is introducing a significant amount of additional volatility.

It is also worth noting that the commodity that has jumped the most in the last year or two is sugar, which has gone from €400 per tonne to €1,200 or €1,250 per tonne on the spot market. From a production planning perspective, it would be incorrect to consider sugar a cheap nutrient in terms of price or availability and security of supply.

Food companies are not completely obsessed with profit. In this country, the net profit margins of the consumer foods arms of publicly quoted companies are in low single figures. At primary level, primary dairy processors and meat processors are probably working between 1% and 2% profit margins. That is the reality.

The final price is set by the retailer. Resale price maintenance is banned under competition law. Food companies and food suppliers have no part to play in the price the consumer ultimately pays. We already have a tax differential. The 23% standard rate of VAT applies to a small number of food products. They are, typically, the ones in question, including confectionery, soft drinks and cakes. There is already a 23% differential between them and all other food products, which are zero rated.

In the consumer price index, food and non-alcoholic beverages now account for approximately 11% of consumer spend, compared with roughly 25% in the 1980s. This has had a huge impact along the food supply chain. Food is a highly regulated sector, and correctly so, with regard to food safety and so on. All of these costs have had to be absorbed at production and processing level. These costs are highly relevant to this overall discussion.

In Denmark, where a saturated fat tax was introduced approximately one year ago, there is now cross-party support for the removal of the tax because of its impact on a number of areas, particularly the economic area. It has driven cross-border shopping into Germany. We had a similar issue here two or three years ago with Northern Ireland. Work done by the Central Statistics Office and the Department of Finance suggested a cost in the region of €800 million from that. Denmark has also withdrawn proposals for the introduction of an additional sugar tax. Similarly, in Italy a range of taxation measures are being examined as part of that country's austerity programme but the Italian Government has pulled back from introducing a tax of that sort.

Senator van Turnhout mentioned stringy cheese and the fact it is highly processed. The stringy cheese in question is cheddar cheese. It is no more and no less.