Seanad debates

Wednesday, 21 May 2008

6:00 pm

Photo of Frances FitzgeraldFrances Fitzgerald (Fine Gael)
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I welcome the Minister of State and congratulate him on his reappointment.

I am pleased to raise the need for the Minister for Enterprise, Trade and Employment to outline the action the Government intends to take as a result of the information that has come to light that Irish consumers are paying up to 50% more than consumers in the United Kingdom for similar goods. It seems ridiculous and unfair that an Irish consumer is expected to pay up to 50% more than a British consumer for a similar item sold in British owned stores based in this country. I am interested in hearing what the Minister of State has to say. If there were to be a noticeable discrepancy between the two prices, one would expect the increase in the value of the euro to result in cheaper goods imported from sterling areas to this country. That has not happened. Does the Minister of State have information on whether sufficient account has been taken of the increased value of the euro by the various stores? It appears there has been a continuous rise in the cost of goods imported from the UK. Can the Government, and does it intend to, take action to address this inequity, which appears to penalise Irish consumers? Does current consumer protection afford enough protection from exploitation to the public? What is the role of the National Consumer Agency in tackling this issue? Has the Minister of State liaised with the National Consumer Agency on the issue? What is the reaction of the Minister of State in this regard?

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I thank Senator Fitzgerald for raising this important topic.

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

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

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

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

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

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

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

Photo of Frances FitzgeraldFrances Fitzgerald (Fine Gael)
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I thank the Minister of State for his strong and forthright response to the issue raised. The Minister of State said that Ireland is not a command economy and that customers should be dealt with fairly given the change in the euro. What actions will follow from the meeting with the National Consumer Agency? In what areas can the Government take action?

The Minister of State is effectively agreeing there has been a rip-off of consumers. What action can the Government take in conjunction with the National Consumer Agency to try to change the situation?

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I do not to wish to outline in detail what actions can be taken. A range of issues and possible actions were discussed at the meeting today. The National Consumer Agency will meet with Retail Ireland to discuss the issue further. Arising from this, the Tánaiste will set out a course of action to deal with some of the aspects raised.

My background is in the retail sector. There is an increased awareness on the part of consumers in regard to the cost of goods. Some 17% of consumers recently surveyed indicated they are aware of what is happening and would change their shopping habits. A further 18% of those surveyed are considering doing that. There is a public awareness of the issue. Consumers have a responsibility in this regard and they also have power. They should be exercising that power and ensuring they get value for money. The Government can only do so much. We need to look to the consumer to assist us in this.

Photo of Frances FitzgeraldFrances Fitzgerald (Fine Gael)
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Consumer power.

Photo of John McGuinnessJohn McGuinness (Carlow-Kilkenny, Fianna Fail)
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I believe consumers are becoming more aware of what is going on. They are price conscious now given the increase in foodstuffs and so on. I will take a particular interest in this matter. I know also that the Tánaiste following her meeting today will also assist in doing whatever can be done. There will be action in this area.

Photo of Frances FitzgeraldFrances Fitzgerald (Fine Gael)
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I welcome that.