John McGuinness (Carlow-Kilkenny, Fianna Fail)

I thank Senator Fitzgerald for raising this important topic.

In examining the differential between the price of goods in Ireland and the price of similar goods in the United Kingdom and elsewhere, we need to separate two related aspects of the issue. The first is the fact that prices here for a wide range of goods have been higher than those in the United Kingdom and other EU member states for a number of years. A survey undertaken by the consumer strategy group in 2004 found that, even after adjustments to take account of different rates of VAT, a basket of internationally branded goods cost 22% more here than in the eurozone.

The second aspect is the recent widening of the gap between the price of goods here and in Great Britain and Northern Ireland which has resulted from the failure of retailers to lower the price of goods imported from the UK in response to the sharp appreciation since November 2007 of the euro against sterling. In 2007, €1 was worth on average Stg£0.68. Yesterday, it was worth almost Stg£0.80, representing a rise of more than 16% in the value of the euro against sterling. The combined effect of these factors has been to bring about the situation referred to by Senator Fitzgerald whereby consumers in the Republic are in some cases paying up to 50% more for the same goods than their counterparts in Britain and Northern Ireland.

Regardless of what arguments retailers make price differentials of this magnitude are unjustified and indefensible. Though the focus of recent commentary has been on British-based retailers with operations here it is fair to say that there has been little or no sign that Irish-owned retailers have reduced the price of goods imported from Britain in response to the fall in the value of sterling. The main argument put forward by retailers for the longstanding gap between the price of goods here and in Britain and elsewhere in the EU is the alleged higher cost of doing business in this country. Ireland is not a low-cost economy but there are justifiable grounds for scepticism about the claim that higher prices here are attributable solely to higher costs.

As the consumer strategy group pointed out, while we do not rank highest in the eurozone for many business costs, we do rank highest for many consumer prices. The recent survey of prices in ten British retailers with stores in Ireland conducted by a national Sunday newspaper found that one retailer charged the same prices as in Britain while the mark-up on UK prices in other stores ranged from 20% to more than 50%. The wide variation in this mark-up among stores with a broadly similar cost base suggests that the cost argument is far from being a complete or satisfactory explanation for the higher prices that Irish consumers are forced to pay.

It is also fair to say that retailers have not to date been very forthcoming about the reasons for their failure to reflect the fall in the value of sterling in the price of goods sourced from the UK. Reference has been made to the fact that products currently on sale may have been bought by the retailers prior to the appreciation of the euro or that retailers hedge, or forward buy, currency in order to protect themselves from exchange rate fluctuations. While these explanations may have some validity, they are now wearing increasingly thin given that the sustained rise of the euro against sterling commenced six months ago in mid-November 2007. At the very least, there is an onus on retailers to provide fuller information about their forward purchases of products or currency. While no one is asking retailers to disclose commercially sensitive information, we are entitled at this stage to be told more about how long such arrangements last, what proportion of products or currency exposure they cover and when consumers will finally see the benefit of the stronger euro in the prices they pay in the shops.

We imported €20 billion worth of goods from the United Kingdom in 2007, almost one-third of our total imports. Our annual imports of foods and beverages from the UK are approximately €2.5 billion. A 16% rise in the value of the euro against sterling should, in the context of purchases of this scale from the UK, result in a significant benefit flowing to every household in the country as well as to the national economy. The need to ensure that this benefit is fully passed on to Irish consumers is all the more important in view of the sharp rise in the price of foodstuffs in recent months. Retailers cannot trumpet their commitment to lower prices and better value for consumers while failing to pass on the sizeable price reductions that should stem from the appreciation of the euro in recent months.

The Government is in no doubt about the importance of this issue. The Tánaiste and Minister for Enterprise, Trade and Employment met this afternoon with the chief executive of the National Consumer Agency and a series of follow-up actions will result from this meeting. We are not going to take any rash or ill-judged steps. This is not a command economy where Government tell business enterprises what goods to sell or at what price to sell them. However, we are entitled to assume that responsible business enterprises will deal fairly with consumers and will pass on in full gains resulting from currency movements and not seek to profit from them.