In those seductive Tourist Board commercials of open roads, breathtaking scenery and friendly folk, the promise used to be the ‘Ireland of the welcomes’. Now, after a decade of unprecedented prosperity, the welcoming Irish image has been replaced by a very different one - that of the rip-off Republic.
Ireland’s Celtic Tiger economy has become the most successful in Europe. But the success has come at a price - the Republic is now the second most expensive country in the euro zone, after Finland, and the cost of even basic foodstuffs has soared.
Everywhere the talk is of rip-offs. Economics expert Eddie Hobbs, who is currently presenting an Irish TV series titled ‘Rip-off Republic’, says: “We are constantly being told we have a successful economy but the fact is we are getting ripped off left, right and centre and a lot of people are finding it very difficult to make ends meet.”
Successive shopping surveys have fuelled the claims. The newly established National Consumer Agency found that a basket of internationally branded groceries retailed in the Republic at E89.30 and at only E70.94 elsewhere in the euro zone, a gap of 22% even when different VAT rates were taken into account. A parliamentary committee survey established that Irish consumers paid 15% more for the same basket of groceries than their counterparts in Northern Ireland and Britain.
The main Irish opposition party, Fine Gael, which has been running a “rip-off Ireland” website for consumers to detail complaints, raised eyebrows with a survey on the mark-up multiples have on basic foodstuffs. On milk, for instance, it claimed the mark-up per litre was 214%, with the producer getting just 27 cents and the consumer paying more than three times that.
The party found that on a basket of groceries costing E20.89, the farmer got just E8.78,
while Superquinn had a mark-up of 157%, Dunnes Stores 135% and Tesco 120%. Party spokesman Denis Naughten, presenting the findings at a recent Dublin press conference, claimed the multiples were making huge profits at the expense of both consumers and producers.
But is it as simple as that? Not according to Retail Ireland, a business group representing the major chains. Its spokesman, Torlach Denihan, says most of the cost was added to food after it left the farmgate and listed transport, storage, processing, packaging, refrigeration and promotion as factors that contributed to the retail price.
The latest consumer price index, he points out, shows Irish food prices falling by 1.4% over the past year, at a time when inflation rose by 2%. “This stands on its head allegations that the retail sector is profiteering at the expense of
consumers or producers.” The basic reason for the high prices, according to trade leaders, is that the Republic is now an expensive place to do business, with a minimum wage of E7.65 an hour that is the second highest in the EU, after Luxembourg. Insurance cover and energy bills are also high, while traffic congestion, particularly in Dublin, has a huge impact on distribution costs.
According to Tesco Ireland’s chief executive, Gordon Fryett, the company’s operating costs in the Republic are on average 20% higher than in the UK. Supplies cost 9% more in the Republic, he says, while labour costs are 20% higher than in the UK, with transport and distribution, as well as security, 28% more expensive. Waste management costs are 250% higher.
Fryett, who was testifying to a parliamentary committee investigating the high Irish grocery prices, dismisses reports that the company’s Irish profits margins are 11% higher than in the UK. “The fact is, they are lower than in the UK,” he said, while declining to give specific figures.
The refusal of Tesco and four other major players in the Irish market - Dunnes, Superquinn, Aldi and Lidl - to provide turnover and profit figures caused considerable irritation to the committee. One member, Fine Gael’s Phil Hogan, says: “The only way we can know if there is excessive pricing or profit-taking is for all those involved to publish their figures. The public are entitled to such information and the government should ensure it is provided.”
In a recommendation to trade and enterprise minister Michael Martin, the committee has called for an official study by the Competition Authority to establish the profit levels being made by the multiples, and to issue a report within a year. “There are huge sums of money being made and we need to be able to look at retailers’ profit and turnover figures,” says committee chairman Donie Cassidy. Meanwhile, Martin is wrestling with what to do about the controversial groceries order banning below-cost selling. Competition Authority chairman John Fingleton, due to take over in October as head of the Office of Fair Trading, claimed in a final submission that the ban adds E500 a year to the grocery bills of every household in the Republic.
The order, introduced some 20 years ago after the collapse of a supermarket chain in a price war, prevents robust competition and price-cutting, say the critics, which include the National Consumer Agency. But suppliers, producers and members of independent grocers’ body RGDATA say removing the ban will encourage predatory pricing by the multiples which will squeeze margins even tighter and force many out of business.
Martin - the architect of Ireland’s smoking ban as health minister - is due to deliver his verdict in the autumn, when parliament resumes.