Wednesday, 2 April 2003
Humanitarian Crisis in Iraq: Statements. - Regulatory Reform: Motion.
That Seanad Éireann,
–recalls the commitment in the Programme for Government 2002-2007 to vigorously pursue a programme of regulatory reform with particular emphasis on removing unwarranted constraints on competition in all sectors of the economy and placing the consumer at the top of the policy agenda;
–congratulates the Competition Authority on the recently published report into competition in eight professions carried out by Indecon International Economic Consultants;
We decided to table the motion to highlight the work of the Competition Authority. In recent years there has been a growing trend towards removing many of the tools of economic policy from the hands of national policy makers and placing them within the responsibility of transnational organisations. Interest rates are now set in Frankfurt and the annual budget is drawn up within the guidelines set down in a European Union pact. A key area in which national economic policy can make a difference is overseeing the competitive environment for business. The Competition Authority was established in 1991 as a statutory body with a specific role to enforce our competition law which is designed to protect and benefit the consumer.
Greater competition in the economy stimulates innovation and efficiency among business, enables consumers to buy goods and services at the best possible price and enhances overall national competitiveness. A competitive economy provides a basis for increasing productivity and living standards. In the long term it is also the most important policy tool for holding down inflation. This is a competitive process which the Competition Authority is committed to safeguarding in the interests of the consumer, businesses and the economy in general.
It is very much in keeping with the Minister's philosophy that the Competition Authority is working very well as an independent statutory authority. In carrying out its commitment to oversee and promote competition in the market, the authority has published a number of reports providing clear, sometimes disturbing and often surprising findings. It recently announced the publication of its annual report for 2002 which reveals the first promising indications of increased output arising from improved public investment in competition. It also highlights the resolution of many important investigations without resort to litigation, as well as information on two criminal investigations, 56 summonses and 18 searches which were carried out by the authority during the year.
The Competition Authority has also signalled its determination to aggressively tackle anti-competitive practices in the economy. This has already been demonstrated in sectors such as telecommunications and air travel, but it has also become the authority's responsibility to put certain sectors in which competition is less evident under the microscope. To that end, the findings of a specially commissioned report on competitive practices in eight professions was made public. The study examined the activities of doctors, dentists, accountants, veterinary surgeons, architects, engineers, solicitors and barristers. Those findings are interesting and worthwhile.
Of the eight professions studied, the authority found the most serious anti-competitive practices in the legal profession and in medicine. The regulation of these areas restricts entry and competition through a variety of mechanisms. One example is the legal profession, where all solicitors qualify from a course run by the Law Society and all barristers from one organised by the Kings Inns. Another is the limited number of places in medical schools and some of the restrictions placed in the way of doctors educated elsewhere who seek to work here.
The authority also included a number of recommendations in its report. For example, it is stated that removing the restriction on some professionals forming limited companies could increase investment in the provision of services such those of a primary health care nature. There is no doubt we would like to see increased investment in this area.
Furthermore, the authority found that the limitations on places in medical schools reduced competition in this sector. The authority was able to identify a number of areas to be improved in the sector, which could result in facilitating the creation of new general practitioner practices and allowing them to respond to market demands. Using the research as a foundation, the authority has plans to issue individual reports on competition in each profession on a phased basis. If appropriate, the authority will seek changes to existing practices or offer regulatory guidelines to the Government.
Since its foundation, the Competition Authority has taken on an active role in the economy. Having received additional powers under the Competition Act 2002, the authority is ready to assume a more active and effective role in the economy. Old cases are being cleared out to allow the authority concentrate on priority issues and it has increased its staffing level considerably during the past six months.
As stated earlier, the authority's annual report was recently published as well as a major report on a number of professions. I congratulate the authority, particularly the chairman, Dr. John Fingleton, on these excellent studies. In addition, reports on the banking sector and the insurance industry are currently in preparation.
Representatives of the authority came before the Joint Committee on Enterprise and Small Business, which is carrying out studies into the insurance industry. I am aware that the Tánaiste and Minister for Enterprise, Trade and Employment has taken up this matter as a priority of her ministry. Insurance costs are becoming a major issue in the economy in terms of public liability, car insurance and other insurance companies which operate in the marketplace. There is no competition in this area. Many businesses have been forced to cease trading as a result of the increase in insurance costs.
Following advertisements, the Joint Committee on Enterprise and Small Business received an enormous number of submissions on this area and the number of industries and small companies that have closed is frightening. Insurance costs for small companies have trebled. I am aware that the Tánaiste intends to ensure that a change is brought about in the industry and I wish her well in her endeavours.
Promoting competition has been a relatively underdeveloped area of economic policy but it is now one of the main policy tools available to ensure a productive economy. That puts a heavy onus on the authority, which has much ground to cover, but also on the Government, which has the final responsibility for policy action and ensuring the authority has the firepower to successfully undertake this vital role.
An area about which I have been concerned over the past 12 months, and on which I contacted the Competition Authority, is the beef industry. There is a view abroad that a cartel is working in that industry. Farmers are dissatisfied with the consistently low prices being paid for their quality of product and the same prices are being paid across the entire industry and in all the factories. It is obvious that there is some type of arrangement in the industry to maintain prices at a certain level.
The difference in the price of petrol and diesel throughout the country is interesting. Anyone driving from Roscommon to Dublin or the south will find there are enormous differences in prices. One can pay between 89.1 cent and 94.9 cent per litre of unleaded petrol in some locations. That is a considerable difference but members of the public are literally voting with their feet. The Leas-Chathaoirleach will be aware of the major difference in petrol and diesel prices between Belmullet and Dublin. Competition has ensured that they are maintained at the lowest possible prices.
The same applies to the airline industry. In fairness to Ryanair and other low cost airlines, they have reduced costs and created competition. I am sure the Tánaiste is delighted with the way Aer Lingus, which is now extremely competitive, has responded. We wish to see the same environment created in the insurance industry in particular. That would be a tremendous personal achievement for the Tánaiste, in conjunction with the Competition Authority. The Tánaiste put in place a number of measures in this regard since returning to office as Minister for Enterprise, Trade and Employment last year. I hope she can bring about a result that will reduce the cost of insurance, which will in turn stimulate job creation. It is discouraging for anyone setting up in business to be presented with enormous insurance costs and it is a deterrent to the creation of employment.
Anyone who saw the "Prime Time" programme on fraud in the insurance industry will understand the reasons costs are so high in the economy. One individual from Tralee made approximately seven claims in recent years, while another young boy was encouraged to make claims. This has resulted in enormous insurance costs. The banning of advertisements by solicitors encouraging people to make claims on a "No foal, no fee" basis is to be welcomed.
I welcome the Tánaiste. We are aware of her keen interest in this area, particularly in regard to insurance. I look forward to the ongoing work of the Competition Authority as outlined by Senator Leyden.
I welcome the motion and the opportunity to speak on the various matters highlighted in the Competition Authority's report. Of its nature, it is something of a preliminary report which is highly critical of the medical and legal professions. As we are aware, the authority is investigating eight professions in all.
It was rather startling to read that the cost of legal and medical services could be reduced by up to 30% if anti-competitive practices in these professions were ended. At least that is the view of Indecon, the economic consultants commissioned by the Competition Authority to prepare this report.
This major report will form part of a three year process of assessing anti-competitive practices in eight professions. The process is due to end next year by which time the authority hopes to have issued further reports and recommendations on each of the professions concerned.
Mr. Alan Gray, managing director of Indecon, pointed out that in other jurisdictions the removal of anti-competitive practices such as demarcation had led to falls in prices of 10% to 20%. However, when a number of anti-competitive practices were removed regarding a single profession, decreases in prices of 20% to 30% resulted. He cited solicitors, barristers and doctors as professions where such large decreases in costs were possible.
The other professions included in the Competition Authority's ongoing inquiry are architects, engineers, vets, opticians and dentists. So far the studies have found that there is normal competition between architects and engineers. However, with the other professions the extent of the restrictions on competition is very significant. The extent of the restrictions in the legal and medical professions is, according to Mr. Gray, "really very remarkable and has the effect of damaging consumer interests." He said the issues identified in the report were ones which Indecon believed should be addressed as a priority by the Competition Authority and Government.
The Competition Authority's chairman, Dr. John Fingleton, has indicated that it will use the report as a detailed base for the remainder of its study of competition in the professions concerned. The study will now progress profession by profession, starting with engineers and working concurrently rather than sequentially, and consultation papers will be published before a final report on each profession. Dr. Fingleton made the point that in beginning with the engineering profession it was likely to be completed quickly because it was not heavily regulated and he believed this would be of interest when hearing arguments from other professions with regard to regulation and quality of service.
Control of education and limits on advertising seem to be the most common barriers to competition. Mr. Gray of Indecon found very severe restrictions on competition between solicitors, extensive restrictions on competition between barristers, a number of extensive restrictions affecting competition between doctors and significant restrictions on competition between vets and dentists. As already stated, it found relatively few restrictions to competition between architects and engineers. Regarding opticians, he said there were a number of restrictions which had a potentially negative effect on competition.
The prohibition in some professions on members setting up limited companies and working in multidisciplinary practices with other professions and issues to do with demarcation and conduct led to restrictions on competition. The report stated that removing the restrictions on some professionals forming limited companies could increase investment in the provision of services such as primary health care. Dr. Fingleton said the effects of any changes introduced could take time to work their way into the system.
The report found that the Law Society's monopoly on the provision of certain courses for trainee solicitors was likely to restrict the number of entrants to the profession and also meant that Dublin was the only location where such training was available. Removing certain restrictions on solicitors who qualified in other jurisdictions coming to practise in Ireland would enhance competition. It also stated solicitors should be allowed to advertise superior specialist services and make "cold call" approaches to potential clients. Personal injury services would be an exception – we have all seen the extensive advertising in the Golden Pages by solicitors, an indication of how lucrative the business is. I agree with the report's conclusions about the exclusion of such services.
On conveyancing, the report stated restrictions on solicitors from other EU jurisdictions offering such services should be lifted and that a system of licensed conveyancers could be introduced. It also stated solicitors should be allowed to form limited liability companies and work with members of other professions.
The report stated the Kings Inns monopoly on the provision of a number of legal courses was likely to restrict the number of entrants to the profession of barrister. It also stated the fact that trainees were not paid was likely to act as a barrier to the profession. Rules that prevented barristers from advertising and prohibited clients getting direct access to barristers were likely to restrict competition. It criticised the restrictions whereby barristers employed by companies were not allowed address the courts and, furthermore, were obliged to use a solicitor to get access to a practising barrister who would then represent the company in court. Again, it found that barristers should be allowed to form companies and work in multidisciplinary practices.
The report stated many of the regulations covering the medical profession were appropriate and for the protection of the public. It added, however, that there were extensive restrictions that inhibited competition and investment without providing proportionate benefits. The limitation on places in medical schools cuts competition, as does the system used to control the transfer here of doctors from non-EU countries. It pointed out that the system for creating and filling public sector consultancy posts was too slow and not responsive enough to demand. We all know about this.
According to the report, no limit should be placed on the number of medical card contracts that could be awarded to general practitioners in any particular area. This would facilitate the creation of new GP practices and allow the number of practices to respond to market demands. There should be scope for patients to make direct contact with consultants without having to go to a GP first.
The report concluded that a system for registering qualified dental technicians and denturists would increase competition in the sector by allowing people other than dentists to sell dentures to customers. Rules in relation to non-EU dentists coming here to practise were criticised, as well as the limitation on the number of places.
We are all at one on this issue. I am aware of the Tánaiste's keen interest in the area, which is very welcome, but there are contradictions that we must address. The recent Health Insurance (Amendment) Bill provided for the transfer of large sums from one insurance company to another. Choice is needed. We must become more consistent in our practices. I support the motion.
Mary Harney (Tánaiste; Minister, Department for Enterprise and Employment; Minister, Department for Enterprise, Trade and Employment; Dublin Mid West, Progressive Democrats)
Link to this: Individually | In context
I am glad to have the opportunity to address the Seanad on this important issue as I firmly believe implementing a successful programme of regulatory reform is critical to our ability as a country to sustain future economic and social progress. I am a firm believer in the power of competition to benefit the consumer and spur innovation and productivity growth. Research has shown that vigorous competition in local markets not only benefits consumers but is also an essential element in providing the competitive base that will enable export companies to succeed in world markets.
While we have been very successful at attracting and developing an export sector which has productivity levels and growth rates up there with the best in the world, the same cannot be said for some of our sheltered sectors. The difference is not the brains or talent of those involved but their exposure to competition. Given our small home market, our internationally traded sector has to compete with the best in Europe and the world, while our sheltered sector is frequently protected from real competition by way of archaic regulations or cosy cartels. That is the reason there is such a strong focus on competition and regulatory reform in both the programme for Government and the partnership agreement, Sustaining Progress.
I have a particular concern for consumers, not least because of the fact that although everyone is a consumer at some level, consumers do not have a very loud representative voice. I have put the consumer at the top of the priority agenda, as stated in An Agreed Programme for Government, and I am determined that we remove unwarranted constraints on competition in the interests principally of consumer welfare.
Regulatory reform is one strand of this campaign. It is the process of reviewing both the quality and quantity of regulation to ensure it promotes economic and social well-being. The Government's better regulation agenda involves measures to improve existing and new regulations. We need to examine critically the need for regulation and the effects it can have on our citizens. Although regulation is an important tool for governments to achieve public policy goals, too much regulation can impede growth, stifle creativity and create bottlenecks in the system.
We have a wide range of regulation in Ireland. The electricity, gas and telecommunications systems are regulated. Airport charges and access to the airwaves are regulated, as are the professions and public transport. Equally, we have a range of standards in regulation. I support well thought out and properly implemented regulation in areas where competition alone will not achieve optimum consumer welfare. However, these must be horizontal, transparent rules which apply equally to existing and new market entrants and not simply a mechanism to confer advantages on incumbent suppliers.
What is the state of our regulation and who can give an authoritative independent view on it? The OECD in its report on regulatory reform in Ireland, published in 2001, said that we made a good start in implementing a regulatory reform programme, that we compare well with other OECD countries in terms of market access and that the pace of liberalisation of the telecommunications and aviation sectors has resulted in many benefits. However, it pointed out that there is much more to be done in respect of certain sectors to strengthen competition and rebalance the relationship between producer and consumer in favour of the consumer.
Prior to the OECD report, we had made much progress on competition law. There was a wide-ranging review by an expert group which resulted in the drafting of the Bill which became the Competition Act 2002. The Act brought together competition and merger control law and implemented significant changes. These included the abolition of the notification system for agreements and more independence for the Competition Authority.
In the important area of enforcement, enhanced powers were given to the Competition Authority. There are increased jail terms from two years to five years for so-called "hard core" competition offences, such as price-fixing and market-sharing. Powers of arrest and detention were also introduced. Responsibility for deciding upon mergers, other than media mergers, was transferred from my Department to the Competition Authority on 1 January last, with decisions on non-media mergers being based solely on competition criteria. The Act also gives the Authority a clear advocacy role regarding measures necessary to improve competition in markets by way of structural and regulatory changes. To complement improvements in the law, the resources, both staff and financial, of the Competition Authority have been significantly improved.
The Government is committed to better regulation and much has been achieved in areas such as taxis, liquor licensing and pharmacies. However, we recognise that much remains to be done and that if state regulation is excessive in quantity or of poor quality, it will be an unnecessary burden on economic and social activity. Our approach to regulatory reform is pragmatic. We want to simplify regulation and ensure that it is proportionate.
Following receipt of the OECD report, the Government put in train a number of actions to address issues raised. The retail pharmacy sector was criticised by the OECD in regard of the award of general medical service contracts to pharmacies on what was regarded as a restrictive basis. Restrictions included quantitative entry criteria and the offending regulations which governed this matter have been revoked. Entry to the retail pharmacy profession now has no restrictions on granting contracts in terms of location, population or viability of existing pharmacies. The opening of new pharmacies continues to be governed by the Pharmacy Acts, which apply qualitative criteria and are subject to restrictions imposed by non-pharmacy legislation such as planning law.
The OECD recommended the restriction on pharmacists educated in other EU countries managing or supervising a pharmacy that is less than three years old be eliminated. I agree with OECD on this, but Ireland has availed of a derogation under the relevant European directive on the free movement of pharmacists which permits the restriction. A review group appointed by the Minister for Health and Children in October 2001 has completed its work in regard to retail pharmacy and the Minister is currently examining the report. I look forward to seeing remaining quantitative restrictions lifted.
In the area of pub licensing, much progress was made in the Intoxicating Liquor Act 2000. Furthermore, the Commission on Liquor Licensing published a report in 2001 recommending a further easing of restriction in the off-licence trade. In 2002, it published studies with recommendations focusing, in particular, on theatres and night clubs and on access to licensed premises. The commission published a further report today. I look forward, on the basis of its work. to seeing a more competitive bar trade emerging in the future.
In so far as my responsibilities are concerned, the Competition Authority's study of the professions started in May 2001, following the OECD report which suggested that competition in the professional services sector in Ireland could be stronger. Following a preliminary public consultation process, the authority announced that the study would cover competition in eight professions in three sectors: engineers and architects in the construction sector; medical practitioners, veterinary surgeons, dentists and optometrists in the medical sector; and solicitors and barristers in the legal sector.
These professions touch on almost every aspect of society and they work in critical areas of people's lives, such as health, food safety, legal rights and security of building structures. Historically, the way the professions were regulated had important and often unintended consequences. If regulations or restrictions result in unnecessarily high prices, barriers to the provision of professional services, disincentives to innovate or barriers to entry to these professions, the negative consequences for consumers can be significant. A situation of inappropriate or bad regulation leads to higher costs, which, in turn, contribute to inflation. In the current climate we need to avail of every opportunity to keep down inflation.
Many aspects of regulation have no adverse impact on competition. Examples would be professional competence, client confidentiality and codes of ethics. In other cases, however, regulation may sometimes damage competition, notably in the restriction of educational facilities for aspirants, quotas on numbers of operators, quotas on students and "scale" or "recommended" fees. Some restrictions may, however, be justified if there are wider public policy benefits. It is essential to ensure that regulation does not simply protect certain practitioners or serve to support narrow, vested economic interests. It is important to also recognise that, for the most part, maintaining standards and facilitating competition are mutually supportive.
The Competition Authority has received a wide-ranging report on the professions from its consultants and is now taking the result of that work into account in finalising its study. At this stage I will not comment in detail on the work which has to be done, other than to say that it is disturbing to see the list of restrictions which exist across the range of professions. It is important that vested interests are not permitted to maintain the status quo because in many cases this militates directly against our fight to be competitive and provide consumers, whether they purchase services or goods, with the best deal possible at every level.
Senators are aware that the Competition Authority is also involved in studies of the insurance and banking areas, the former in conjunction with my Department. This is a study of competition issues in the non-life insurance market, with particular reference to motor insurance, employer's liability and public liability. It arises from the report of the Motor Insurance Advisory Board. It is intended that most of the work on this study will be completed in 2003. The study of competition in the provision of banking services – excluding investment banking – will identity barriers to entry into non-investment banking in the State. It will also identify and analyse industry practices, legislation and/or administrative practices in non-investment banking in the State that limit the degree of rivalry on the market to the detriment of consumers. It is intended that this study will also be completed in 2003.
The new social partnership agreement contains a number of objectives and commitments on regulatory reform and seeks to renew Ireland's competitiveness using a broad range of policies. It advocates a regulatory policy that provides for the screening of new and existing regulations in terms of their impact on the economy and society, establishes the framework whereby regulatory arrangements can be optimised for particular market sectors and renews the focus on reducing the burden being imposed, through regulation, on the citizen and business.
Sustaining Progress also contains a commitment to publish a White Paper this year and to introduce regulatory impact assessment in all Government Departments. There will be a renewed emphasis on sectoral regulatory reforms, including reforms in the networked industries and infrastructural sectors, and, in particular, markets such as liquor licensing, financial services, construction, legal and health care professions. In addition, there will be a renewed emphasis on creating a better regulatory environment for enterprise, particularly for companies of small and medium size.
In the area of anti-inflation initiatives, to help exert downward pressure on inflation in order that we can maintain competitiveness in some areas and recover it in others, Sustaining Progress contains a commitment to set up a group representative of the major economic departments, IBEC and the ICTU. It also includes participation, as appropriate, from the Competition Authority and the Office of the Director of Consumer Affairs. It is envisaged that this group will draw up an action plan on anti-inflation initiatives and monitor progress on this plan.
At this stage of our country's development, I find it difficult to understand why restrictions, which were justified historically by arguments such as "maintaining employment", remain when all evidence has shown that where there is real competition, there are benefits for businesses, professions and consumers. The truth is that vigorous competition benefits the economy and society through lower costs, low inflation and higher employment.
I am glad to have the opportunity of responding to this debate. First, I welcome the Tánaiste and congratulate her on the work she has been doing for the consumer in this area. It has been progressive and positive in many ways and I have been very happy to co-operate and support it in as many ways as I possibly can. The initiatives that have been taken are having an effect, albeit far too slowly but the work cannot be done more quickly because there are real difficulties to overcome. It is trying to unlock and uncover issues that have existed for generations, in some cases for centuries. I take heart from the reference in broad general terms in the Tánaiste's speech to the question of regulation. She said, "I support well thought out and properly implemented regulation in areas where competition alone will not achieve optimum consumer welfare." I support this nuanced approach to regulation. That is what it is necessary and where things need to be done.
Elsewhere the Tánaiste referred to the resources and supports for the Competition Authority. Recently I indicated in this House that at the first opportunity I would put a proposal to the Tánaiste and will take the opportunity of doing so now. The Criminal Asset Bureau's success has created some additional resources for the State, perhaps not huge amounts but in the meantime the Competition Authority is now dealing with issues that can lead to criminal charges. It is investigating potential criminal offences, yet its resources – the last time I checked – amounted to no more than three detectives for the whole State.
I ask the Tánaiste to consider as an appropriate move redirecting some of the resources from the CAB to the Competition Authority. This would produce a double gain. In the CAB we are recovering resources that have been stolen from the State in one form or another and which we can now effectively invest in continuing the work under the Competition Authority. It would be an appropriate, positive and progressive quid pro quo to move resources from one area to the other. I ask the Tánaiste to consider whether that is a feasible proposal and whether on its own terms it is feasible for the Competition Authority to attempt to do the work she has set out for it. Nobody in the House will disapprove of or argue against the outline of work that has been laid down but there is a huge amount to do.
Leaving aside the issues dealt with in the Tánaiste's speech and also by Senator Coghlan, with all of which I agree, particularly regarding the Indecon report, there remains the issue of price fixing. In the past week I have travelled around the country a lot and now automatically check fuel prices as I drive through every town. I could make a list of the towns where clearly there are price fixing cartels.
I passed through a town today where I counted seven large service fuel stations and not one of them offered a price that was 0.1 cent different from any of the others. I passed through the next town, ten miles away, to find there was a broad difference of ten cent between the cheapest and the dearest. It is very easy to see that seven outlets do not suddenly come on the same figure of 89.9 cent or 90.6 cent, or whatever the figure happens to be, per litre, suggesting that there is some form of conspiracy, co-ordination, or cartel operating in those situations.
Another issue I have raised several times in the past couple of months is the gap between the price paid to farmers at the farm gate and that paid by consumers at the other end. This includes the price of milk, meat and other products. There is an operation that we need to look at very closely. On a number of occasions we have discussed the question of building, housing and land development in that context, something that we need to and can do. I ask that those issues be looked at very closely.
Personal injuries is another example of an area where prices and costs can be reduced. In personal injury cases somewhere between 25% and 50% of the cost on average comprises legal fees; in other words, it never reaches the victim. This percentage very often rises to 70% or 75% but on average is somewhere between 25% and 50%, which is unacceptable and cannot continue.
Controlling inflation is a concern which everyone shares. It is not just a matter for Government, the business community or workers. It affects everybody, including consumers, families, and the broader community.
The issues outlined in the motion are important for every one of us. We must at least put our shoulders behind them to give them as much support as possible. The partnership programme will be of help in this direction but on its own will not deliver the goods. Opening up the areas which have come through in the Indecon report is crucial. Further resources for the Competition Authority are also crucial as it cannot do its work without them. I would like to see at least ten more trained or qualified detectives available to it in order that it can conduct the investigations that are necessary and will be required if it is to deliver the goods. It gives me great pleasure to support the motion.
I welcome the Minister of State for Enterprise, Trade and Employment, Deputy Michael Ahern. I am sorry that the Tánaiste has had to leave but that is no reflection on the Minister of State. Perhaps I am relieved that she had to leave in that she addressed in much of her speech the pharmacy sector which I intend to cover.
I belong to a party which supports competition and the market economy. However, that is not to say the market economy does not have its limitations or that there are not instances where Government must intervene to protect the public interest. I am not driven to achieve a free market at any cost. I recognise, for example, the need for Government to intervene, particularly in the provision of key social and health services. When it comes to services of this nature, the overriding consideration must be what Government can do to ensure quality services are available or to improve services, whether they are provided directly by Government or on behalf of Government through the private sector. Appropriate services should be delivered by the private sector on behalf of Government where it is effective and efficient to do so. For example, I recently read a report from the pharmaeconomics department of St. James's Hospital that estimated that it was 11 times cheaper for Government to deliver the methadone protocol through the private sector, that is, through pharmacies and general practitioners, than directly through State services.
I am happy to say I support the motion. In doing so I put down a clear marker that competition and economics are not the be all and end all in providing professional services for the people. The Tánaiste referred at some length to the debate on pharmacy, one of the areas of which I have some experience and on which I would like to make a few points to highlight the arguments I am making. The decision is whether we view a pharmacy as a retailer driven by economics or as an integral part of the health service operated by professionals who provide a medical service for their customers. It is interesting to note that even when all sectors of the medical service are under attack, there is no dissatisfaction among members of the public with the service provided for them by their local community pharmacist, yet we have a situation where people driven by economic logic are set on following a course of action that will seriously damage the service available to the customer. A recent report commissioned by the EU on the economic impact of regulation in the field of liberal professions in different member states interestingly showed that Ireland has the lowest level of regulation in the pharmacy sector.
In a submission to the Pharmacy Review Group referred to by the Tánaiste, the Asthma Society of Ireland stated that it, "as a representative organisation of and for people with asthma, would have grave concerns with regard to this term of reference that deems to 'maximise the potential to increase competition within the sector', if this means deregulating the sector." It stated that encouraging open competition, whereby chains of pharmacies could set up throughout Ireland, would more than likely damage local pharmacies in the community. It also stated that:
There is also the risk that opening up competition within the pharmacy sector will actually lead to the closure of rural pharmacies, with new pharmacies being established in the more economically viable areas. This would mark the decline of these essential community amenities; the very opposite of what your fifth term of reference implies. Simply put, the Irish pharmacy is not merely a business venture; it is an integral part of our primary care system. The pharmacist is also the first port of call for many who don't have a medical card and are looking for medical advice. The customer gets free advice and reassurance.
We feel that the de-regulation of pharmacy services may curtail services and in effect reduce patient care, as has been the case in the United States, just at a time when the role of the pharmacist in the promotion of primary, secondary and tertiary care has been identified as an important element in the provision of future diabetes patient care in this country.
The national health strategy, 2001, was based on core principles of equity, being people-centred, quality, accountability, continuity of care, a holistic approach and improved population health. The current ownership structure of the community pharmacy sector in Ireland facilitates the delivery of such a service and should be allowed to continue to do so. The challenge for the future, therefore, should be to build on that core base of professional service managed and controlled by pharmacists.
PricewaterhouseCoopers estimated that the cost-effectiveness of the Pharmacy Regulations 1996 saved the Exchequer at least €155 million annually as a result of significant reductions in the leakage of demand in other parts of the health service. For example, increased drug compliance resulted in reduction of demand for accident and emergency services.
In rural areas we have seen this type of thing before. Gone are the local bank, post office and corner shop – valuable community services lost forever in the name of ideology. The community pharmacy may be next and we cannot afford to let this happen. PWC also showed that there is considerable evidence to suggest that in excess of 300 of the 1,200 pharmacies in this country are very small marginal businesses, which are now vulnerable to closure if we proceed with a deregulated market.
At a recent seminar on the future of pharmacy in Ireland, the American experience was discussed and the dangers associated with a free market in the delivery of pharmacy services. Their experience is that rural health care suffered in a deregulated market because multinationals concentrated mostly in large population centres – the US chains concentrated on the east and west coasts. This will hit hardest the highest users of pharmacy services – the elderly, the long-term ill, etc. – who will have to travel further for access to these services. In Norway, the Government deregulated pharmacy services 18 months ago and today three chains own 70% of all pharmacies. There is no reason to believe the Irish experience will be any different.
The recently published report by the UK Office of Fair Trading called for the full deregulation of the pharmacy sector in the UK. The report was quickly rebuffed by the UK Trade and Industry Secretary, who said, "I am clear that there are limits to markets, particularly in the delivery of health services." Her comments were quickly followed by those of Lord Borrie QC, former director general of the OFT and Labour Peer, who said:
On superpubs, I note that the recently published report on the drinks trade recommends that limitations be placed on the size and location of pubs. The report recommends that the owner should manage pubs and that new publicans cannot own more than one premises, specifically to reduce the power of the chains. The report, backed by the Minister for Justice, Equality and Law Reform, calls for the replacement of superpubs by small owner-run premises which will be designed to serve the needs of local communities. Why are pubs' licences being treated in this way while pharmacy licences are being thrown to the wolves?
Have the economists taken a narrow view in certain areas and, as a result, confused our priorities to act in the overall good? Following free market ideology is not enough, we have to consider all aspects of the service required and ensure we legislate in the public interest. As legislators, we have a responsibility to question varying opinions – those of the economist, the vested interest groups and the consumer – and, in particular, we need to way up the consequences of our proposed decisions. Having examined the proposed courses of action, we should legislate in the overall interests of the community we serve.
What is great about being a pragmatist is that one picks up the best ideas and looks at the concepts that work. That is one of the reasons I long ago abandoned liberal market economics. They do not work because they are based on presumptions about human behaviour that are not true. They espouse the view that people should be driven into a form of behaviour which is inimical to their well-being.
When one looks at something like competition, one starts from the same base, namely, what works best for those who are receiving the service, and this is where economists have a problem. What is best cannot be encompassed by considerations of price alone. It is probably indisputable that Ryanair provides, in many cases, the cheapest air service between this country and the United Kingdom, but it is highly debatable that it provides the best.
This evening I read the executive summary of the Competition Authority's report on the professions. I endeavoured to print it but, in the joys of monopoly service providers, my printer would not work and apparently it will take another week to get it fixed. I could not print it, but I did read it. I was intrigued by the different parts of it. I am particularly intrigued by the fact that the authority identified the problem of the quantitative restriction in entry to a number of the professions – particularly medicine, dentistry and veterinary science. There is a degree to which this is also true in the case of the architectural profession. There is no simple solution to that particular problem.
I have believed all my life that every young person in this country should be able to enter any profession for which he or she has the intellectual capacity. There should be no quantitative restrictions on the entry to any profession. That is the single best and simplest way of dealing with some of the restrictive practices which appear to characterise some of our more eminent professions. That is the first aspect. Are we going to take the responsibility, which will be expensive for the State, of ensuring that there are enough places for every young person in the country who wants to study medicine, veterinary science, dentistry or law? There are enough places for anybody who wants to do engineering, my own profession. There are probably not enough for those who want to do architecture.
It is a very competitive profession and always has been. In fact, I am a little taken aback at the Indecon suggestion that the consumer would be better off if the Association of Consulting Engineers of Ireland did not publish records of fees. The consumer would be worse off if he or she did not know. The lists should be an accurate record of historical data: this is what the ACEI and the IEI do. The idea that these could be a constraint on competition is another matter which could be debated.
We have surrounded what we call the liberal professions in a cloud of mumbo-jumbo and self-righteous self-importance. The sooner much of this is cut away the better but some of the nonsense the Competition Authority has come out with about health care needs and deserves to be challenged. It is of the opinion, in public, that if there was more competition in the provision of health care, the consumer would be better off and prices would drop. The problem is that there is an infinite demand for health care. As there is no limit to the demand, the more that is provided the more people will want. If we have competitive provision based on market principles, we end up with a more expensive health service – as has happened in the USA where the health service is the most expensive in the world, costing 14% of the GDP. The USA is the richest country in the world: according to the way economists present these figures, it is perhaps 25% richer than most countries in Europe, yet it costs Americans that much more to have a health service which has singularly failed to give them a life expectancy as high as that of many countries in Europe and has tragically failed to give them an infant mortality rate comparable with that of the best countries in Europe.
Let us not get carried away with competition. The solution, in terms of the so-called liberal professions, is very straightforward. It is to allow, or require, people to publish fees, increase the supply of qualified personnel, reduce the artificial qualification barriers that are often introduced and establish objective criteria. The students I teach do four years of study and within six months of leaving the course can go out and be left in charge of a piece of equipment costing perhaps €5 million or €10 million. After six months they are regarded by tough, competitive, market focused US multinationals as capable of being left in charge of something like that, perhaps overnight.
The Senator should not joke about this – it is serious.
The legal profession, on the other hand, would have us believe somebody who does a four year degree in law needs another four years before he or she can function adequately as a lawyer. That is palpable nonsense. Either there is something wrong with the degree course or there is something wrong with the subsequent training.
There is one thing in the Indecon report which is dangerous nonsense and demonstrates how we should not let ideology get in the way of practicality. The idea that every specialist consultant should be directly accessible to every individual who has a pain, without referral from a general practitioner, is a recipe for chaos. We may well investigate whether there are enough consultants – that is a separate issue – but the idea that we would improve the quality of health care by allowing everybody who had a pain in his or her head and thought he or she had a brain tumour to go straight to a specialist rather than having to accept the practical and common-sense advice of a GP first is absolute nonsense. Only those who had let ideology cloud practicality would come up with such a recommendation.
I welcome the Minister of State. I will talk about the last part of the motion:
[that Seanad Éireann] supports the Competition Authority and the Director of Consumer Affairs being given additional priorities and tasks to boost this counter-inflationary policy, including:
(i) more aggressive implementation of competition policy, including dealing with sheltered sectors where unnecessary barriers to entry exist,
(ii) accelerating the studies of professional services, which were initiated by the Competition Authority at the request of the Government on foot of the OECD review of Ireland's regulatory regime.
I will try to stick to my last remark and discuss the medical profession. It is very odd to hear the word "competition" used so much in dealing with the medical profession because most of us involved in it feel that if only we could have a bit more competition, life might be a bit more bearable. Far too many doctors are far too busy and many, unfortunately, are now taking early retirement. I do not think this has been taken into account, nor has it been taken into account by those who would address the problem.
Thirty per cent of all doctors are general practitioners and work, on average, a 79 hour week, of which 46 hours is on calls. I note that this all comes from the report we are discussing. A total of 39% of general practitioners said it was extremely difficult to get help. Another 33% said it was very difficult. In other words, 52% were having terrible trouble in getting help to run their practices. We must take into account that there really is a shortage of supply rather than a need for competition. This has not been dealt with in the report. Certainly, the price of a visit to a general practitioner seems to be about €35 but is more expensive in town than in the country. The increase in the price of a consultation with a general practitioner is larger than inflation but one thing on which the Minister for Health and Children and I agree all the time is that medical inflation has been much larger than general inflation, of which, unfortunately, our old bugbear, insurance, is a very important part.
Deputy Glennon could be asked about the increases Medisec have had to bring forward. He initiated a very economic scheme but after a certain number of years the fees are now about twice what they used to be. That is a big problem. On questioning patients, the authors of the report did not find that price was a major factor in whom one chose as a doctor. Geographical proximity, reputation, quality of service and customer trust, as it was described – I would prefer to have seen it being described as patient trust, but what harm – were more important factors.
I have found that one of the greatest difficulties experienced by general practitioners in starting up lies in getting planning permission. Senators might remember that in the good old days people could start in their front rooms or perhaps have a garage converted but that is no longer allowed. Obtaining planning permission in one of the new shopping centres is a difficulty but there is also the problem of cost. These outlets, which are competing with retail outlets, are very expensive. This is certainly putting up the cost of seeing general practitioners.
Quite rightly, patients would like more information on fees. Perhaps the Medical Council's stipulations have been too harsh – certainly, one cannot advertise one's fees in the Yellow Pages– but one can put up a schedule of charges in one's surgery. The vast majority of doctors do this. It is nearly a form of advertising because it does tell people about one's specialist services. I do not think doctors would have a problem with this.
The report did discuss the issue of doctors' being disallowed from forming limited liability companies with other medical or paramedical practitioners. It seems a good idea from the point of view of economics. We all see how well the new co-operatives are working. However, there is one problem. The report stated if doctors set up a limited liability company, there could be specialists within the company but there is a problem with this. If the company had a specialist in toenails, we could see everybody being referred for treatment for their toenails for the good of the company – not that any of my colleagues would ever think of doing something like this. That is something we have to take into account just in case in the distant future some medical practitioners are like that. It could end up making things more rather than less expensive for the patient.
It is a pity general practitioners are so dependent on the pharmaceutical companies for promotional literature encouraging people to have vaccinations, even though the Department of Health and Children produces some very good literature. Patients who have colostomies have a stoma with a bag attached and they have to learn how to deal with it. A patient recently pointed out to me that all the stoma care nurses are employed by the pharmaceutical companies. Naturally they will push their own product and encourage frequent use and frequent changing. It would be far better if the Department of Health and Children employed stoma care nurses. In areas like this more competition would be extremely useful.
The report says there should be easier entry for all general practitioners into the General Medical Service. I could not but support this. Nowadays the IMO must be consulted to see if setting up another GMS list in an area where there are plenty of other doctors with GMS lists would be resisted by people in those areas. This very rarely happens now and the most serious problem is getting people to take up GMS lists in some parts of the country. It is not a question of trying to get competition for these lists; it is a question of getting anyone to take them at all. Not all of this was taken into account by the people who wrote the review.
Some 25% of doctors in the country are consultants, but we have a terrible shortage of consultants. The report points out that we are ranked 13th out of 14 European countries in the number of inhabitants per doctor. The health boards and hospitals apply for the doctors they want and are far more likely to apply for cardiac surgeons than neurologists. There is a desperate shortage of neurologists, but people with Parkinsonism or degenerative myelomas do not get the same sort of attention that people with bad hearts do.
There is a serious delay in appointing consultants. This is not just the fault of Comhairle na nOspidéal or the Department. A doctor who is appointed in December might not agree to start until September due to existing commitments. These sorts of considerations have not been taken into account. They have taken no notice of these important delays.
We must be careful about assessing the non-EU medical schools through which people from outside the European Union have qualified. Not enough consideration is given to that. The Medical Practitioners Act, which we brought in with great haste last June to allow service as well as examinations to be taken into account, still has not been enforced. We have been promised for years a medical practitioners Act but still do not have one.