Wednesday, 17 December 2003
Economic Competitiveness: Motion.
That Seanad Éireann affirms the importance of competition in all sectors to achieve low prices and fairness for consumers, a level playing field for all businesses and overall efficiency for the economy and accordingly, approves and supports the Government's policy to promote competition in the economy.
Competition is absolutely essential for a free and open society. Freedom to compete means freedom to innovate and offer new products and services and, ultimately, to create wealth and prosperity. It goes to the heart of the type of society and economy we want. One does not have to be a specialist in law or economics to realise this.
The role competition plays in ensuring fairness is easy enough to recognise. To ensure a fair balance of economic power and a free society with functioning markets, we need strong competition, active consumers and appropriate regulation. We are improving in regard to all three needs, thanks to the action of the Government. For example, we are opening up more areas for competition in transport and services. We are properly resourcing the Competition Authority, the results of whose work are becoming increasingly evident. We are promoting more consumer awareness through the Office of the Director of Consumer Affairs and we have placed the consumer interest at the heart of financial regulation in the Irish Financial Services Regulatory Authority.
It is quite significant that the Irish Financial Services Regulatory Authority's recent consultation paper defines its three key mandates as follows: helping consumers to make informed choices through education and codes of practice in a fair financial services market; having a regulatory system that fosters safe and sound financial institutions while operating in a competitive and expanding market of high reputation; and developing an appropriate regulatory system for credit unions. These mandates serve to underline the arguments I am making. Despite much scepticism, the Irish Financial Services Regulatory Authority is shown to be making an excellent start with its recent price survey and other initiatives, as is evident from its consultation paper.
There is a marked difference between the "competition" this motion seeks to address and the "competitiveness" referred to in the Fine Gael amendment. This is a point on which I expect my learned colleague Senator Minihan to expand. It is important for a competitive economy to have competition within it, but the two concepts are separate.
We are providing for better regulation across many areas of the economy, from communications to accountancy and financial services. The passage of the Companies (Auditing and Accounting) Bill 2003 this morning serves as an example. The Government has shown sensitivity to the need for appropriate regulation rather than over-regulation. One criticism of our past is that we have over-regulated.
Consider the introduction of competition to airports and the creation of three new airport businesses from Aer Rianta. The Labour Party and others want to see the full plan for every day in Shannon and Cork airports. Its bias is towards planning, control and the protection of existing interests and arrangements and it just does not see that competition does not work like that. The whole point of competition is to give Shannon and Cork airports the freedom to compete, innovate and make their businesses work to their benefit and that of their customers.
At a strategic level, we believe there is a clear basis for these businesses. However, they can only work with the freedom to compete. This includes the autonomy to make, implement and modify their own business plans. There is a radical difference between the preference to allow Shannon and Cork airports the freedom to compete and the Labour Party's preference for central planning in advance of every step before anything strategic is done.
It matters little enough whether people say the planning should happen in Aer Rianta, the Department of Transport, among social partners or at Government level. There is no need for this type of central planning for our airports at all. The point is that one chooses either to have faith in the ability of independent companies to compete and prosper or to plan and protect centrally. Freedom to compete is the polar opposite of planning, control and protection.
Some people create a spectre around the word "competition" and allude to predatory, dog-eat-dog behaviour and the so-called law of the jungle. This is a worn-out cliché and a caricature wheeled out occasionally to oppose change. It plays on people's fears and displays a great lack of confidence in what people can and do achieve when they compete.
We know from experience that competition works for consumers and for the public interest. It delivers lower prices and more and better services. We have seen it on a massive scale in terms of air transport. The Ryanair story has been catalogued enough in the Houses without my going into it in detail, but it is worth mentioning that Aer Lingus has thrived by competing effectively in recent times. The benefits from air transport competition have been immense and have been enjoyed by millions of people. There are social benefits as well as economic benefits and thousands of jobs and small businesses in tourism have felt the direct beneficial effect of low cost access to Ireland. If anything has contributed to the rise in numbers of tourists coming to Ireland, it has been access to low cost air travel.
It is of strategic importance that we maintain and develop this access. One expert has pointed out that air routes are elements of infrastructure, as vital as roads and rail lines. They may perhaps be even more important for an island. We need to build and maintain air routes at the lowest possible cost, and this is why airport competition will be good for the country as well as competition between terminals at Dublin.
Competition in telecommunications has delivered a range of services that would be unthinkable if we still had Telecom Éireann. Imagine if we had a sole fixed line operator, one mobile company and one cable company, all in State ownership. Only the most ideological of ideologues of the left would say we would have better and cheaper services with that type of monopoly. We have further to go down the road of competition in telecommunications, particularly on the local loop and we cannot let up in this area or any other.
We need more competition in many areas of the economy. To complement the work of the Government and the Tánaiste in reducing insurance costs, we need more players in various parts of the insurance market. The Tánaiste has encouraged businesses to look at the Irish market again, especially since the Personal Injuries Assessment Board will soon be up and running and the civil law reforms will be in place, as they are going through the Dáil at present.
The Minister for Transport is leading the way on bus routes and private operators. Again, who will claim now that the people of Dublin are worse off because we have the Aircoach service? We can also use the power of competition in sectors of the health service, as clearly we could do with more competition in health insurance. The structure of the market, with one dominant company in VHI towering over BUPA with a market share of over 80%, is far from ideal but that is an historical legacy. The VHI management discharges its duties and functions in the circumstances in which it finds itself and has done so well in the past. I doubt we would ever have allowed this market share to be built by management action, that is, by mergers and acquisitions. We would not be comfortable with a bank having a market share over 80% and the health insurance market is in great need of more competition. Many health policy strategic considerations will have to be addressed in achieving this.
Competition in the provision of some health services is behind the success of the National Treatment Purchase Fund. Operations are priced and contracts entered into and if the price one hospital is offering – private or public, in Ireland or Britain – is too high, there is no onus on the National Treatment Purchase Fund to use it. Competition works for the good of patients here and it produces value for public money. It will be well worth our while absorbing and applying what we have learned from the use of €30 million or so in the National Treatment Purchase Fund.
It is clear that we should continue to use the power of competition in as many areas as possible for value for public money. I congratulate the Competition Authority for the range of its work and for enforcing competition policy in ways that are not always dramatic but are effective. The recent action on petrol stations and newspaper prices are good examples. I am confident the Competition Authority's ongoing consultations and reviews will pay dividends, not always in high profile ways, but in creating a competition culture in the country.
Is it not clear now that the presumption must be in favour of competition? The burden of proof lies with the opponents of competition to demonstrate that competition would produce worse outcomes. It is a rare case where the public interest is best served by a monopoly, even a regulated one. I ask anyone who defends anti-competitive practices or non-competitive arrangements to demonstrate how consumer interests are enhanced by the preservation of rules and procedures that reduce competition. The onus to prove the case is on that side, not on those of us who favour competition. We favour competition because it is a force for growth, innovation and prosperity and also because it is inherently fair. Competition brings fairness and economic development together and no one needs fear that. We are making progress on competition in Ireland. The mindset has been changed, slowly enough and mainly by example, but we must press on. The result will be better for our citizens, better for the economy, better for workers and job creation and better for our international competitiveness.
The Opposition amendment refers to the report, "Competitive Challenge 2003" from the National Competitiveness Council and Forfás. It states that facilitating markets to operate efficiently by ensuring adequate competition is vital to driving down the cost of doing business in Ireland but according to ACRA 2003, however, Ireland ranks 13th out of 16 countries in terms of the intensity of domestic competition. The report also states that the Competition Act 2002 was a significant step forward in enhancing Irish competition law and strengthening the powers of the Competition Authority. It refers to Ireland having no civil sanctions for infringement of competition law, unlike some other countries, and that needs to be considered. The report also refers to impediments to competition as a result of State-imposed legislation and regulations which need to be removed. I said earlier that we were perhaps over-regulated in the past, which is not to say that some industries or activities should not be regulated. Dominance within a market has to be regulated but we must allow competition to flourish, as that is beneficial to everyone.
"Seanad Éireann condemns the failure of the Government's policies to maintain Ireland's competitiveness as evidenced by the substantial contribution which Government stealth taxes have made to inflation in recent years and the recent report of the National Competitiveness Council which revealed that Ireland is the joint most expensive country in the euro zone for consumer goods, ranks fourth most expensive of 16 countries for insurance premiums per capita and is the third most expensive of nine countries for industrial electricity costs.
I welcome the Minister of State at the Department of Enterprise, Trade and Employment, Deputy Fahey. It is good to see him back again after his recent escapades. It is a sign of our proximity to Christmas that the Progressive Democrats have decided to table a motion commending the Government for its policy on and approach to competition. They must have assumed that in the spirit of goodwill that normally descends upon us all at this festive time that they would receive uncritical acclaim from all sides of the House for their motion. I am sorry to disappoint my friends opposite, but the ghosts of Christmas past, present and future prevent us from embracing the sentiment behind their motion.
Mr. Coghlan: For the thousands of Irish businesses fighting to retain their competitive position in domestic and international markets at present, this motion will ring hollow. The increased costs facing business, which are directly attributable to Government-sanctioned increases or initiatives, are the single biggest indictment of the failure of the Government's approach to tackling competitiveness in the Irish economy. Businesses and consumers must also bear additional costs arising from the persistent failure of the Government to tackle monopolies and cartels, particularly in the non-traded sectors.
A competitive economy is a laudable and achievable objective. However, it is patently cynical for members of the Government to portray themselves as the champions of competition, while simultaneously undermining the cost base of most businesses in the State. Increases in energy costs, waste charges, telecommunications costs and insurance costs are directly attributable to Government inaction in these key areas. The Government has created an abstract vision of what competition might be like in key sectors but has singularly failed to deliver on that vision. We have the reality of a supposedly competitive electricity market, yet consumers end up with less choice and higher prices. Similarly, in the telecommunications sector the Government has failed to introduce real choice and value for consumers.
In public transport, we still have State-owned monopolies that ill serve the interests of consumers. We have a postal service that is less efficient than the carriage-drawn service of 100 years ago and the programme of infrastructural development that is supposed to underpin a competitive economy is full of inefficiencies, cost overruns and delays. The poor Minister for Transport will soon end up opening the same roads twice in a valiant effort to maintain his high public profile in the media.
In addition to State-sponsored inefficiencies and costs, the Government has also seriously undermined the competitiveness of Irish businesses by introducing an array of stealth charges and taxes which attack the very heart of economic competitiveness of businesses in the State. While trumpeting low corporation tax rates, the Government has done its utmost to ensure that few businesses get to make any profits at all.
At every chance, the Government has sought to increase its indirect tax take from consumers and businesses. It hopes that the absence of a harp on the envelope seeking the increased charges will distract business people from the true source of this perfidy. Seldom in the course of Irish politics have so few taken so much from so many, and all with the hope that no one will notice. Unfortunately for it, some people have noticed.
Companies providing foreign direct investment have noticed the slide in our competitiveness. They have seen how other governments have been prepared to adopt innovative and less grabby policies that sustain and encourage growth, employment investment and development. They have recognised that this regime pays lip service to competitiveness. It talks the talk, but cannot walk the walk. The Tánaiste's confirmation yesterday that the Government is now focused on the quality and not the quantity of new jobs will be cold comfort to the thousands of our fellow countrymen who have lost their livelihoods this year.
I do not doubt the sincerity and commitment of my friends opposite. However, instead of raising a toast to the emperor's new clothes, their time and effort would be better spent putting pressure on their Ministers to return to basics. Seven years of sitting on the comfortable leather of ministerial Mercedes has dulled their senses and numbed their ministerial motivation.
Mr. Coghlan: What can be done to tackle the problem? For a start, the Government should call a halt to any additional cost increases from State owned or controlled sectors. This includes the energy sector and aspects of the telecommunications sector. It should also call a halt to the imposition of any new stealth taxes. A high powered committee of business people and officials should be established to examine the impact of any new charges or taxes on businesses and to report publicly on their findings. Our development agencies should also redouble their efforts to assist indigenous creators of employment.
For too long our industrial policy has veered too much towards Boston and Berlin at the expense of Ballyhaunis, Ballymun and Ballyferriter. It is time we accorded equal respect and resources to our indigenous entrepreneurs and stopped continually tilting the hat to foreign investors. For too long we have neglected the employment potential of key indigenous sectors of the economy. These are the people and businesses that will be here for the long haul and which will create employment and wealth in their locality. They too require a competitive environment and ultimately will fail if the Government continues to see the business sector as an open ended source of funding for out of control public expenditure.
A competitive environment and effective competition policy are fine aspirations but without an honest, meaningful and transparent commitment to achieving such objectives, they will remain empty, dangerous and meaningless. Meanwhile, the employment and industrial base of the State will be eaten away by stealth taxes, cartels, monopolies and a Government that is more concerned with soundbites than action.
We will feel the effects of this shallow and superficial approach to competition and the economy for years to come. If the Members opposite are serious about this motion, they should retable it at their next parliamentary party meeting and request the Tánaiste to outline how she proposes to address Ireland's increasing joblessness and its slide into uncompetitiveness. They can then return to this House to outline their proposed solutions to the problems they have helped to create.
In terms of competitiveness, Senator Dardis mentioned the splitting up of Cork, Dublin and Shannon Airports into separate entities as an example. Senator Quinn is here. He is the owner of many supermarkets, but does not have a separate board to look after each one. I cannot see what the creation of a different board for each airport will do for competitiveness. If we have a good model in place, the same model should extend to other related premises or businesses. While I agree with providing freedom to the airports with regard to what they can do and that much can be done to make them more competitive and attractive to business, the Government is missing an opportunity and is creating more red tape rather than eliminating it. We see the same red tape hindering the progress of local authorities.
The Government will spend €5.9 billion on water and sewerage schemes over the next number of years as part of the national development plan. The majority of the schemes will be carried out through public private partnerships, PPPs, or design, build and operate schemes, DBOs. These will not provide competitiveness. One or two firms or companies will compete for tenders resulting in the formation of cartels throughout the country. We will end up with one or two groups or multinationals owning the water sources and the management of water and sewerage systems throughout the country. What will this do for the country's competitiveness?
As Senator Coghlan pointed out, stealth taxes have increased over the years. Water and sewerage is an area where stealth taxes will rise even further and the ordinary Joe Soap will end up paying the piper. The Government is losing control because of how it is proceeding. If we are to hand over our water sources and water and sewerage systems to DBOs and PPPs, we should debate the matter. It seems as if we are about to put them into the hands of a few. Few companies will be able to tender for these schemes. One or two groups will specialise in the business and they will have a big advantage when tendering. As a result they will have a monopoly which will not lead to competitiveness. The Government must examine this issue.
We have seen the same problem with the banks. Over the past ten years the number of banks opening on high streets throughout the country has escalated. It was said that the more banks we had, the more competitive the market would be. However, any fall in interest rates was not a result of having more banks. We did not see any reduction in bank charges either. Now we see the banks rationalising and amalgamating and we will end up with only two or three banks in towns throughout the country. This is an area where we did not gain competitiveness by the introduction of variety in business. Different types of competition will bring down prices and assist competitiveness. I suggest the Government has not given sufficient attention to those areas – Senator Coghlan is correct in his comments in that regard. I second the amendment moved by Senator Coghlan.
Dr. Mansergh: I welcome the more reasoned and less political contribution of the Leas-Chathaoirleach. I compliment the Tánaiste and Minister for Enterprise, Trade and Employment and her team of Ministers of State, including Deputy Fahey, on their work in the context of improving competitiveness. From my experience of close involvement with members of the Government over a five year period, I can say that Ministers work very hard. A number of Government sub-committees are working on the well-acknowledged deficiencies in infrastructure, including competitiveness issues, with a view to making progress in resolving them. Obviously, the idea that people just sit back comfortably in their chairs does not hold.
We need to maintain a balance in this debate. Nobody disputes that there are genuine and pressing competitiveness concerns. Nevertheless, it is unjustifiable to argue that we are becoming hopelessly uncompetitive and that the picture is one of doom and gloom. In many areas, we are very competitive and, in general, our economic performance over the past few years is envied by other countries, large and small. To a great extent, we have got the basics right, but there is much catching up to be done in other areas.
I am glad inflation is coming down closer to the European average of 2.2% to 2.3% and I look forward to a further reduction, perhaps below 2% next year. I simply do not understand the basis for references to public expenditure being out of control. Nobody could draw that conclusion from the recent budget. It seems likely that, at the end of this year, we will have fairly negligible borrowing figures, compared to last year's budget estimate. I do not believe there will be a larger deficit, in borrowing terms, as is being predicted for next year.
I will refer to a few areas of work in progress on competitiveness issues. Education is extremely important. Just today, the Government announced substantial spending on the improvement of primary and secondary schools. The budget reinstated valuable research and development expenditure and one hopes there will not be a stop-go situation. In the presence of two university Senators, I have to say I am somewhat concerned about the current grant for third level education. In technical terms, because of the reinstatement of research and development and the deal on maintenance grants last year, there was a significant increase in third level spending. As a result, the overall day to day spending may be suffering. That is undesirable as it relates to our competitiveness. I hope that issue will be looked at before the revised Book of Estimates is issued, rather than left aside until next year. I have some concerns in that regard. The decentralisation programme will reduce some of the pressures on the greater Dublin area. In an indirect way, those pressures are contributing to our uncompetitiveness.
I have some concerns on the overall question of Kyoto and carbon taxes. I note that a certain interest group, comprising those involved in the wind industry, is threatening us with all sorts of heavy fines. EU members have to look rather carefully at what the rest of the world is doing and finally decide what we ought to do, taking into account the competitiveness impact of taking actions to which some of the bigger countries will not conform.
It is very clear, regardless of whether we like it, that the US economy is built on cheap energy. If we make our energy much more costly while the US fails to take any action on its situation, it is difficult to expect any closure of the gap between US and EU competitiveness. While I do not suggest there is any lack of justification for environmental concerns, we need to look very carefully at any action we take in terms of the implications for competitiveness.
Investment in transport infrastructure is, perhaps, one of the areas in which we are most deficient. However, great efforts are being made and we are beginning to see significant strides forward. In the past year, the motorway from Dublin to the Border has been opened, followed, in the last week, by the Kildare by-pass and, in the last two days, a significantly improved rail timetable which, for the first time, is beginning to pay attention to congestion in cities other than Dublin. For example, a commuter service between Limerick and Ennis is now being provided and I have no doubt the Minister will look forward to some action on Galway's public transport problems before very long.
We need to be careful about the burden of regulation to ensure that, in the name of accountability, we do not bring in too much regulation to add to existing burdens. The term "stealth taxes" has been much abused. It has been applied to matters which are nothing of the kind, such as increases in electricity charges. I do not agree with the policy, which simply creates future problems, of having freebies on a wide range of public services, thereby leading to a disproportionate rise in future when the system becomes untenable.
In the context of indigenous employment, tourism receives a great deal of encouragement and backing from the State. Service employment is the area of greatest increase. I do not accept the notion that we have policies and a climate which is inimical to the creation of indigenous employment, taking a broad view of the situation.
Mr. Quinn: I welcome the Government motion and the particular wording used in terms of its determination to promote competition. I have been a believer in competition since I started in business 43 years ago, to which the Leas-Chathaoirleach kindly referred. I have been aware of the benefits of competition. When I started in business, back in 1960, the main operator in our area was a company named Liptons which, if I recall correctly, had 60 branches and was backed up by other companies such as Home and Colonial and Maypole, none of which was Irish-owned. At that stage, Dunnes Stores had been in operation for about three or four years. It gives some idea of what happened and how within ten years Liptons, Home Colonial and Maypole had disappeared and Dunnes Stores took over the market. I would love to take some credit for this change, but that goes to the consumers who followed the market. The effect of the market is such that the more we drive it, encourage it and make it competitive and open, the more likely we will benefit from it.
On my first visit to Leningrad in 1989, I went to a supermarket outside the city. I asked the manager how many customers he had and he was able to tell me the exact number. I was very impressed by this and I asked how he knew he had 4,680 customers. He replied that it was the number of inhabitants in the town. I discovered that his was the worst supermarket I had ever seen, but everyone was forced to shop there as there was no other supermarket in the town and he had cornered the marketplace. That example is a reminder to me of the benefits of competition. There is a cycle race known as "Devil Take the Hindmost" in which there are 20 laps with 20 cyclists. After each lap, one rider has to drop out after a lap sprint is announced. Something similar happens in competition. The benefit of competition is to the community and those who respond to what is offered by it.
However, competition has to be watched carefully as there can be some disadvantages to it. I suggest that the main disadvantage of the campaign against rip-off Ireland is that it concentrates solely on price to the extent that it may discourage those who take into account service, balance and quality. The campaign may even result in poorer quality of consumer goods and products.
When I walk along Grafton Street or into the Liffey Valley, Jervis and Blanchardstown shopping centres, I feel as if I am in Liverpool, Manchester or Birmingham. I do not see many Irish-owned shops anymore, which is one of the disadvantages of open competition. Earlier in the year, I attended an interesting conference on all aspects of retailing. One speaker from abroad said that in competition between the good, big retailer and the good, small retailer, in the long term, the good, big retailer is likely to win such as in the business I know well in Britain where there are now only five companies remaining. The good small retailer has great difficulties competing against their large counterparts which are capable of undercutting prices. In the US, the Robinson-Packman Act was introduced to keep the smaller retail sector alive and healthy. However, large retailers, such as Walmart with its huge buying power, inevitably take over the market.
We must encourage competition, but we must also keep in mind the balance that there are some disadvantages if there is an over concentration on open competition. It is likely that those in business will not be Irish-based because the size of the large competitors tends to take that business. It has happened in other areas, but there are also success stories. I like to quote the Irish proverb –"Éist le fuaim na habhann agus gheobhaidh tú breac"–"Listen to the sound of the river and you will get a trout." If those in the business, and not just retailers, are to succeed, they must listen to the changing marketplace. Sometimes, the smaller business is able to provide a product or service to attract customers and beat the bigger ones. We must take both of these into account when we pursue competition.
Mr. Ross: Until I listened to Senator Quinn, I always distrusted business people who claimed to welcome competition. There was a similar mantra from semi-State bodies, such as Eircom and CIE, which asserted that competition was always a good thing, but followed it with the word "but". They asserted that competition was a good thing, but it was, in effect, good for other companies and as long as it was an abstract concept. It is a concept that we approve of as a people because it is good for the consumer. However, the State has a duty to intervene in the market.
Some markets become distorted and monopolies develop for various reasons which are the product of the market. When that happens, competition is suppressed while the consumer and other industries suffer. It is important that we are having this debate in the House. The Progressive Democrats can assert their commitment to the competitive ideal, even if they cannot practice all its aspects in Government. I do not have a viewpoint on who is right or wrong on this Private Members' motion. The aspiration of the motion put down by Senator Dardis and Senator Minihan is unarguable. However, the Fine Gael Party amendment is an unnecessary attempt to discredit the Government's aspiration by putting in a few, irrelevant, cheap political points, ones which it does not believe in and cannot put into practice.
I take issue with the term "stealth taxes" as I have never quite understood what is meant by it. I understand what the detractors mean by stealth taxes, but I agree with Senator Mansergh's comments on them. I do not believe that the rises in ESB, CIE and VHI prices are taxes introduced by the Government. They are undesirable, but they are often a reflection of the extraordinary inefficiencies in those particular companies. The greatest outcry is by those semi-State monopolies that practise it. The problem is not the increase in prices, but that the costs in these particular semi-State companies are too high. The VHI, the ESB, CIE and RTE and other quasi-monopolies operate in a small county which has in theory opened up to competition. In effect, there is minimal competition, duopolies and token competitors. The result is that competition is suppressed or does not exist at all and there is price fixing. Nobody has suggested that there is cartel between competitors in these utilities – if we can call them that – but there is an understanding. Nobody from one company picks up the telephone to fix the price with another and pretend there is competition. However, there is an understanding between these companies that is contrary to consumers' interests.
The Tánaiste and Minister for Enterprise, Trade and Employment recently acknowledged the serious problems with inward investment. I am open to correction but I understand that she said on the business news on "Morning Ireland" that Ireland is no longer a competitive economy. The programme is probably too early for most of the Progressive Democrats Members to hear.
Mr. Ross: This was in response to the IDA report of the day before which stated we are losing jobs in IDA supported companies faster than we are creating them. This is very serious and is due to the fact that in the software industry where multinationals are involved, the pay for very highly skilled people is much higher than in places like India and China and we cannot compete. I was delighted that she said they are looking at other ways, such as research and development, and quality rather than quantity jobs, to restore competitiveness. I hope it is not an aspiration but a real development because with the strength of the euro the nation is in some trouble in this area.
I compliment the Tánaiste and Minister for Enterprise, Trade and Employment on her work on competition. Her work is evident in the establishment of the PIAB. I am a member of the Joint Committee on Enterprise and Small Business and I know insurance costs are a major contributory factor in the lack of competitiveness in many sectors compared to our competitors. The establishment of the PIAB will add greatly to competition in this market and will assist people in securing insurance at a more competitive rate.
Mr. Leyden: The retailer's group, RGDATA, has called on the Competition Authority to investigate the very serious claims – they are only claims – which have been made in respect of the cost of vegetables supplied by the north County Dublin growers to Tesco, who have approximately 35% of the vegetable market in this region, a very high percentage. It would be anti-competitive if there was any pressure on producers not to provide their products to the Aldi and Lidl chain stores which have secured a very high percentage of the market. Both those chains are very competitive, but unfortunately a high percentage of their products is imported in bulk from other parts of Europe in particular. It is an open market, which we accept, but I encourage them, because there is no point in criticising them, to purchase more products from the Republic of Ireland. I know they are implementing that policy and I recommend it.
Mr. Leyden: —to work in co-operation with Aldi and Lidl and suppliers to ensure they provide products at competitive prices to these chains. They are making a very big impact and are spreading throughout the country. If one goes into any of their stores one will see that they have a policy of a reduced number of checkouts. This is to encourage the perception that there are more customers there than is the case.
They are making progress. I welcome competition but I also welcome more sales of Irish products. Tesco, in fairness, is establishing a branch in Roscommon where it is getting a great welcome from the public. Its store will be open next year where approximately 100 people will be employed. Tesco now tends to buy more Irish products which is important from the point of view of our sales.
Mr. Leyden: —on the purchase of Murphy's Brewery in Cork, when I was Minister of State at the Department of Posts and Telegraphs. I was acting with the IDA at the time. We were not successful, but it became very clear to me what inflation meant to companies the size of Heineken. One of the factors which was holding them back in a decision to come to Ireland at the time was the rate of inflation. We have succeeded in bringing down inflation to approximately 2.5%. It is a major achievement and in fairness to the Minister for Finance, the budget did not add to inflation in general. The price of drink was not increased. Petrol was increased in price slightly, but I hope there is competition in the market.
Mr. Leyden: With the developments in Iraq the price of crude oil will fall as Iraq will be a major supplier of oil. With a settlement and tensions easing enough to allow a government to be formed there in the next 12 months, they will be very anxious to produce oil to enable them to be more competitive.
Mr. Ryan: As a member of the political left, I concluded long ago that the 19th century nostrum of nationalising everything was neither necessary nor particularly useful in looking after either working people or society. I take a similar view of competition. Of course there are areas of life where competition is good. For instance it would be very good to have serious competition in the licence trade in Dublin, where Fianna Fáil has resolutely protected owners of large pub chains, at the expense of consumers, because they are major supporters of Fianna Fáil. We all know who they are.
We watched the taxi regime in Dublin being defended by a succession of Fianna Fáil Ministers. I give former Minister of State, Bobby Molloy, full credit for being decisive in ending that. Some people come in here with brass necks and talk about competition while resolutely defending interest groups to which they are close. I am not talking about the Progressive Democrats, who have an attachment to competition. I think they are wrong in saying that competition in all areas is good.
The nearest thing to a free competitive market in health care can be seen in the United States. It is the most expensive health care service in the world, consuming $1 in $7 of the gross national product of the richest country in the world. All indicators suggest that the American health care system is not better than that of those countries with regulated markets or markets where there is limited or no competition. Life expectancy in the United States is lower than in most of the countries in northern Europe. Infant mortality is scandalously high – perhaps 50% higher than the European average.
We must be careful not to try to impose models on areas of activity where the model does not fit – the classic one being health care. Does anybody seriously believe we would have a better education service if every town had three national schools on the basis of the price people would pay for their children to get primary education? There are areas of life where competition is singularly inappropriate to bring about the quality of service people need.
We are in a peculiar position in the case of electricity provision. We are told that industrial electricity costs are among the highest in Europe. However, every month there is a collective whinge from prospective investors who believe it is not economic to invest in electricity generation. There is yet another attempt ongoing at present. If we allegedly have the most efficient electricity service in Europe—
Mr. Ryan: —why is this the case? As Senator Mansergh said, we do not. The best indicator of the efficiency of the ESB is that the most ruthless market capitalists in the United States are prepared to loan large amounts of money to it at premium interest rates because they recognise the capacity of the ESB to deliver and pay them back. This has nothing to do with having a monopoly, which has gone. It is because, contrary to what Senator Ross said, it happens to be an extraordinarily efficient organisation.
Mr. Ryan: There is a balancing of price in the ESB in the sense that while industrial costs are perhaps higher than some would wish, domestic electricity is among the lowest priced in the developed world. What have we decided to do? We decided to reduce the price to industry. The famous term is "rebalancing", which the regulator has used occasionally. Rebalancing means changing the burden of the cost of electricity by taking it away from business and giving it to consumers. This does not make any improvement in our overall competitiveness. It simply changes the burden. We have a very good electricity generating system run with extraordinary expertise by very dedicated public servants, who are paid perhaps half what middle ranking officials of the least competitive sector of the Irish economy – the banking sector – believe themselves to be worth.
Competition is grand for the sale of televisions. I spoke at a Rotary meeting in Cork recently. A man told me he was in the oil business and had 40 competitors. If he were in that business on his own he would be a millionaire. There are areas of life where competition is very good and healthy and where it would be very useful in this country. I refer to the legal profession and others, which dress themselves up in alleged concerns about professional ethics and standards while being nothing more than closed shops protecting themselves from anything as nasty as price competition.
I have no problem with the Government advancing competition where it is an appropriate response and where the market really exists. However, there are many areas where this is the least preferable way of dealing with it. There are other ways, for example cost benchmarking – I do not mean pay benchmarking – to compare ourselves with other countries and give quasi-monopolies targets to be in the bottom quartile. I would love our banks to be subject to serious competition; they are not. Any system, which can pay people 0.5% interest for their deposits and charge 12.5% interest on loans, is not in a serious competitive market. This is a far bigger threat to our competitiveness than the price of electricity.
Minister of State at the Department of Enterprise, Trade and Employment (Mr. M. Ahern): I thank the Senators for raising these matters this evening. The National Competitiveness Council's annual competitiveness report 2003 and the Competitiveness Challenge 2003 report were published on 1 December 2003. These reports provide an extremely useful insight into Ireland's current competitiveness status as they assist in highlighting key areas to be addressed in meeting the challenges to Ireland's international competitiveness. These reports have been given immediate attention by the Government both in the context of this year's budget and through the Government's commitment to consider and give effect to the NCC recommendations.
The Government continues to take steps to strengthen competitiveness across the economy and to implement specific measures to tackle cost pressures in key areas for Irish industry. As we are all aware, one of the areas most severely affected by price rises in excess of the rate of inflation is insurance. Almost every business in Ireland has been adversely affected by increasing premiums and as a result, this has fuelled Ireland's inflation rate. The Government is in the process of introducing a programme to fundamentally reform the insurance market to tackle the issue of high premiums, which have had a detrimental effect both on consumers and on business competitiveness. The Government is committed to continuing with the reform programme and bringing about improvements in the functioning of the insurance market.
The National Competitiveness Council stated in both its recently published reports that Ireland's immediate priority must be to slow the growth of prices and costs. The Government is committed to enhancing Ireland's competitiveness status and an essential component of this is to provide a business environment with low inflation. Earlier this year the Taoiseach and Tánaiste underlined a target of getting inflation down to 2% and the latest figures from the Central Statistics Office for November show that inflation is now at 2.2%. This will help stabilise firms' costs and provide them with a solid competitive business environment from which they can successfully compete on both domestic and international markets.
However, we cannot afford to be complacent. We will continue to further reduce our inflation rate bringing it into line with our EU partners and other competitors. In this context, the recent budget demonstrated that keeping inflation low was a key priority. The Government has avoided inflation-fuelling taxes in line with the requests of the National Competitiveness Council. The budget, furthermore, reflects the Government's commitment to support job creation and investment in Ireland. We have introduced a series of new measures so that the tax system further supports initiative, risk-taking and innovation.
The new measures include the introduction of a research and development tax credit, the removal of stamp duty on the registration of patents and the extension and improvement of the business expansion and seed capital schemes. The National Competitiveness Council has presented the Government with a set of key priority areas in respect of which progress needs to be monitored. When the Government discussed both of the council's reports at its meeting on 25 November last, it was agreed that the Government will consider Ireland's competitiveness status every six months. This consideration will involve discussions on the recommendations of both NCC reports. The Government also agreed to establish a monitoring process to consider and track progress on the implementation of the council's recommendations.
The Government sees competition as the lifeblood of a vibrant economy. It is committed to removing unwarranted constraints on competition in all sectors of the economy. It will place consumers at the top of the policy agenda. Increased competition has a critical role to play in helping to keep prices under control. In the aviation industry, for example, competition from low cost airlines substantially reduced the cost of air travel. While much needs to be done to encourage competition in some sectors of the economy, the Government is working hard to bring about changes.
Competition is effective if it provides a real choice to consumers, who are then prepared to exercise that choice to seek out the best value for the products or services they require. The Office of the Director of Consumer Affairs launched its price awareness campaign last month to stimulate greater price awareness among consumers. Surveys conducted by the office as part of the campaign revealed substantial variations in prices across a wide range of goods, such as potatoes, petrol, insurance and CDs, within localised areas. The clear message from the surveys is that consumers should shop around for the best deal.
The effective promotion of competition is not possible without an effective legal framework. Sound competition legislation contributes to competitiveness by penalising anti-competitive and anti-consumer behaviour and by protecting the competitive process in all sectors of the economy. The Tánaiste, who has overall responsibility for competition and consumer matters, sponsored the Competition Act 2002 for this reason. The 2002 Act reformed and modernised previous legislation relating to competition policy and merger control. In particular, it increased the penalties for serious cartel activities such as price fixing, enhanced the independence of the Competition Authority and transferred responsibility for controlling mergers and acquisitions from the Minister to the authority. More enforcement powers, such as increased jail terms for hard-core competition offences such as price-fixing and market-sharing, have been given to the authority. New powers of arrest and detention have been introduced.
As a consequence of an arrangement between the Competition Authority and the Garda bureau of fraud investigation, two detective sergeants have been seconded on a whole-time basis to assist in the investigation of criminal breaches of the Act. The authority has more civil cases before the courts than ever before. It has settled a number of investigations on the basis of undertakings received by businesses alleged to have breached competition law. In the past ten days, the authority has announced settlements in investigations involving The Irish Times, the Irish Independent and Statoil. The authority received assurances about future practices in respect of the resale price of daily newspapers and consumer petrol pricing policies.
The authority's financial and staffing resources have increased substantially in recent years. Staffing levels increased from 29 in 2000 to 47 in 2003 and the authority's budget more than doubled in this time. Part 3 of the 2002 Act, which deals with the control of mergers and acquisitions, commenced on 1 January 2003. Under these provisions, responsibility for controlling mergers transferred from the Minister for Enterprise, Trade and Employment to the Competition Authority. Decisions on mergers have been taken by the Competition Authority since 1 January last, therefore, solely on the basis of competition criteria. Special provisions relating to media mergers were also included in the Act.
The Government recognises that restrictions on competition arising from regulations can impose substantial costs on the economy. Such restrictions can have adverse effects on the international competitiveness of Irish business. The Government is committed to addressing sectors where barriers to entry or restrictive practices exist. A high level group on regulation, under the aegis of the Department of the Taoiseach, oversees the implementation of our response to the 2001 OECD report on regulatory reform and advises the Government accordingly. The Government's commitment to better regulation stems from the recognition that if State regulation is excessive in quantity or of poor quality, it will be an unnecessary burden on economic and social activity. By minimising regulatory barriers, we can make it easier for entrepreneurs to avail of business opportunities and to enter markets and we can achieve greater efficiency and choice for consumers.
I have mentioned that the Competition Act 2002 enhanced the Competition Authority's enforcement powers. The authority is challenging anti-competitive arrangements by initiating legal actions via its enforcement role, either on its own initiative or on foot of complaints and, in a wider role, by studying various sectors of the economy from the perspective of competition. In deciding on the sectors to be studied, the authority has taken account of the importance of the sector for the economy, the indicators of the level of competition, the existence of public or private barriers to entry and the general public interest.
The Competition Authority is involved in studies of three separate sectors of the economy – the professions, the banking sector and the insurance sector. The authority's studies of the professions involve a comprehensive study of the medical, legal and construction professions. The studies specifically cover medical practitioners, dentists, veterinary surgeons, optometrists, solicitors, barristers, engineers and architects. The authority will produce separate reports on each individual profession. It is envisaged that this process will conclude in 2004.
The Competition Authority has also undertaken a study of competition in the provision of banking services. It has published a consultation paper as part of this study. To date, the process has involved narrowing the focus of the study to a number of key markets for further study. The markets that have been chosen are personal current accounts and loans to small and medium sized enterprises. The markets will be analysed from the perspectives of barriers to entry and degrees of rivalry. The study will identify the barriers to entry and analyse their origin, their intended effects and their actual effects. It will make recommendations to have disproportionate barriers to entry removed, where appropriate. The study will identify and analyse industry practices, legislation or administrative practices that limit the degree of rivalry in the marketplace to the detriment of consumers. It is expected that the authority's report on the banking sector will be completed in the third quarter of 2004, although an interim report prepared by the LECG economic consultants will be released in the summer of 2004. All interested parties will be invited by the authority to comment on the report.
In conjunction with the Department of Enterprise, Trade and Employment, the Competition Authority has undertaken a study of competition issues in the non-life insurance market, with particular reference to motor insurance, employers' liability and public liability. These sectors are being analysed from the perspectives of barriers to entry and the degree of rivalry. The authority intends to produce a final report during the second quarter of 2004. An initial report, which is expected by February 2004, will set out the preliminary results of the research and allow for comments by interested parties.
Mr. Bannon: I welcome the Minister of State, Deputy Michael Ahern. It seems that he has shifted negligence for this country's lack of competitiveness to the Tánaiste. By acknowledging in his speech the usefulness of the annual report of the National Competitiveness Council, he can be said to have pointed out that the Government has not met its duty to bring down inflation. I would like to comment on Senator Leyden, who seems to be living in a little cuckoo land of his own.
Mr. Bannon: If Senator Ross, who also lives in a little world of his own, wants to come to my part of the world he will have to get a pair of designer wellies to see exactly what Government policies have done to the midlands region in recent years. I refer in particular to rural areas. We have seen the closure of small country shops, pubs and other important services which kept the fabric of rural Ireland intact for many years. That has gone. One hears about the national spatial strategy and the decentralisation plan—
Mr. Bannon: I support it. There is no doubt whatsoever that the motion is worthy in its aspirations. However, I cannot support the hypocrisy of the Progressive Democrats who tabled it. "Low prices and fairness for consumers" allied to an increase in "overall efficiency for the economy" are admirable goals shared by everyone in the House. However, as we know, there is a great distance between fine-sounding words and effective action, of which we have not had much over the last seven years during which Fianna Fáil and the Progressive Democrats have been in government. They have not demonstrated our competitiveness to the general public. When the annual competitiveness report for 2003 was launched, I called on the Order of Business for a debate. It very much acknowledges the Government's negligence in the area.
Mr. Bannon: This is the most expensive country in Europe, while Dublin is the 21st most expensive capital city in the world. Urgent remedial action must be considered as a priority by the Government. Our economic welfare is not negotiable. There is real and justifiable anger throughout the country that what money is left in people's pockets after the Government has taken its pickings in taxes, including stealth taxes, is not going far enough. There is anger that consumers are continually paying over the odds for inferior services and that the Government is doing absolutely nothing about it. That is very evident. Consumers have been continually ripped off since we leapt into the euro bandwagon. Prices are being pulled out of the air, with "The sky is the limit" appearing to be the motto of many. Our citizens and visitors—
Mr. Bannon: The Progressive Democrats must not have been looking at what is happening nationwide to table such a motion. These are important services, and we need people involved in them. The more, the merrier. I know that here in the capital, where there are a fair number of taxis, they are all being used.
Competition is urgently needed in the health sector. Doctors, dentists and other health care providers must be as open about their charges as any other business. I pointed out last week on the Adjournment that for a simple signature doctors were seeking approximately €65. That is just to sign the application form of a disabled person. The Government must look into this. When he was here last week, the Minister of State at the Department of Health and Children, Deputy O'Malley, told me that he admitted his responsibility in the area and that he would look into the matter. He has done very little to date. The Minister did not even refer to it.
Mr. Bannon: Mobile phone charges in Ireland are deemed the highest in the world. Car manufacturers are ripping off Irish drivers by charging buyers up to 40% more than the prices that they set for other EU countries. According to the European Central Bank, businesses in Ireland are being charged higher interest rates than comparable companies in other EU member states. A survey of approximately 1,800 credit institutions across 12 EU countries showed that overdraft and business loan rates were higher in Ireland than elsewhere. As I said, insurance costs have risen by over 100% in the last two years, while business costs generally have risen at over three times the rate of inflation over the same period.
The Competition Authority's strategy statement for 2003 to 2005 states, "Credible enforcement against anti-competitive behaviour is important to maintaining an environment in which markets benefit customers". Fine Gael's rip-off Ireland website is a testament to such anti-competitive and anti-consumer behaviour. The Government is throwing its citizens to the financial sharks. There is evidence of this every day of the week.
Mr. Minihan: If competition is good for consumers, the economy and society, at least I agree with Senator Bannon on that point. It works. Those of us who favour competition as a core value have won that argument. From air travel to radio stations to mobile phones, and, lately, even Friday night chat shows, consumers have evidence that competition delivers for them.
Mr. Minihan: The question about competition is no longer why but why not. The onus is now on anyone to show why we cannot have competition. This goes across the board. Competition is a force for value for money and efficiency. It is no threat to anyone except protected private interests – often interests which are well hidden or masquerade under a public interest disguise. The days of artificial monopolies are over – no one wants them back. This is well understood by the public. Even if some political parties and others are slow learners, I welcome signs that the light has recently gone on in the heads of Labour Party members about the benefits to consumers of competition. I am still not convinced however – I do not think the public is convinced – of the strength of their convictions or understanding of competition.
I have listened with interest to Fine Gael Senators speaking on that party's amendment. What was clearly not well understood by its members was what competition was. They have mixed up the words "competition" and "competitiveness". Is it some clever new parliamentary tactic to table an amendment to a motion about the wrong subject or use a word which just sounds like another in the hope of making an impact?
Mr. Minihan: The Fine Gael Party is not the greatest shot at the best of times, but tonight its Members have not even aimed at the correct target. They should at least have read the correct motion before tabling their amendment. Opposition Members referred to sound bites and asked if we are serious about the motion. Are they serious about their amendment, when they did not even read the motion in the first instance? The proposer of the amendment left the House when this matter was brought to his attention.
Competition contributes to the overall competitiveness of the economy. However, competition is not competitiveness. Let us be clear about that and debate the correct subject. Competition is about fair and functioning markets, open pricing and choice for consumers. For something so obviously good, it is still surprising that it took people in Ireland so long to learn to embrace competition. The European Union was a great help in this regard because it put competition policy at the centre of creating the Single Market. Far from being an import from the American model of economy and society, competition is a core part of the EU Single Market. This shows the foolishness of the accusation in The Irish Times today that the Tánaiste wants to import some notional US-style neo-liberalism against the Taoiseach's European inclination. Critics of the EU on the hard left, including many who opposed the Nice treaty, accused the Union of being a neo-liberal, big business project. They are right in one regard only, namely, that the EU favours a functioning and fair open market economy and vigorously enforces competition policy to this end. The Tánaiste, the Taoiseach and the Government do likewise.
To be against competition is discredited and old fashioned. Most people work in competitive situations and in competition. They are not afraid of it because it is normal. This is the aspect that opponents of the plan to have competition between airports do not understand. Competition is part of normal working life for most people in Ireland. I am convinced, for example, that Cork Airport has a bright future and will thrive as a result of being free to compete. This policy did not come a day too soon.
For this reason alone, the Government's competition scorecard for 2003 shows a massive positive. It deserves congratulations and the Progressive Democrats will be shouting "encore" in the years ahead in terms of the introduction of further pro-competition policies. I will be happy to debate this motion again when Fine Gael comes to understand the core issue involved—
Mr. Minihan: —he stated that the Minister of State did not refer to it. However, I must inform him that, on the second last page of the speech it is clearly stated that the authority has embarked on a comprehensive study of the medical, legal and construction professions. Not only did the Fine Gael Senators not read the motion, they have not even listened to the debate.
Mr. Minihan: I support the motion. Competition has been successful in this country and consumers have benefited from it. As we continue to move in that direction, consumers will make further gains. When referring to the Fine Gael rip off Ireland website, the appropriate part to use is Fine Gael RIP.
Dr. Henry: I shall try to bring some peace and calm to the debate. Competition is very important and I read the report with great interest. However, one area which was not addressed in any great depth was that of retaining trained personnel within the economy. We have made major efforts to promote businesses involved in the pharmaceutical, chemical and information technology areas, which rely heavily on trained personnel. I fully supported the Minister for Finance's moves on individualisation in respect of tax having, as I stated at the time, suffered being described by a member of the Revenue Commissioners as being the same as a wholly owned subsidiary of my husband when I complained about the amount of tax I was paying. It is a pity the Minister has not made further efforts in this area. We must try to ensure that we retain within the economy the people we are now training at second and third level in science and technology.
There have been many reports on equity in third level education and efforts are made to ensure that employment is fair. The Houses recently passed the Maternity Protection (Amendment) Bill but it will have little effect if child care facilities are not available in the various industries or businesses we are discussing. I suggest that the Minister might try to remove from the economy what is described as the "churn" factor. This is where people, generally women, are trained up to a certain level and employed in industry or business. These individuals are then lost because they leave employment, perhaps for domestic reasons, for a short period and there are no retraining methods to facilitate their return.
I hope that the Government can take action in respect of the schemes to which I refer, particularly in the areas of technology and science and engineering. The Department of Trade and Industry in the United Kingdom recently became so concerned about the matter that it compiled a report, so there is no need for us to commission one. One of the women involved in its compilation, Dr. Gill Stephens, famed for discovering Viagra and worldwide research director of Pfizer, a company of importance to this country, spoke in Ireland last week about the importance to our economy of trying to retain people we have trained. That is a matter which is worthy of consideration.
The Government should try to provide more support in these areas. The spirit is willing, but the flesh has been rather weak. Further efforts have not been made in respect of tax breaks for child care or the care of the elderly. I hope the Minister for Finance can do something in this regard in the next budget. The loss of trained workers in any part of the economy is a serious problem.
Mr. Mooney: I am pleased our colleagues in the Progressive Democrats have tabled this motion on a matter that has been raised on the Order of Business on several occasions by various Members on all sides of the House. While we all tend to focus on the same issues, they are equally important in the retelling. One such matter is that of pricing. Elements of the retail sector are ripping off consumers on a regular basis. They are charging exorbitant prices for goods that can be bought more competitively in other outlets because they are getting away with it.
It is quite extraordinary for a country with a proud tradition of speaking up for itself and of ensuring people's rights are not trampled upon that when it comes to purchasing something out of the family budget, we do not shop around as the Tanáiste advised some months ago. When the Tanáiste gave that sensible advice, echoing I suggest her rural background and that of those of us from rural backgrounds who were brought up to believe that every penny counted, she was pilloried in some sections of the media. Editorials in the Irish Independent guffawed at the thought of the Deputy Prime Minister suggesting people should shop around for good value. That brought home to me how parochial we can be and how, time and again, we miss the point when a good Government such as this one makes eminently suitable proposals. Such assertions are not properly researched, assessed or analysed. The knee-jerk reaction that if it is coming from a Fianna Fáil-PD Government it cannot be any good immediately comes into play.
It is even more extraordinary that since making the Tánaiste made that statement a plethora of statistics have poured out, in the main from the Director of Consumer Affairs, illustrating the gross disparities right across consumer pricing. The very same newspapers which pilloried the Tanáiste six months ago for her advice are now highlighting these disparities and advising their readers to shop around. I am glad the Government highlighted this matter during the past couple of months. I hope the Competition Authority will look beyond Statoil and the insurance industry in this regard. There is no doubt but that the leisure and textile industries at retail level have questions to answer. As somebody involved in the music business, I acknowledge that the conglomerates offer special discounts on specific products from time to time.
I recently went into a retail store in Liffey Valley shopping centre to purchase a DVD of a movie released some 12 months ago in the cinemas. The particular DVD I wanted was priced at €19.99. I decided to leave purchasing it for another day and two days later when I went into HMV in Grafton Street to purchase it I discovered the same DVD in that store cost €27.99, a difference of almost €8. These were two mega-stores, not small retail outlets which would have some justification for such practice. They were overcharging because they know they can get away with it. There were no special discounts involved; this was a mainstream product on a shelf with a wide variety of others in a particular category of movies. They are able to charge such prices because they know people will pay them and not shop around. The same is true in the case of CDs, videos and PlayStation games. I endorse the Tanáiste's advice to shop around, particularly in the lead up to Christmas.
One of the three priorities referred to by the Government relates to banking. I am grateful to our colleague, Senator Ross, who in his eminently readable business section of the Sunday Independent some weeks ago cited examples, relating to the transfer of euro within the eurozone and the operation of a cartel among the major banks, of charges for the transfer of euro from one European country to another. I thought such practices had been abolished with the introduction of the euro. I understood the banks were no longer in a position to charge for such transactions. They can and do, as we all know, charge for currency transfers outside the eurozone. I did not think such charges applied if one was sending a cheque or bankdraft for €100 from Ireland to France or Germany. Not only do they charge for the process, they also delay it. I plead with the Government, when investigating the banking sector under competition law, to consider that area in concert with its European Union partners. This matter cannot be dealt with unilaterally.
My next question is not an original one. Why is it that consumer goods are cheaper in the United States than in the European Union? What is the difference? Surely, it is not about economies of scale because there are 350 to 400 million consumers in the European Union. The Single European Act which has been in operation since 1987 deals with the free movement of goods, people and services. We are now aware, with the introduction of the euro, of the existence of disparities in some European economies. The issue of why disparities are so large will be a challenge to the EU.
Senator Minihan referred in eloquent detail to the underlying ethos that the European Union is competition driven. Other questions such as whether this is attributable to over-regulation in the European Union need to be asked. If so, Europe could take a lead from Ireland. This Government has adopted what could loosely be referred to as a lightness of touch in the context of regulation, an issue the Minister mentioned in his speech.
All politics being local, competition in the external sense is fine but within the internal economy that is Ireland, there remains gross disparities between east and west, especially in the area of infrastructure. I again put down a marker for the need to accelerate the infrastructural development of the peripheral regions. If we are to have a truly competitive economy internationally, there must be a degree of parity within the internal economy which will benefit not just one section or specific region. There have been massive and very welcome infrastructural developments along the east coast. We must also consider the peripheral regions if we are to be truly competitive.
Mr. B. Hayes: I welcome the Minister of State and thank him for his fine address. There is a suggestion from the other side that we have put down the wrong amendment. If that is the case, the Government has responded in the most substantial way possible – the Minister's speech refers to everything said in the amendment. That is one example of how the goal posts can be moved in the context of a debate. When Senators Bannon and Minihan lock horns, we get the best out of them and they are put under pressure from their respective research departments.
Earlier this year, I had an opportunity to visit Australia – I mentioned this to Senator Dardis who visited that country some time ago – where the prices in terms of goods and services are astonishing by comparison to Europe. That underlines the additional added costs in the European economy that must be addressed. Food and fuel prices in Australia are exactly half those charged in Ireland. I accept that salaries there are lower than in the eurozone.
I wish to make a number of suggestions which might be of assistance in dealing with the pricing issue. We should put in place a local price regulator with responsibility to name and shame on local prices. It would be good practice for the regulator to outline the prices he or she had seen for the price of diesel or petrol, or the cost of a visit to a doctor's surgery in, for example, the South Dublin County Council area. This could be done on a county by county basis. It would be the regulator's responsibility to investigate prices and publish local data on goods and services.
I agree with what the Tánaiste said in recent months: there is a need for people to be price aware. For this to happen there must be better displaying of prices. While rights are provided by the Legislature, consumers will not stand up for themselves. The publication of prices in the local press by a regulator would heighten the responsibility of consumers to shop around for the best possible price. We must be firm on businesses which do not display prices; this bad habit must be addressed.
I recently compared the cost of an extension to my house with that of an extension to my sister's house. She lives in a much more affluent part of Dublin city than I do. I was astonished to discover that in the alleged more affluent parts of Dublin the price of simple construction work was double what it was in other parts of the city. Those who live in these alleged more affluent areas will have to demand that prices charged by contractors are driven down. They will have to use their muscle and shop around to get the best possible price.
The findings of a recent survey of big and small businesses in the south Dublin chamber of commerce area, the third biggest chamber of commerce in the country, have highlighted the problem of insurance. I know the Government is aware of this issue. This is stifling business and having a disproportionately large effect in the SME sector. While I know there have been some welcome developments, the Government will really have to tackle this issue. It is pricing jobs out of the market. Jobs are being lost in small businesses. The Government will have to take a keener interest in this matter.
I commend the amendment to the House. I hope that by raising this issue we will constantly monitor and review the Government's performance in this area. Unfortunately, most of the inflation generated in the economy is domestically produced. It stems from Government services and the semi-State sector constantly pushing up the price of the old reliables. The best way to keep a lid on prices is by ensuring such incremental charges are kept to a minimum. As it stands, they are fuelling the gap between direct and indirect taxation.
Mr. Dardis: I thank the Senators who have contributed to this useful debate. It is a pity Senator Bannon is not here to listen to Senator Hayes as at least he came up with some ideas as to what should be done, particularly the idea of a local regulator. It is good to receive constructive proposals on future policy.
I commend the Minister on his address to the House. When speaking about the 2003 report of the National Competitiveness Council on the competitiveness challenge, he said this would be given immediate attention by the Government, both in the context of the budget and the Government's commitment to consider and give effect to the NCC recommendations. It is important that such reports are acted upon. I, therefore, welcome the Government's response.
Several Members have referred to The Competitive Challenge 2003 report which states, "According to the Forfás consumer pricing report 2003, roughly 73% of total Irish inflation originated in the services sector during the period 2000-02". This reinforces the point Senator Bannon made about people having to pay €60 to have a medical card application form signed. While the retail sector is frequently thought of as being the one driving "rip-off Ireland", the services sector seems to be the bigger culprit.
We must accept that there are certain essential utilities which are the function of central government, or at least a state apparatus. The question is how competition can be introduced within this sector and how the sector can be regulated. The experience in England indicates that the privatisation of the water supply network has not been a success, to put it mildly. The issue is how such a service can be delivered to the best effect in order that competitiveness of industry and Ireland as a whole is assisted.
Senator Quinn is correct to say there are issues other than price at play in the retail sector – quality, service and other factors are also important. However, competition delivers these and it is left to the consumer to decide the balance they afford to price as opposed to quality and vice versa. Senator Leyden raised the practice of a supermarket like Aldi. While I am not suggesting the quality of goods in Aldi is inferior, it has given an outlet to people who regard price as more important than quality and service. Supermarket chains such as Aldi give options which is to be welcomed.
Senator Ryan said it would be useful if a number of schools in a community competed on a private basis. While his idea is correct, there is already such competition at primary and secondary school level. There are certain schools to which parents want to send their children as they are considered to be better than others in the area. There is competition whichis based on how staff carry out their work.
As the Senator concerned is not here to defend himself, I will not name him but it seems he has reached the point where there is not a pub, petrol pump, shop, farmer or hackney in rural Ireland. When he had finished talking about the price of petrol, one would have thought there were also no cars there.
Mr. Dardis: I, the Cathaoirleach and others have expressed concerns on many occasions about the future of rural Ireland and the decline in farming and numbers of farmers. However, many positive things have also happened, largely because people are able to make positive choices and move into the urban areas to which they want to move. They are not locked into poverty in rural areas, which was the case for so long.
Facilitating markets to operate efficiently by ensuring adequate competition is vital to driving down the cost of doing business in Ireland. Market entry by new firms and a high degree of rivalry between existing firms pushes other companies to lower costs, improve quality and service, and create new products and processes. Intense competition in domestic markets is a powerful stimulus to the creation and persistence of international competitive advantage.
In other words, if competition is dealt with, international competitiveness will improve. The Annual Competitiveness Report 2003 also states: "Policies that undermine competition, innovation and dynamism among companies represent the most common and most profound error in government policy towards industry." Senator Bannon made the point that we were not making any steps forward. However, the independent assessment states that the Competition Act 2002 was a significant step forward in enhancing Irish competition law and strengthening the powers of the Competition Authority. I commend the motion to the House.