Dáil debates

Thursday, 11 May 2023

Ceisteanna ar Sonraíodh Uain Dóibh - Priority Questions

Inflation Rate

10:30 am

Photo of Louise O'ReillyLouise O'Reilly (Dublin Fingal, Sinn Fein)
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55. To ask the Minister for Enterprise, Trade and Employment if he is aware of the view expressed by European and international agencies and organisations that corporate profiteering is a real and significant contributor to inflation; and if he has plans to tackle price gouging in food products. [22055/23]

Photo of Louise O'ReillyLouise O'Reilly (Dublin Fingal, Sinn Fein)
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My question is fairly straightforward. It is to ask the Minister for Enterprise, Trade and Employment if he is aware of the view expressed by European and international agencies and organisations that corporate profiteering is a real and significant contributor to inflation and if there are any plans to tackle price gouging in food products.

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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We had some discussion of this issue yesterday in a committee. I am aware, of course, of views expressed by European agencies and organisations that corporate profits are a contributing factor to inflation. The European Central Bank, ECB, examined the degree to which inflation is being driven by increases in wages compared with profits. It established there has been a significant increase in corporate profits throughout 2022 across multiple sectors and that this contributed to more than half of European domestic price pressures in the last quarter of 2022. The ECB has predicted that, over the coming years, growth in profit margins and wages will moderate as a result of its efforts to lower inflation and that this will have a knock-on effect on product prices. It has stated it is closely monitoring any exploitation of the uncertainty created by high and volatile inflation and supply-demand mismatches.

Ultimately the setting of market prices is a commercial matter to be decided on by individual commercial entities. Due to varied pricing strategies, it may take some time for wholesale price changes to be reflected in retail prices. The increase in commodity prices, such as in oil, energy and grain, has resulted in increases in the domestic sale price of several core products such as milk, butter and bread because these feed into fuel and fertiliser costs. Domestic food prices are influenced by international pricing. We import and export food at international prices. Prices in Ireland for domestically produced food will be influenced by the price achieved for these in export markets. A recent study by Kantar is showing that the rate of food inflation in Ireland has dropped slightly for the first time in two years for the period from February to April. This compares with EUROSTAT figures for the eurozone area which show inflation rose slightly to 7% in April. The fact that Irish food inflation is less than the EU average suggests Irish supports for business as well as the level of competition in the market are starting to have an effect.

The ECB expects profits to grow more moderately as the mismatches between demand and supply are resolved and inflation eases, and particularly as demand is dampened through rising interest rates. I will come back with a more specific answer next time.

Photo of Louise O'ReillyLouise O'Reilly (Dublin Fingal, Sinn Fein)
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The Minister mentioned wages. It is worth bearing in mind that while corporate profits might be ripping away, wages are not. In real terms, according to Unite Investigates, a division of the Unite trade union, wages are falling by an average of €76 weekly. We can see this from the perspective of consumers who are seeing their wages falling by an average of €76 while also seeing that profits are high. At the beginning of March, the ECB highlighted that corporate profiteering contributes twice as much to price rises as wage increases. Wages, therefore, are nowhere near what the corporate profits are. Indeed, the ECB is flagging this as an issue.

What are the Minister and his Department doing to ensure corporate profiteering is not contributing to food and grocery prices increases in respect of large supermarkets and the big food conglomerates and processors? I do not mean asking them nicely by saying, "Sure lads, you aren't doing this." I mean asking what specifically is being done in this regard.

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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I acknowledge the ECB reports that have come out. The Government, of course, acknowledges the pressures families are under. This is why we have been proactive in limiting the fallout from higher rates of inflation. A total of €12 billion, some 4.5% of national income, has now been provided in direct relief to absorb some of the impacts and ease the burden of inflation on households and families. The Government believes, especially for vital products such as staple foods, where reduced input costs come through to product prices, that consumers should benefit from this. This is why the Minister of State, Deputy Richmond, chaired a special meeting of the retail forum yesterday and will have another such meeting in six weeks' time. The Government has given a clear signal to business leaders in the retail sector that we are not happy and that we expect to see the reduction in the cost of production passed on to consumers in terms of pricing. We also expect to see primary producers protected in that context.

Photo of Louise O'ReillyLouise O'Reilly (Dublin Fingal, Sinn Fein)
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Is the strong message being sent by the Government that it is not happy? I am not being funny, but is that the strong message the Government is sending? That is what the Minister said. He said the Government had sent a strong message and that it is not happy. Could the message not be something like the Government is going to demand transparency? Could it not be that, if the Government does not see delivery in reductions for consumers, it will act? The Minister just said the Government's message was it was not happy. Can I give the Minister a message from consumers? They are getting creased. They also are not happy, but their unhappiness is taking the form of having to make hard choices concerning what they buy in the supermarket, including such things as food to feed their kids, nappies and all those essential things. I appreciate the Minister has sympathy with people and I do not, for a moment, suggest there is a monopoly on compassion anywhere, but does the Minister understand people want to see a little bit more in terms of action, deliverables, timeframes and targets?

Photo of Simon CoveneySimon Coveney (Cork South Central, Fine Gael)
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That is exactly why we held the meeting of the retail forum yesterday and it is also why I took advice from the Competition and Consumer Protection Commission, CCPC, regarding options. I would like to get more advice from it concerning the options available to us in the context of delivering more transparency in the food supply chain to ensure consumers are paying reasonable prices. I hope to get this advice in the coming weeks.

Additionally, we completed the passage of legislation in this House last night to progress a new agrifood regulator, whose job it will be to try to provide more transparency on this supply chain in terms of protecting primary producers and ensuring processors and retailers are delivering fair prices for consumers. There is a lot happening in this space. We must, however, ensure we think through any new initiatives because several countries have suggested bringing forward price caps and have then decided not to do that. Others have tried to limit margins and then have had to change those decisions. We must ensure, therefore, we have a functioning enterprise and competitive market here while also ensuring we protect consumers. The Government will act to do this.