John Dolan: Soaring prices threatening to strangle hope of a recovery from pandemic

In his weekly column John Dolan reflects on soaring energy prices and other financial pressures on the Irish consumer
John Dolan: Soaring prices threatening to strangle hope of a recovery from pandemic

WINTER WARMTH: A 39% rise in home-heating oil, compared to last year, will be noticed as people start filling up for the winter in the coming weeks.

A CENTURY ago this very week, a national campaign was launched to urge Dáil Éireann to step in and control the soaring prices of foods and other essential items.

A meeting of Dublin Corporation heard such a campaign would be welcomed by beleaguered households around the country.

The price rises were seen as profiteering - an emotive word coined during the Napoleonic Wars and often invoked during World War I. Now, with Ireland standing on the precipice between a war with Britain and a civil war, profiteering was back.

The word refers to the fact that during wars and, yes, pandemics, when essential items can be in short supply, some unscrupulous traders indulge in price gouging, and the more scrupulous ones are sorely tempted to join in.

Profiteering Acts had already been passed in Britain in 1919 and 1920, and newspapers reported on housewives’ unions uniting to “beat the profiteering tradesman”.

In 1921, as Ireland held its breath in the hope of a peace treaty with Britain, ordinary households were at least as concerned with the soaring price of the weekly shop as to what Dev and Collins would conjure up.

So, a series of Anti-Profiteering Committees were set up in each local authority across the land, which would fix the price of foodstuffs, allowing for a reasonable profit for traders. Violations of such orders would be met with fines, and repeat offenders faced jail.

These Anti-Profiteering Committees even went so far as to hold preliminary checks. A committee in Cork, chaired by Lord Mayor Donal O’Callaghan, studied prices since 1914 and concluded reductions should be made, while the Echo reported: “Today’s cost of living is very testing.” One odd finding was that margarine cost more than farmers’ best butter, which must have baffled many a house-proud housewife.

It appears these Anti-Profiteering Committees soon fizzled out, and aside from a few lacklustre attempts in the intervening 100 years to introduce price controls, the free market has been allowed a free hand.

The question now is, as Ireland recovers from a pandemic, and as prices continue to rise in almost every area, fuelling rocketing inflation, is it time to have a look again at the whole issue of price controls?

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In general, there are no controls on prices in Ireland. The idea is that competition and the canny consumer shopping around will keep the lid on prices.

But are those two checks and balances enough?

The average Irish consumer, I would contend, would fill up at a petrol station and purchase a latte without even a second glance at the price tag - never mind making a silent vow to take their business elsewhere next time. But this is just the collective attitude we need if we are to avoid the tag of ‘rip-off Ireland’.

As the Consumers’ Association of Ireland (CAI) points out: “Some retailers may opt to charge a significantly higher price for the same or similar product than their competitors, and they are within their rights to do so. In a free and competitive market, it is then up to the consumer to decide if they wish to pay that price.”

The CAI urges consumers to shop around and seek out the best available value, but here is where we are falling short.

I am as guilty as anyone. On holiday in West Cork in the summer, I paid a scandalous €10 for a posh-sounding lunch which turned out to be a limp ham sandwich that would barely have filled a kitten’s tum.

Did I complain? Not only did I stay silent, I actually thanked the staff heartily as I left, a nagging hunger still in my belly.

I wouldn’t go there again, of course, but this was a one-off anyway, so boycotting the establishment was not an option. If we, the consumers, are unwilling or unable to keep a lid on rising prices, then it may be that the Government needs to intervene.

Even then, its hands may be tied.

For instance, we already have a Commission for Regulation of Utilities (CRU) to protect customers from over-pricing, and price-fixing in the energy sector, and to ensure a healthy level of competition.

But it has been powerless to protect us from a staggering 30 price hikes so far in 2021 by various energy suppliers, and its Chair, Aoife McEvilly, clearly feels they are within their rights to add an extra €500 in annual electricity and gas bills.

She recently said this was “unfortunately due to a series of circumstances that are international market-driven”, adding: “I think we’re in for a difficult winter.”

No kidding.

We also have the Central Bank of Ireland regulating the financial services sector in Ireland, but that obviously does not have the teeth to prevent Irish mortgages being the highest in the EU.

So, any hope that the Government is either willing or able to keep the lid on prices in other sectors of the economy must be forlorn. But the question may be, can they afford not to act?

The Government and consumer will have some sympathy for traders, given the effects of the pandemic. Many traders will say they simply have no choice but to raise prices of goods to keep their heads above water. In this instance, it is not profiteering at all, merely an economic necessity.

But rising prices present a clear and present danger to recovery. Soaring inflation is threatening to derail the Irish economy just as it tries to go full steam ahead after the pandemic. It is now at a 10-year high, and the rate has risen for ten successive months.

Among the contributors to this are a 39% rise in home-heating oil compared to last year, which will be noticed as people start filling up for the winter in the coming weeks. Also, petrol and diesel prices are up around 13% year on year just as people start to return to the work commute after Covid.

The Government could help consumers by reducing tax on oil and fuel, but it’s unlikely the Green (or financial) players in the coalition would agree to that.

There have been significant increases in other basic, universal commodities such as gas, housing and rent, and the extra costs involved in house-building are threatening attempts to tackle the homes shortage. Clothing and footwear is rising sharply too. All of this is devaluing wages and increasing pressure for pay rises.

There hasn’t been talk of introducing price controls in Ireland since 2000, the last time inflation was posing a threat to growth, and the chances of the present Government opening that can of worms are probably unlikely.

Which means the best way to keep a lid on prices is through vigilant consumers like you and I taking a stand against high prices.

The question is, are we up for the fight?

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