Private Members' Business. - Price of Gas: Motion.

Tuesday, 13 May 1980

Dáil Eireann Debate
Vol. 320 No. 9

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Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  I move:

That Dáil Éireann, seriously concerned at the escalating price of bottled and town gas because of the serious hardship it is causing to large families and elderly people who use this fuel for cooking and heating, calls upon the Government to take steps to reduce the price of gas to consumers.

This is an urgent motion. Throughout the city of Dublin and the country there are thousands of householders who have no system of cooking and heating other than gas. With the price of town gas and bottled gas escalating, there is an urgent need for this House to express its serious concern and take action to remedy the situation. For families who use gas for cooking, prices have reached such a level that people are forced to eat cold meals. They are deprived of warm food because the price of gas has gone out of control.

In an RTE interview yesterday the Minister for Energy said that consumers were being faced with almost intolerable increases in price. Those were his actual words. I would go so far as to say that increases are intolerable. There is no [1521]“almost” about it. The Minister blamed the price increases on the increased cost of naphtha. I admit the price of naphtha has had a very serious effect, but I accuse the Government openly of being to blame also for the increases in gas prices and of not helping to cushion consumers against those price increases.

My reasons for blaming the Government are twofold. They reduced the subsidy on town gas. This subsidy was introduced by the Coalition Government in June 1975 and further extended in May 1977. Secondly, the Government increased the excise duty on gas in this year's budget. The subsidy on the price of town gas for cooking and central heating was reduced by 4.5p in February 1978. That was a sizeable reduction at the time. The second significant increase in the price of gas was the increase in excise duty from £7 per ton of naphtha to £24 a ton in this year's budget. This meant an increase in excise duty of from 2p a gallon to 7p a gallon, or an overall increase of 5p a gallon. This year's budget also increased excise duty by 22p per cylinder on the ordinary 25 lb. cylinder.

It is necessary to outline for the House tonight the extent of the increases in prices for natural gas and bottled gas. In May 1977 the net price per therm of gas for cooking was 45.03p. The gross price was 66.23p. The subsidy was 21.20p. On 1 February 1978 the price was increased from 45.03p to 49.53p. At the time the Government withdrew 4.5p of the subsidy, and from there the price took off. The subsidy was reduced from 21.20p to 16.70p. The net increases were as follows: On 14 May 1979 the price went up to 60.61p; on 20 August 1979 to 66.53p; on 18 September to 69.88p; on 7 January of this year to 84.75p; on 23 February to 90.47p; on 4 March to 98.93p; on 6 May it went to 107.73p. Between May 1977 and May of this year, the price increased on eight separate occasions. Therefore there have been price increases on eight separate occasions and on two of those occasions the Government were solely responsible for the increases concerned.

[1522] Regarding the central heating rate, the net price on 25 May 1977 was 32.70p. The gross price was 49.90p with a subsidy of 17.20p, but on 1 February 1978 the net price increased to 49.90p with the reduction of the 4.50p. Since May 197 the increase in this regard has been from 32.70p to 90.78p. In this instance, too, there were eight separate increases.

In April 1977 a cylinder of gas cost £2.62 but that price has increased now to £4.33 and this includes the 22p that the Government take. In addition to having to pay this high price for the regular cylinder of gas for domestic use there is a delivery charge in operation and this varies from 27p in Kilkenny, for instance, to 40p in other areas and to as much as 50p in this city. In this city too, the price of cooking gas has increased in less than three years from 45.03 per therm to 109.77p. All of these increases are very significant.

It is important to recall too that the subsidy has been decreasing consistently. In May 1977 the figure in this respect was 21.20p but it decreased in February 1978 to 16.70p at which figure it has remained since. To put this subsidy situation in respect of town gas in percentage terms, it has decreased from about 32 per cent in May 1977 to about 13 per cent now. This decrease has had a significant effect on the cost of this gas to the consumer. Obviously if the subsidy had been maintained at the 32 per cent level town gas would be costing the consumer at least 20p less per therm, a situation that would alleviate the hardship that is caused to such people as those with a number of young children or old age pensioners, widows and others in receipt of social welfare payments who rely totally on town gas for all their cooking and heating needs. It is unforgivable that the Government should be allowing this sort of situation to continue. The problem is aggravated more in the city where so many people rely solely on gas for cooking and heating, but there is a similar situation in towns.

The Government's decision to increase the excise duty on bottled gas by 22 per cent was very wrong. People in [1523] rural Ireland particularly will not forget easily this decision because it is in rural Ireland that bottled gas is relied on to a very large extent especially in the smaller houses. I call on the Government to restore the subsidy in this regard to the 1977 ratio of about 32 per cent.

I know I cannot extend the scope of this motion, but the Government should seriously examine the possibility of providing a subsidy for all types of fuel throughout the country. This motion deals with gas only but there are many people throughout the country experiencing difficulties in regard to other fuel costs.

The household budget survey published recently shows that the percentage of average weekly expenditure of urban households from 1973 up to 1977 increased from 4.8 per cent to 5.6 per cent. I do not want to be the forecaster of bad news but in, say, two years time, whenever the relevant report for 1980 is published, I predict that that 5.6 per cent will be in excess of 6.5 per cent because of the massive increases in gas prices allowed by the Government, because of their withdrawal of the subsidy and their increase in taxation on gas supplies. The Government are absolutely to blame for this.

This motion calls on the Government to take steps to reduce the price of gas to consumers. This evening's Evening Herald carries a caption “Kinsale Gas Will Slash Home Bills”. I am sorry to predict that it will be some time before Kinsale gas will slash home bills. In yesterday's Evening Press the Tánaiste got top headlines with a caption “The National Gas Grid Looks On” and in the Evening Herald“Kinsale Gas For Dublin”. However, anybody who read those articles will have seen that things were not half as definite as that. For instance in the first article it was reported that the Government had ordered a major study on the establishment of a multimillion pound national gas grid. Then it was reported that the Minister for Energy, Deputy Colley, had ordered a [1524] number of important steps following the publication yesterday of a major study on the town gas industry; also that the Minister for Energy had now requested Bord Gáis Éireann to undertake preliminary studies and surveys in relation to possible routes for a pipeline and the cost involved. It was said that he had also asked the Dublin Gas Company to submit a detailed programme of action to achieve necessary reforms within that company.

The report published yesterday was an important one. The study group was comprised of experts from different Government Departments who undertook to have consultations with the Irish Town Gas Association, individual gas companies, the trade unions catering for employees of those companies, the ESB and Bord Gáis Éireann, with submissions from a number of interested parties. The report stated that the Tánaiste had given preliminary consideration to the question of publishing the report in full but that at this stage his conclusion was that the report was not in a form suitable for publication. In regard to a study of major importance such as this one I believe that the Tánaiste has a duty to this House and to the country to have it published in full. This was a study undertaken at significant cost to the taxpayer, carried out by people employed in the public service, the trade union movement, the ESB and so on, and now we discover we shall see a digested or censored edition only. I challenge the Tánaiste and Minister for Energy to explain to this House and the country why this report is not being published in full. There is an obligation on him to do so. This report is probably one of the most significant to have been produced for many years, dealing with a national gas line from our offshore supplies. It deals with this gas line from Cork to Dublin together with feeder lines off the main one and with the actual cost entailed. It deals with the extent and scope of whatever feeder lines may be provided off the main one and the actual supply of gas offshore. Let there be no question about it, the ordinary taxpayer has paid for this report. But now all Séan Citizen [1525] will receive is an edition censored by the Tánaiste and Government. I reject this totally out of hand. I call on the Government to publish this report in full and not have this veil of secrecy hanging over the whole matter. People are entitled to know the facts, what this is all about, because in some years time, if this scheme ever goes ahead, people may well wonder what was in that report that was hidden.

We are at present talking about a three to five year preliminary study. I believe this supply could be laid on much faster than is at present being predicted. We are aware that in Great Britain approximately 12 gas boards have managed to provide supplies throughout England, Scotland and Wales. We must meet this challenge and endeavour to supply to Dublin consumers the national gas which is located off Kinsale. This would help to reduce the price of gas and also have an enormous effect on our balance of payments. An Bord Gáis must be expanded very rapidly to expeditiously provide gas supplies not just for the city of Dublin but for our other major cities and large provincial centres. There should not be just one main line feeding the gas supply from Cork to Dublin, but a number of feeder lines running, for example, to Galway and Limerick and other major towns. There may not be sufficient gas supplies available, however. The studies which have been undertaken must be acted upon immediately.

Natural gas supply has been managed in Britain and it has been most successfully carried out in Holland and Japan. I see no reason why we cannot do the same here. The delays mentioned, of at least three to five year periods, are much too long. We have the example of other countries, but even without that we should be able to expedite a natural gas supply throughout the country. This would benefit many industries, even if only for heating purposes, and would further industrial development.

In the report the Minister says that he has already requested Bord Gáis Eireann to undertake preliminary studies and [1526] surveys in relation to possible routes for a pipeline and the capital cost involved. I do not know when this request was made; it could have been in the last few days. The House should be furnished with this information, because it is in the national interest.

The report concludes that the future of the town gas industry in general, apart from the special case of Cork for which an allocation of natural gas has already been approved, hinges largely on the future of the Dublin Gas Company which accounts for over 90 per cent of the sales of the industry, excluding Cork. The report sets out a number of essential conditions to be met before any allocation of natural gas can be made to the industry. Those conditions are outlined and are reasonable. A matter of such national importance should not hinge solely on the Dublin Gas Company's future. Could the Minister tell the House tomorrow why this should be so? If necessary, the Dublin Gas Company which services only a portion of the city of Dublin should be purchased outright. This whole matter is of such vast national importance that, if necessary, the Dublin Gas Company should be purchased and taken over to the satisfaction of all concerned and everyone with whom I have discussed this matter is of the same opinion as I am.

The cost of changeover from the present system to natural gas is not enormous. The provision of a national network would provide much employment, be of benefit to the country as a whole and bring about a reduction in the price of gas. There are a number of important steps which the Government must undertake. In the interim they should consider withdrawing the duty at present being charged on bottled and town gas. Secondly, they should restore the subsidy in the same ratio as when the Coalition Government were in office. This would help to alleviate hardship throughout the country. The Government should ensure that every possible effort is made to conserve energy and heat. The provision of grants for insulation of windows, doors and so on is of importance.

[1527] The Minister has tabled an amendment which I totally reject. The Government have failed miserably to make any effort whatsoever to control the price of bottled and town gas. I seriously deplore their lack of effort in this regard. My party are seriously concerned about the escalating prices of these commodities.

Minister of State at the Department of Industry, Commerce and Tourism (Mr. Meaney): Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  I move the following amendment:

To delete all words after “Dáil Éireann” and substitute the following:—

“appreciates the stringent control exercised by the Minister for Industry, Commerce and Tourism on bottled and town gas prices and recognises that the price increases approved for these commodities were fully justified and were necessary to maintain supplies.”

I have been perturbed by the innuendos and statements made by members of the Opposition that there is no real price control and that no effort has been made by the Government or the National Prices Commission in this area. That is very far from the truth.

Deputy Enright said the Government had failed to make any effort to control the price of town gas and bottled gas. That is not so and the facts I shall set out will confirm my statement. Deputy F. O'Brien earlier tonight made the same allegation. On 20 February 1980 Deputy Barry Desmond said that the sanctioning of price increases had been let rip. I take grave exception to those statements. The Government and the National Prices Commission examine every application for a price increase. Price control is reasonable and adequate and all applications are investigated thoroughly. The National Prices Commission meet each week and they issue a report every month. These reports are available to Members of this House and to the public. There is nothing underhand about the operations of the National [1528] Price Commission and Deputies are quite unfair to make statements that are not in accordance with the facts. It bears out what I said before, that people are trying to make political capital out of the matter.

Mr. O'Toole: Information on Patrick O'Toole  Zoom on Patrick O'Toole  It is the Minister who decides, not the National Prices Commission.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  The National Prices Commission are there in an advisory capacity. I did not interrupt Deputy Enright when he was speaking and I would be glad if Deputy O'Toole would let me speak without interruption. The last interruptions the Deputy made did not end up so well. I do not intend to become personal.

Mr. O'Toole: Information on Patrick O'Toole  Zoom on Patrick O'Toole  I am not becoming personal. I am talking about what the Minister for Industry, Commerce and Tourism said.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  We are dealing with the price of gas, nothing else.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  Deputy O'Toole will get his chance to speak. I challenge him to contradict what I have said about price control. Does he think the National Prices Commission are not doing their duty?

Mr. O'Toole: Information on Patrick O'Toole  Zoom on Patrick O'Toole  It is the Minister who decides.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  Is the Deputy saying the National Prices Commission are not doing their job?

Mr. O'Toole: Information on Patrick O'Toole  Zoom on Patrick O'Toole  I am not blaming the National Prices Commission——

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  We cannot have a question and answer session across the floor of the House. The House should deal with the matter before it.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  It is approximately three months since the House debated and defeated a motion on the part of the [1529] Labour Party condemning the failure of the Government to control prices. On that occasion the Minister welcomed the opportunity to highlight the achievements of the Government in fulfilling their commitment to effective price control. This motion which concerns bottled gas and town gas prices enables me to spell out for the House and the people the stringent price control system currently operated in this country.

Before I proceed further to discuss the motion I should like to place on record my appreciation of the work of the National Prices Commission, the members of which give unselfishly of their valuable time, in the operation of the Government's price control policies. I should also like to commend the staff of the commission and of the Prices Division of my Department.

First, on my own behalf and on behalf of my colleagues in Government, I wish to state there is no lack of awareness on our part of the effects that these price increases—in fact any price increases—have on ordinary people. Members of this House are well aware of what affects the ordinary people and they do not have to be lectured by anybody on that matter. I wish to stress that, as reflected in the amendment to which I now speak, statements made by Opposition Deputies would attempt to give the impression that the Government are in some way oblivious to the feelings of our constituents. I can assure Deputies that this Government are intensely aware and concerned to minimise the effects of these unavoidable price increases and this concern was amply demonstrated in the budget on 27 February 1980.

In that budget, the Minister for Finance stated that major improvements in the income of the less well off were a central element in the budget. This was clearly illustrated in the announcement that weekly rates for contributory and non-contributory old age pensions, widows' pensions, pensions for invalids and deserted wife's benefits and allowances and health allowances such [1530] as the incapacitated pensions maintenance allowance were being increased by 25 per cent. I mention these increases because the motion put down by Deputy Enright and others referred to the hardship being caused to large families and elderly people. I want to spell out the advantages granted by the Government to those people. The increases I mentioned were in addition to increases given in October 1979 which represented some 6 per cent on average on weekly rates.

The new weekly rates of benefit which came into operation in April 1980 were, on average, 31 per cent higher in the case of long-term rates and 26 per cent higher in the case of short-term rates than the rates of benefit in operation in April 1979. It was one of the largest percentage increases in the history of the State. There were also special increases for people over 65 years. The benefits granted by the Government were given to help the less well off, to cushion them against price increases that would affect them. The Government also recognised the importance of children's allowances as an income supplement.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  We are getting away from the price of gas.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  The motion in the name of Deputy Enright spoke of hardship on large families and elderly people. I am pointing out how these people have been cushioned against the effects of price increases. I am entitled to reply to what was said——

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  The Chair has no objection. All I am pointing out is that we cannot have a debate on social welfare benefits.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  The increases in social welfare benefits were granted especially to cushion people against any price increases. Among the price increases was the increase in respect of gas. I am pointing out to the House how the Government last February set about the job of helping the most vulnerable sections to cope with price increases.

I read the record of the debate of the [1531] motion by the Labour Party on prices last February and the records of similar motions since this Government came to power in 1977. It strikes me that the Opposition have continually ranted about the Government's inability to control prices but they have failed to demonstrate in any instance that a price increase was not fully justified by the circumstances.

Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  I mentioned two instances.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  That is not so. Do the Opposition believe the NPC are soft on prices?

Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  I am not blaming the National Prices Commission, I am blaming the Government.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  The Deputy is backtracking now. He put the blame on them completely.

Mr. O'Toole: Information on Patrick O'Toole  Zoom on Patrick O'Toole  The Minister is blaming them for the increases.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  I am not blaming them. I have stood over them and their good work.


An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  We have three Deputies in the House. Surely we could have a little peace. Will Deputy Enright and Deputy O'Toole please keep quiet? The Minister of State, on the amendment.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  I know you are trying to keep the Deputies from interrupting but they are getting a bit annoyed. I appreciate what you are doing. With regard to the increases in bottled gas and town gas prices, the simple fact is that the operating costs of the companies in those sections have increased enormously in recent times. Everybody agrees with that. In such circumstances, there are three options which could be followed. First, the applications for price [1532] increases could be refused point blank. Given the size of the cost increases involved, the companies concerned, no doubt, could not absorb these costs. We have to realise that gas companies, the same as other companies, have to pay for raw materials, wages, depreciation, insurance and overheads.

The consequence of exercising this option are obvious. Those firms which did not cease operations immediately would have had to cut services severely with substantial numbers of employees being made redundant and the consumer left without supply.

A second option might be to refuse the price increases and grant subsidies to the suppliers to make good the difference. As Deputies are no doubt aware, the price of town gas at the consumer level is already in receipt of a Government subsidy. The present subsidy amounts to £5.8 million per annum, equivalent to between 16p and 19p per therm. Any increase in the amount of the town gas subsidy or the introduction of a subsidy on bottled gas prices could only be met through increased taxation. That is one point which Deputy Enright completely avoided when he was making his statement. When he spoke about a subsidy he did not spell out where it would come from or who would pay for it.

Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  In 1970 I called for a subsidy.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  In 1970 the Deputy was not correct about what he said about a subsidy.

Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  In 1975 I called on the Government to bring in a subsidy. The Coalition Government brought in a subsidy of 32 per cent.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Deputy Enright has already made his speech.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  It continues to be the Government's belief that such subsidies applying irrespective of individual needs are defective and do not sufficiently discriminate in favour of the less well-off [1533] sections of the community. Moreover, subsidisation can lead to distortion in consumption patterns and hides the real cost of a product or service. If one had subsidisation at a very high level it could lead to wasteful usage of energy by the better-off section of the community. I am not talking about the less well-off section but about the better-off section. Deputy Enright's case was completely based on a subsidy but he gave no indication of the cost of the subsidy or who would be expected to pay for it.

Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  And tax.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  He did not say if the tax went where the money would be got from. Deputy Enright should have spelt out those things clearly and included them in his motion.

Mr. O'Toole: Information on Patrick O'Toole  Zoom on Patrick O'Toole  He had all the answers to those questions in 1977.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  In 1977 Deputy Enright mentioned the increase in the subsidy but that was just prior to the general election and was confined completely to Dublin. Have I got my facts right?

Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  It was a subsidy of 32 per cent.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  In May 1977 prior to the general election the National Coalition Government increased the subsidy confined to the price of gas in Dublin. Shortly after that, when there was a change of Government and Fianna Fáil came in, the subsidy was increased for the rest of the country because we believe in equity.

Mr. O'Toole: Information on Patrick O'Toole  Zoom on Patrick O'Toole  Fianna Fáil reduced the subsidy in Dublin by a half.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  Will the Deputy let the Minister conclude? He has very limited time.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  The Deputies talk a lot about subsidies. Do they not help out the better-off members of society? The motion states:

[1534] ...because of the serious hardship it is causing to large families and elderly people who use this fuel for cooking and heating, calls upon the Government to take steps to reduce the price of gas to consumers.

That means to all consumers. While the Deputy mentioned two categories of people he did not at the end of his motion confine it to them. He meant that everybody would be subsidised, that the very wealthy would gain by this. The Government believe that it is better to increase social welfare payments and to try to cushion the less well-off members of our society. Deputy Enright may have his points but he can see as clearly as I can that to subsidise the very wealthy people is not the proper way to go about it. Deputy Enright and I are old friends but I remember when his party were in power they could not pay the price of a census so that we would know how many people were in the country. They are now talking about all they did, but that is another day's work.


Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  I do not believe that either of these two options which I have outlined would be acceptable to many. The option chosen was to allow the companies concerned to increase their prices by amounts sufficient to compensate them for their justified cost increases. There is an important economic merit in this option as it involves the consumer paying something approximating to the real cost of the service or product involved.

I would like now to deal with the separate commodities mentioned in the motion, bottled gas and town gas and the application of a controlled price system to these. With regard to bottled gas prices, there have been two increases in prices since January 1980. During January the Minister approved of an increase of 29p in the price of the standard domestic cylinder of bottled gas. The main company concerned in the production of bottled gas claimed increased costs in excess of £5 million in respect of the increased cost of propane and [1535] butane, the feed stocks used in bottled gas production, increased labour costs and costs related to the devaluation of the Irish punt. Having examined this price increase application, the National Prices Commission recommended an increase of 57p in the price of the standard domestic cylinder. However, the Minister was not totally convinced that the company's claim was justifiable and consequently he approved an increase of 29p on the standard domestic cylinder. I hope the Deputy has been listening to that very carefully. I want to emphasise to him that the Minister was wide awake in relation to what was happening.

Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  When was that?

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  I will give the Deputy a copy of my speech afterwards. The second price increase was approved by the Minister in late February 1980 and ammounted to 77p in the case of the standard domestic cylinder. This price increases provided for:

firstly, an increase of 22p per standard cylinder and pro rata for other size cylinders to take account of the increase of 5p per gallon imposed on butane and propane in the budget;

secondly, an increase of 50p per standard cylinder and pro ratafor other size cylinders to take account of a recommendation of the National Prices Commission for compensation for Calor Gas (Ireland) Limited, and Ergas Limited, mainly for the raw materials used in the production of bottled gas;

thirdly, an increase of 5p per standard cylinder and pro rata for other size cylinders in retail traders' cash margins which had been recommended by the National Prices Commission to compensate these traders for cost increases.

Some public representatives were concerned about the traders' margins and had been making cases for them. This was general among all parties.

It is worth noting that the companies [1536] involved had originally proposed an increase of 63p on the standard cylinder. The National Prices Commission undertook a detailed examination of the proposal and recommended to the Minister that the companies be allowed to increase their prices by 59p per standard cylinder. The Minister, aware of the series of increases and showing concern following his examination of the proposal, decided that the price increase should be 50p per standard cylinder. The original application was therefore cut back by 13p or more than 20 per cent. That is sure proof that the Minister and the Government are deeply involved and know what is happening in relation to all price increases.

As I have already stated, the price increase of 77p also included an increase of 5p per standard cylinder and pro rata for other size cylinders in retailers' cash margins which had been recommended by the National Prices Commission to compensate these traders for cost increases. The retailers involved had applied for increases ranging from 12p to 25½p. Following detailed examination the price increase approved was 5p per standard cylinder. That was a big cut down from the original application. The final price increase approved was just 5p. For the sake of comparison the current maximum retail price of Calor gas, the standard domestic cylinder, is approximately £4.33 here, in the UK it is £4.80 and in Northern Ireland it is £4.60. That is despite the fact that there is a difference in currency and so on. That shows that we compare well with our nearest neighbours. It is essential to note, therefore, that an increase which without price control could have amounted to 110.5p was cut back to 77p a reduction of over 30 per cent. Even the most ardent critic of the Government could not deny that the actions of the Minister in restricting the amount of price increase on bottled gas cylinders reflects the stringent control being exercised over prices. It is also clear evidence that this Government, while recognising and appreciating the work of the National Prices Commission, do not and [1537] will not act as a rubber stamp where price increases are concerned.

An important factor to emerge from the two increases in bottled gas prices approved in 1980 has been the significance of the main raw materials, butane and propane, as contributory cost factors. Some of the Opposition speakers referred to butane and propane as if they were a trade name for lollipops. Those properties are at the kernel of what is happening and I hope Opposition Deputies will bear that in mind.

In the case of the main bottled gas producer the total increased cost of butane and propane which the Minister allowed over the last two price increases amounted to over £5½ million on an annual basis. This is equivalent to 91 per cent of the total increased cost allowed. As Deputies are aware, butane and propane are derivatives of oil and move in line with petroleum product price increases. In addition to the fact that the cost of feedstock from their normal sources of supply was increasing dramatically in price, the Irish bottled gas producers also faced a cut-back in the volumes available from these sources at a time when the volume of consumer demand was increasing at a rate nearing 20 per cent. As a result it was necessary for the Irish companies to supplement their supplies with supplies purchased at much higher prices on the world spot market. The reality of the situation is that, if the Irish bottled gas producers are not prepared to pay the increased prices for butane and propane, supplies of the materials to this country would diminish. The consequences of such an occurrence would be dramatic and the social hardships it would create would be immense.

I now turn to the question of town gas price increases. The principal town gas operations, Dublin, Cork, Limerick and Waterford, all use naptha as a feedstock for the production of town gas. Again, naphtha is a petroleum derivative and reflects the movements in world oil prices. It is supplied by the international companies on foot of contracts freely entered into with the gas companies. [1538] Therefore, it does not come under the Department as much as other matters we have been discussing.

It is both a worth while and sobering exercise to reflect on the movements in crude oil prices in recent years. To put it mildly, the increases in crude oil prices in the last two years have been staggering. The price of a barrel of Saudi Arabian light crude, which is the “marker” against which all other crude prices are measured, was 12.95 US dollars in January 1978. By January 1979 it had increased to 13.34 US dollars; in July 1979 it was 18 US dollars a barrel, in December 1979 it was 24 US dollars a barrel and the present price is 26 US dollars a barrel. It can be seen, therefore, that in little more than a year the price of Saudi light has increased by almost 100 per cent. It is interesting to reflect that in the three years prior to this Government assuming office, 1974, 1975, 1976, we experienced annual inflation rates of 17.0, 20.9 and 18 per cent respectively. The movement in crude oil prices over the corresponding period was from 10.55 US dollars for a barrel of Saudi light crude in 1974 to 12.95 US dollars a barrel in 1976, an increase of 23 per cent over the period. The conclusions which can be drawn from contrasting these figures are obvious and reflect the stringent nature of this present Government's price control policies.

Mr. Enright: Information on Tom Enright  Zoom on Tom Enright  There was a 400 per cent increase between 1973 and 1976.

Mr. Meaney: Information on Thomas J. V. Meaney  Zoom on Thomas J. V. Meaney  Tempered with the Government's desire to keep price increases to the absolute minimum is the awareness that unless firms are compensated for their justified increased costs they will not be in a position to finance the purchase of replacement stocks. I have outlined for the House the movements in oil product prices and the consequent increases in the cost of naphtha, the feedstock for the production of town gas. It would be unrealistic to think that price increases to the town gas producers could be refused, bearing in mind the significant increases in naphtha prices. With the exception of the increase in [1539] Dublin gas prices announced on 2 May 1980, all of the other most recent price increases by the town gas companies have been designed to compensate, in the main, for naphtha cost increases.

It is opportune for me to say a few words about the recent increase in Dublin gas prices. In 1979 the Alliance and Dublin Consumers Gas Company incurred severe losses on trading. A special price increase was granted to prevent further trading losses and to fund capital expenditure which was designed to achieve significant improvements in feedstock utilisation. It is also worth noting that there had been a significant drop in consumption, due in part to the mild winter and contributed to by price consciousness. The Government saw no alternative to granting this price increase which had been recommended by the National Prices Commission. However, the Government recognised that the granting of this special price increase was not the total solution to the company's problems. Accordingly, as a condition to this price increase, the Tánaiste and Minister for Energy has asked the Dublin Gas Company to prepare within six weeks a detailed development programme aimed at securing the long term viability of the company. I assure the House and consumers that the Dublin Gas Company will be required to apply any 1980 trading surplus available out of the revenue from this special price increase after the purposes for which it was granted are covered to the relief of the consumers in 1981.

On a more general note, I want to refer briefly to other cost factors. It must be clearly understood that the cost pressures which nurture our inflation have both external and domestic origins. Given the open nature of the Irish economy, we cannot insulate ourselves completely from the adverse forces or influences operating in markets abroad. The big rise in import prices, including oil based products, reflects the international and political nature of current inflation and is indicative of the widespread character of the problem. [1540] Our primary concern must, therefore, be to ensure that our relative competitiveness abroad is not weakened by inflation created at home. Increased wages and salaries not matched by real increased productivity must be passed on in increased prices and, therefore, in the final analysis, are of no real benefit to the people who obtain them.

In conclusion, I would again stress the Government's commitment to stringent price control for all sectors of industry. However, in administering the price control system, the Government must have regard to the need to compensate companies for justified cost increases and thus ensure the availability of vital raw materials and inputs to industry and supplies of consumer energy requirements.

Mr. O'Toole: Information on Patrick O'Toole  Zoom on Patrick O'Toole  I appreciate the Minister's efforts to try to put a good face on things as far as he can. He has a problem. It is one of inconsistency and the final part of his speech bears this out adequately and, unfortunately, blatantly. A few years ago when the party to which I belong were in office and the Minister of State's party were on this side of the House, any mention by our members of escalating costs at the time being attributable to external factors were treated with absolute derision, in other words everything that increased was due to domestic Government policy over which we had control. No benefit of any doubt was given that there might even be a shadow of blame to be cast on the cost of imported materials or oil.

We heard a lot about the cost of oil and energy but over the last 12 months the cost of oil, to which increases in gas prices and prices in general must be attributed in some degree, amounted to 50 per cent. Thank God they are not in the position we found ourselves in facing much larger increases in imported fuel costs.

The Minister gave us a long dissertation on the theory of subsidies. It was at the behest of Fianna Fáil that we introduced subsidies on food items and on gas when in Government. The theory propounded by them, which we agreed [1541] agreed with and endorsed by our actions, was that in a position of rising inflationary trends and a drop in living standards, one had to intervene to save people from hardship. This we did.

In assuming office in the case of gas the level of subsidy was 21p on a gross cost of 66p, in other words there was over a 30 per cent subsidy. We found initially that inflation decreased and for a short time things looked rosy but then the inflationary spiral took over once again and got worse and worse. The same conditions and circumstances apply now for a rethink on the introduction of increased subsidies as applied when they were introduced initially. The Government are blind to these conditions and will not admit that they exist. This is a serious fault in any Government—to fail to confront reality when they see it.

The Minister of State said that subsidies could be discriminatory and could be of more benefit to the wealthy than to the less well off. This is a fact but that is not an excuse for not introducing them. As the Minister well knows, a mild toothache or any ailment of the mouth should not result in total extraction of a person's teeth. If the Minister in his wisdom feels that the application of subsidies across the board cannot be justified because they help the well-off as well as the less well-off, there is a simple remedy—apply selective subsidies to people who, in the Minister's opinion, should be helped, for example, people with large families, unemployed in receipt of social welfare benefit, the old in receipt of pensions, the disabled and so on. There are many categories of people who could be selected for special treatment through the form of increased subsidy on gas.

As I said, on assuming office the degree of subsidy that applied was in the region of over 30 per cent. We have now reached the stage where it is just more than half of that, 16.7p on a gross of 109.73p. The increases which have taken place in gas prices over the last 12 months must give rise to concern and people must ask where will it stop. On a [1542] rough calculation, if the average gas cylinder continues to increase at the rate at which it has increased over the last nine months, by 1984 the accumulative mathematical conundrum comes out at the average 25 pound cylinder costing £19.80. That sounds ludicrous but if the current rate of price increases is allowed to continue at the same rate that is what is facing us—£20 for a 25 pounds cylinder by 1984.

I mentioned inconsistencies in the case of the Minister of State but I cannot but be amazed at the inconsistency expressed in both the actions and the statements of the Minister for Industry, Commerce and Tourism. He talks straight and speaks from the shoulder and he is the one man who has spoken out in really dire tones against the management of Dublin Gas, the whole structure of the company and the way they run the business. He has castigated them publicly on the radio, yet he comes along and grants them an increase and tries to justify that increase, despite the fact that most people who heard him castigate them know that he is trying to justify this increase with tongue in cheek. You cannot have jam on both sides. You cannot say that this company are not working to their full capacity, they are not giving value for money, their management structures leave a great deal to be desired—he has said this on radio—and then come along and justify a price increase. That kind of inconsistency never ceases to amaze me, in particular because it is the Minister for Industry Commerce and Tourism who is involved.

The dissertation to which we were treated by the Minister of State in relation to the NPC is very interesting indeed. When it suits the Government spokesmen they blame the NPC for price increases. They put the onus on them to allow increases and recommend increases, but in the not so distant past, in better days that I recall, when you had an odd reduction here and there in the cost of commodities, the Minister himself made the announcement without any reference at all to the NPC. I have been [1543] watching the media over the past couple of years and it is amusing, to say the least, when increases are announced in the interim prior to the publication of each NPC report and there is a short statement from the GIS stating that the NPC have recommend X per cent increase on this commodity, Y on that and Z on the next and there is no question at all. The Minister for Industry, Commerce and Tourism or the Government are the people to whom the recommendations have been made by the NPC but specifically the Minister for Industry, Commerce and Tourism is the man who has responsibility for allowing or disallowing the increases as recommended by the NPC. I will refresh the Minister's memory. He omitted to mention that in 1977 when his party sought office through the oldest method known to politicians—that is political promises —on page seven of that famous or infamous manifesto concerning itself with prices and on the NPC issue, the Fianna Fáil Party gave an undertaking that they would restructure the commission so as to make them more effective in dealing with price increase applications coming before them. Very little restructuring has taken place. We have had changes in personnel in the commission and to the best of my knowledge that is all that has happened really in the NPC who have been doing a very worth-while job since they were established. They have commissioned different reports on different subjects and different areas of consumer activity and these reports were very knowlegeable, informative and worthwhile. They have [1544] done Trojan work to bring to the notice of consumers what they regard as information which the consumer must have. However, it is unfair of any Minister or Government to try even to imply that they are the people who set the level of prices or who allow or disallow price increases. They investigate, they make recommendations based on their investigations, but it is the political head of the Department, the Minister, who ultimately is charged with the responsibility to accept or reject those recommendations. The Minister cannot hide under the coat-tails of the NPC and it is very unfair and ungrateful of him to do so.

One portion of the speech of the Minister of State dealt with the concern of the Government for price increases. In their manifesto there was a very clear, unequivocal statement to the effect that where the Government themselves had control over certain areas of consumer activity they would not allow price increases.

An Leas-Cheann Comhairle: Information on Seán Browne  Zoom on Seán Browne  This motion is dealing completely with gas prices.

Mr. O'Toole: Information on Patrick O'Toole  Zoom on Patrick O'Toole  On gas prices we had a 22p duty imposed, not by anybody from Saudi Arabia, or anybody producing butane or propane, but by the Minister for Finance, Deputy O'Kennedy. That was only two months ago.

Debate adjourned.

The Dáil adjourned at 8.30 p.m. until 11.30 a.m. on Wednesday, 14 May 1980.

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