Taoiseach cautions against price controls in supermarkets

Taoiseach Leo Varadkar has said he has not ruled out price controls in the food retail sector but added that advice from the State’s consumer protection watchdog cautioned strongly against the introduction of such measures.

It comes as junior minister Neale Richmond said food retailers had provided assurances that consumers will benefit from reduced prices in situations where input costs had lowered.

The government has come under pressure to take action on ensuring high grocery costs are not fuelling supermarkets’ profits after retailers announced reductions in the cost of milk, butter and bread in recent days.

Ahead of Minister of State Neale Richmond convening an emergency meeting of the Retail Forum, Mr Varadkar said that there was a lack of evidence price controls would help consumers and there was an unintended consequence that uncontrolled prices would go up even more.

“For example, in Spain proposals to do so were abandoned because of the impact that would have on smaller retailers and retailers in rural areas in particular.”

The next meeting of the Retail Forum is on June 21, when the government has said it expects further price drops.

Speaking at a meeting of the parliamentary party on Wednesday night, Mr Varadkar told TDs the clear message from Government to retailers was that prices must come down as input costs decrease.

He said a surplus in public finances was only assured for this year, despite the projected 65 billion euro surplus between now and 2025, and said a good welfare and pensions package could be offered as inflation had eaten into current payments.

During Leaders’ Questions, opposition parties called on Government to act on food inflation which the Social Democrats said is “driving so many people to the brink”.

Sinn Fein leader Mary Lou McDonald said shoppers are finding “eye-watering sums that they can’t afford”.

“People’s pay packets can’t stretch any further,” she said.

Ms McDonald told Mr Varadkar that the industry needs to be held account.

“We need genuine enforcement. We need a holding of the industry to account.

“Cosy chats, vague promises are not enough.”

She added: “We can’t have another case of you talking the talk, but failing to follow through where it really counts.”

Mr Varadkar said Government is under “no illusions” about high inflation.

He said petrol and diesel prices are coming down and he expects electricity and gas to come down in the coming months.

“As is often the case, energy inflation feeds into the cost of food, the cost of production, the cost of doing business, and as a result of that, families are seeing a big increase in their grocery bills, and the cost of the weekly shop.”

He said Government was acting by taxing profits, and engaging with the Competition and Consumer Protection Commission (CCPC).

Mr Varadkar also said Minister of State Neale Richmond was meeting a forum of retailers to send a “clear message” that Government expects them to reduce prices following the reduction of input costs.

Ms McDonald said a message to the sector to bring costs down was welcome but not enough.

“The message must be that if the sector does not act that government will.”

She said there needed to be measures for enforcement.

Social Democrats leader Holly Cairns said “the extortionate price of energy and food is driving so many people to the brink” and that real wages were down.

“The real median weekly wage has fallen by nearly 100 euro, that’s more than 5,000 a year.”

Ms Cairns added: “Families are struggling to pay energy costs that have doubled and food prices that are now in the stratosphere.

“Increases in energy and food prices are costing families, at least an additional 3,200 annually.”

Ms Cairns said there was a suspicion that supermarket chains are using Irish consumers as “cash cows” and highlighting increased profits from one chain in Ireland compared with the UK.

She questioned whether other retailers are hiding enormous profit margins and said there was a “toothless regulator and an apathetic Government”.

Mr Varadkar said he did not see any reason why retailers profit margins should be greater here than other jurisdictions.

The Taoiseach added that the fall in real wage growth last year was “an exception”.

“This year, we expect to see real wage growth again, inflation averaging at around 5%. minimum wage is going up by 7.8%, wages going up as well on average by more than 5%.”

He said the number of people in arrears on electricity bills is “actually at its lowest in very many years”.

Ms Cairns said Mr Richmond is going to “wag his finger” at retailers but it was no clear there would be repercussions.

Mr Varadkar said it was a “tired narrative” to say Government was not taking action.

People-Before-Profit TD Paul Murphy said workers had been suffering for more than a year and that the increased money families were spending on fuel and food was going to corporations.

“What we’re experiencing, what we have been experiencing is a profit-price spiral.

“It is not inflation that we’re seeing, it’s greedflation.”

He said profiteering was the main factor.

Mr Murphy asked Mr Varadkar what would happen if retailers did not reduce prices.

“Nothing,” he suggested, adding that Government had appeared to rule out price controls.

Mr Varadkar said he had been misquoted and misrepresented and said he did not rule out price controls.

“Yes, there is profiteering by some companies, and that is absolutely part of this.

“But it is one factor, not the sole factor.”

On price controls, he said there was a risk of products becoming less available.

“We know from socialist governments in the eastern Europe, in Russia, the Soviet Union, the consequences there.

“Shortages, rationing, a black market. Not good things.”