Committee Reports > List of Committees > Joint > 1998 > Committee on Public Enterprise and Transport > Report on the meeting with Minister for PE&T on Duty Free

HOUSES OF THE OIREACHTAS

Report of the Joint Committee on Public Enterprise and Transport on Meeting with the Minister for Public Enterprise, Mary O'Rourke, T.D. on Duty Free

October 1998

HOUSES OF THE OIREACHTAS

Report of the Joint Committee on Public Enterprise and Transport on Meeting with the Minister for Public Enterprise, Mary O'Rourke, T.D. on Duty Free

October 1998

Contents

Introduction

The Joint Committee on Public Enterprise and Transport was established following Orders of Reference of the Dáil and Seanad of 23 October, 1997. In addition, Standing Orders state that the following powers may be conferred on a Committee:

"(1) power to take oral and written evidence and to print and publish from time to time minutes of such evidence taken in public before the Select Committee together with such related documents as the Select Committee thinks fit;".

This report of the Joint Committee on Duty Free was agreed at its meeting on 1 October, 1998.

________________

Seán Doherty, T.D.

Chairman

AN COMHCHOISTE UM FHIONTAIR PHOIBLÍ AGUS IOMPAR

JOINT COMMITTEE ON PUBLIC ENTERPRISE AND TRANSPORT

Dé Céadaoin, 7 Eanair, 1998

Wednesday, 7th January, 1998

The Joint Committee met at 3.05 p.m.

MEMBERS PRESENT:

Deputy Liam Alyward,

Deputy Martin Brady,

Deputy Pat Carey*,

Deputy Austin Currie,

Deputy Brendan Daly,

Deputy Phil Hogan,

Deputy Liam Lawlor,

Deputy Noel O'Flynn,

Deputy Trevor Sargent,

Deputy Emmet Stagg,

Deputy Ivan Yates.

Senator Peter Callanan,

Senator Donie Cassidy**,

Senator Liam Fitzgerald,

Senator Tom Fitzgerald**,

Senator Fergus O'Dowd.

Deputy Seán Doherty in the Chair.

Minister for Public Enterprise, Mary O'Rourke, T.D. in attendance.

Chairman: We will now call on the Minister to join us. I wish the Minister a happy new year and I welcome her officials Mr. John Lumsden and Mr. Matt Benville. I thank the Minister for being available to appear before the Committee today.

Item No. 4 concerns pending changes to the status of duty-free facilities.

Minister for Public Enterprise (Mrs. O'Rourke): I thank the Chairman and Members for arranging this meeting. I wish Members of the Committee a happy new year. We in the Department were observing your planned agenda for the future and you are certainly going to change the world. There is no doubt that we will solve everything in this room. I am not being facetious, however, when I say that I will come to any meeting you propose whatever the topics, depending if I am free and I generally am. It is better to air all these matters and the Committee will be a useful vehicle for what is a busy Department. It will help to refine issues by discussing them and dealing with them.

I am joined by the Assistant Secretary of the Department, Mr. John Lumsden, and Mr. Matt Benville. It is important and opportune to discuss the matter of duty free facilities now as we are drawing towards mid 1999 which is the time when duty free facilities will be abolished. That is the position as of now. Back in 1991 and 1992 it was hailed as a great victory to have obtained the extension until 1999, but now 1999 is practically upon us. Deputy Dukes raised the matter at the June Council of Transport Ministers before he left office and I raised it at the October and December Council of Ministers meetings.

I was underwhelmed by the lack of obvious enthusiasm for my point of view. I put that down to the fact that the Council had agreed in June that all the Transport Ministers were united. The fact that the date was some while away meant the dangers inherent in the abolition of duty free facilities were not as obvious. In addition, Transport Ministers can be as united as they like on the matter and can all stand together in the barna baol - which I expect they will when the time will come - but it requires a unanimous decision by the Finance Ministers and the European Commission joining with them. That is the extent of the challenge facing the country.

The United Kingdom currently holds the EU Presidency and earlier it was expected to have been a big issue in the UK. So far they have not indicated any strong interest in the matter but I hope that, collectively, we will be able to use the UK Presidency to push the issue with the British Government. I understand that many UK workers are involved in the duty free sector, so I hope we can use Britain's EU Presidency to highlight the matter.

Various European Governments have indicated movement on the issue but they have not conveyed it upwards to their Transport and Finance Ministers. For instance, the German Government has tabled resolutions in both Houses of Parliament to endorse a prolongation of duty free facilities, but the matter has not yet seeped upwards. There is a general election this year in Germany so that should have an effect if the issue can be tapped into.

While I have cited those examples from Britain and Germany, other countries have indicated some interest to a greater or lesser degree but there does not seem to be any unification of interest. It certainly does not seem to have reached the higher echelons of Finance Departments or the European Commission but there is still a year and a half to go.

Prior to Christmas I had an informal conversation with this Committee's Chairman and I suggested to him that a comparable Select Committee of the House of Commons is dealing with the matter. I feel that a case should be made to them early on, as the UK has the EU Presidency.

IBEC has made a strong case to me concerning the effects of the removal of duty free facilities, of which I am sure you have all received notification. Similarly, Mr. Frank O'Connell and his colleagues from Aer Rianta have made a strong written case about the matter. In addition, I spoke at a seminar in Brussels on the issue. All that movement is going on but I think that tapping into similar movements - as well as encouraging similar movements to commence - in other countries, along with the gradual spread of and cohesion and co-operation with those movements will give us the strength and uplift we hope for.

Whatever studies emerge I have no doubt that there will be large scale effects on employment. Equally, I am in no doubt there will be pressure on the Government of the day to allow increased landing or other charges to compensate for the loss of duty free facilities. It will be put to you that will happen, although it may not be automatic. That is the downside but in the meantime there is time to deal with the matter.

Deputy Yates: This is a serious issue, particularly for Aer Rianta. It is estimated that 40 per cent of its profits will be affected, not to speak of the fact that it is one of the largest operators of duty free shops around the world, both directly and on a franchise basis. The company will suffer greatly if its whole financial performance, including profits, is to be affected. That is not to speak of the direct jobs involved.

It is estimated that in excess of 2,000 jobs will be put at risk if duty free is phased out. It must be remembered that we are not only dealing with aviation we are also dealing with sea transport and Stena Lines and Irish Ferries are even more dependent on the revenue in question.

Has an evaluation been carried out in Ireland regarding the effect of the phasing out of duty free on access transport costs? Should the displacement of these profits be substituted by increased fares? This is surely quantifiable and it will effect Ireland's peripherality, tourism industry and cargo and freight transport industries, which will result in a loss of competitiveness for the country.

Was the Minister briefed on the recent meeting of Prime Ministers, Finance Ministers and Foreign Affairs Ministers in Luxembourg? All parties have expressed support for her fulsome endeavours in this regard. However, the Taoiseach's comments following the Luxembourg meeting represented something of a cold shower when compared to the efforts made by the Minister. To paraphrase his words, the Taoiseach seemed to say that it was a lost cause, that he was not optimistic about the outcome and that there did not seem to be much support for our position. He seemed to be preparing the ground for an ultimately negative outcome.

Many thousands of Irish workers protested outside the public meeting in Brussels where they met the Minister for Public Enterprise, who stated that ECOFIN and the Commission will have the final say on this matter. However, the workers were disappointed that the Minister for Finance did not make himself available to meet their representatives. While the Minister for Public Enterprise's bona fides in respect of this issue are accepted by those involved, there is a belief that the Taoiseach and the Minister for Finance are less committed, are reluctant to give support to it and are accepting as inevitable the phasing out of duty free at the end of June 1999. I would like to Minister to reply to these points in clear terms.

What consultations has the Minister had with Commissioner Flynn in respect of this matter? As Minister for Agriculture, Food and Forestry, I dealt with Commissioner Flynn on EU beef fines and many other issues. I discovered he was able to horse trade with other Commissioners who wanted things from him. It strikes me that Commissioner Monti totally opposes any change in the ECOFIN council's decision of 1994. What efforts have been made with the President of the Commission to try to ensure that this matter will be reviewed?

Does the Minister agree that the best way to proceed on this issue is to seek a further five year derogation on the basis that the theory behind the abolition of duty free was that it represents a distortion in the principle of the Single Market and that it was presupposed there would be a harmonisation of excise duties and VAT rates within the European Union by June 1999? In reality, there is a greater divergence in VAT rates and excise duties between the 15 member states than existed in 1994. Therefore, it is in our interests to preserve the jobs of the 140,000 people directly and indirectly involved in the manufacture of goods for duty free shops, involved in directly operating those shops and the related transport and sea transport jobs. I had discussions with Ryanair recently and I was informed that 30 per cent of the basic salaries of cabin crews come from the commission paid on sales of duty free. It appears there will be a number of indirect knock-on effects.

In view of the jobs spectrum and the lack of harmonisation of tax, will the Minister ensure that herself, the Taoiseach, the Minister for Finance and Commissioner Flynn set out a clear political strategy to seek a further five year derogation? Will she report to the Committee on a quarterly or half yearly basis - whichever is appropriate - on her progress in this regard?

Deputy O'Rourke: It is often difficult to deal with a number of questions and I will attempt to deal with them as they arise, otherwise the debate will become too diffused.

Deputy Yates inquired if an evaluation had been carried out on the impact on access transport costs if the abolition of duty free comes about. Paul Tansey's 1997 report referred to the various effects of that eventuality. The report states that the loss of duty and tax free revenues will require this trend to be reversed, with airport charges having to increase, up to 50 per cent in the case of Aer Rianta, if current levels of profitability are to be maintained.

Deputy Yates: Was that report published?

Deputy O'Rourke: I believe it was, I recall reading it on a previous occasion. Aer Rianta would be obliged to approach the Government with a proposal to increase charges. In the case of regional airports the increases would be even greater. I stress that any proposal to increase charges would require the Government's approval; no such increase would be automatic. There is no doubt that this is a serious issue.

Deputy Yates also inquired about the meeting of Prime Ministers in Luxembourg. I believe the Taoiseach was completely honest in his comments and was merely reflecting the feedback he received from other Prime Ministers at that meeting. As stated earlier, I was underwhelmed by the lack of vocal support at the Council of Transport Ministers.

At the public meeting in Brussels, which involved the Transport council and ECOFIN, I met the workers' representatives and enjoyed a good discussion with them. As Deputy Yates stated, they were disappointed that the Minister for Finance could not attend. However, the Minister could not make himself available because he and his European counterparts were meeting in another part of the building - without their officials - to try to hammer out agreement on an important issue for Ireland, namely, the IFSC and the various taxation measures affecting it. I entered a nearby room and listened to those negotiations. It became apparent that the Minister was fighting a highly charged battle on the issue. I returned to the workers' representatives and informed them about events.

I have spoken informally to Commissioner Flynn by telephone and in person about this matter. I take the Deputy's point that Commissioner Flynn is a good horse trader and is able to "cut it" at the Commission's negotiating table. I accept the suggestion that it might be a good idea to formalise communications with Mr. Flynn. The Taoiseach informed me that he spoke to the President of the Commission, Mr. Santer, about this issue and I understand the he will continue to work on it.

This matter was predicated in 1992 with the provision of a seven year derogation, which, it was believed, would be required for the harmonisation of tax measures. People felt duty free would cause disparity when that harmonisation came about.

However, it has not come about. There are greater disparities between countries than there were then, as Deputy Yates said. That is one of our strongest cards - that has not happened as they said it would happen and it was predicated on that basis. When I first came to this issue I was inclined to give a date in the distant future. If it was linked to internal tax harmonisation it would make more sense.

Deputy Daly: I thank the Minister for clarifying the situation and express appreciation on behalf of the people in Shannon who have been watching developments very carefully. I thank her for the work she has done up to now to find a mechanism by which this system can be continued.

As the Minister is aware the deadlines are approaching. 1999 is not far away. There is a certain amount of confusion whether there will be a derogation for a further three or four years. I would like to ascertain whether any evaluation has been made of an alternative mechanism which might protect these jobs through a more modern system of airport shopping. While there has been undoubted benefit for travellers in duty free sales of liquor, there have been people expressing the concern for some time whether the duty free facility is as important as it is maintained to be in relation to other commodities. The view has been expressed that with business competition it is possible to buy commodities such as cameras as cheaply on the high street as in duty free shops.

Could I ask the Minister if there has been any breakdown of revenue accruing to Aer Rianta from the operation of duty free shops in Shannon, Cork and Dublin Airports and the revenue accruing to them from duty free shops in places such as Leningrad and Moscow? As far as I am aware these shops will not be affected by this and shopping developed by Aer Rianta through the energetic operations of the people involved in Aer Rianta International who have opened shops outside the European Union are unaffected. Is there any indication of the revenue accruing to Aer Rianta from their activities other then duty free activities in the main airports?

Will the changes that will come about should this go ahead have a knock on effect on fare prices?

Deputy O'Rourke: I understand the Deputy's point. Because of competition now in the consumer market prices are being cut all the time. Can a person purchase a keenly priced commodity and then compare it with the same commodity in a duty free shop? I do not know. I know when you shop around in supermarkets for whiskey there is not much of a reduction in price. There may be an odd special offer but it is not sustained down pricing.

The Deputy asked about an alternative mechanism or alternative jobs if duty free is abolished. In a general sense Aer Rianta have been endeavouring to build up their hotel business. Apart from the Great Southern Hotels, which are continuing to do very well, there is the hotel in Shannon, they are opening another in Dublin in March, they are considering Cork as a base. They are seeking other types of employment for people and in that way they do not want to be found wanting if the abolition were to happen.

The abolition of duty free only applies to European countries but the shops set up in other places earn small amounts of money. I do not have exact figures but the amount is small. That may increase as consumerism in those countries increases but at the moment it is not fláithiúlach and much less money is made there. The main income comes from duty free sales here.

Would it affect fares? Yes, the relevant Minster of the day would propose increases in fares.

Chairman: How does the Minister perceive smaller regional airports such as Knock and Farranfore will be affected?

Deputy O'Rourke: I spoke to someone on the board of Knock Airport and he said it would have a very severe effect. He felt it would go a long way toward causing a steep decline for Knock now that it has just become established.

Deputy Stagg: I welcome the Minister and thank her for coming to discuss this matter with us.

It could be said that Aer Rianta was the original of the species as far as duty free was concerned. It designed and developed the whole scheme which has been taken on by other airlines and airport operators world-wide. It is not true to say it is as cheap to buy goods in the street unless they are illegally duty free. It is true in other European countries where goods are sometimes cheaper in the shops than in the duty free shops but that is not true in the Aer Rianta operated shops. It is considerably cheaper to buy at Dublin or Knock Airports than in the high street. That is my experience and I would be buying commodities the prices of which would be well known. It could said, Minister, that this is another fine mess you have got us into.

Deputy O'Rourke: Me?

Deputy Stagg: I am not laying the full blame at your door but in 1992 the Minister for Finance made a bad decision. That was to give a unanimous decision at ECOFIN to allow for the abolition of duty free with a package of other goods about tax harmonisation. It would do us no harm if the Minister was to revisit that package which was voted on in 1992, see exactly what was in it and tell us exactly what has been done. I want to assist the Minister in the campaign she has mounted but it is difficult for the Minister to have credibility in the campaign. The present Taoiseach voted for abolition so it does not surprise me that our European colleagues are less than vocal in their support of the Irish case. Although we are witnessing a welcome Pauline conversion to bubbling enthusiasm for duty free in at least one Government party, it is hardly surprising to see an underwhelming support for that position in Europe. The case is not credible. The Taoiseach voted for abolition although he had a veto. The package he voted for turned out to be a bottle of smoke. Most of it never came to fruition and what was suggested in it has become worse.

Deputy O'Rourke: Is the Deputy talking about harmonisation?

Deputy Stagg: Yes. That was the excuse for the abolition of duty free. The lack of support in Europe at the transport level was not surprising. I am surprised the Minister was not laughed out of court when raising it.

Deputy O'Rourke:They want it too.

Deputy Stagg: I have serious doubts about that. They may pay limited lip service to that under pressure from their own parliaments, but jobs, air fares, tourism and manufacturing must be protected at the ECOFIN meeting. I do not blame the Minister as my able constituency colleague, the Minister for Finance, has the real power in this issue, though he has a difficult job to convince the other Ministers to agree unanimously to a new proposal for the European Commission. The Commission has no intention of changing until the ECOFIN or Council at Prime Minister level give an instruction. We must bring the campaign forward although it is virtually impossible to win the case now. We might get a derogation for another year or two. Duty free is important to Ireland because of our peripheral position. We must examine the package that was voted on--

Deputy O'Rourke: The text of the package.

Deputy Stagg: Yes. I want to assist the Minister. We can then see how this Committee can work with other Committees in Britain or Europe. I wish the Minister the best of luck in the difficult political position she is in arising from the decision of her party leader.

Deputy O'Rourke: I thank Deputy Stagg. I was about to suggest examining the text of the package at the end of the meeting

Prior to Christmas I looked up the newspapers of the time. The deal was hailed at the time and duty free was to end in 1992. The derogation for seven years gained at the meeting was hailed as a massive feat.

Deputy Stagg: The newspapers got it wrong.

Deputy O'Rourke: That is another day's work.

Deputy Stagg: If one looks up the official text, a decision was made that could not have been made without the present Taoiseach's vote.

Deputy O'Rourke: The decision made was that duty free was to finish in 1992. That meeting brought in a seven year derogation which will bring us to mid-1999. The abolition had already been agreed to. Deputy Stagg is very persuasive.

Deputy Stagg: There was no standing decision.

Deputy O'Rourke: It is exactly accurate. A derogation of seven years was given.

Deputy Stagg: There was no standing decision.

Deputy O'Rourke: I am accurate in saying a derogation was gained for 1992 to 1999 which was hailed as marvellous. People forgot that the years would race on, leaving us here.

Chairman: That is in a particular context.

Deputy O'Rourke: Yes. Deputy Stagg's comments are pithy and appropriate. I was going to recommend getting the text of that European decision so we could see how the decision was couched and against what background. Then we could see what arguments we could raise. The Committee secretariat or my officials could do that. Deputy Stagg said his constituency colleague, the Minister for Finance, was able, with which I agree--

Deputy Stagg: Who knows better than me?

Deputy O'Rourke: -- and that the ECOFIN meeting was where matters would be dealt with.

Deputy O'Flynn: The Minister has shown her concern about this. It is a pity that Deputies' contributions have to be spoiled by blaming people.

Deputy O'Rourke: All Opposition speakers do that.

Deputy O'Flynn: This is an important matter, and we must all work together on it. I compliment the Minister on the work she has done so far. The seven year extension was an exceptional achievement. That decision was made in the context of tax harmonisation plans which have not been realised. However, the circumstances have changed so we should try to get a further derogation. The Minister has spoken of the effects on employment, with which we are all concerned. and with airport charges.

When speaking on the Air Navigation Bill I said that Cork Airport generates a surplus of £2.5 million per year from duty free sales. Cork Airport is doing remarkably well, but it needs all the revenue it can get to sustain itself and grow. I urge the Minister to seek a further derogation. It will be difficult and requires all-party support. We must also devise a new strategy for travel shopping at air and sea ports. I failed to think of a new one while coming to Dublin but I am working on it. Shopping at air and sea ports must be made attractive.

We must devise a strategy which allows air and sea ports to remain profitable and continue to contribute to operating profits. This will keep landing fees and operating charges at respectable and reasonable levels. We should again make a case for Ireland as a peripheral nation in Europe. We had to do so on many issues in the past. Travel to and from Ireland must take place by sea or air and we can make a case for the importance of having shopping facilities available to people travelling to and from Ireland.

Many Europeans do not yet understand the Irish question in relation to duty free shopping. There are few land borders between European states and, therefore, they are not used to shopping in the way that we are used to shopping. I would respectfully suggest that some of these points could be made by the Minister. This is too important an issue in which to involve politics. We must work as a cohesive force. We should take on board the Minister's suggestion regarding meeting our counterparts in different European parliaments to win their support for this derogation.

Mrs. O'Rourke: I accept the Deputies point on all-party support. The Opposition has points to make. However, having made those points we should unite on the case. I have thought about removing the words 'duty free'. There are counter arguments. I read an article by a well known journalist in a daily newspaper which states: "Duty free is essentially dishonest. It is greedy and immoral." One reasons given was that cigarettes are a health hazard. Duty free carries vague connotations of avoidance. Perhaps it is better to highlight the benefits of airport shopping. Most, but not all, of this shopping is duty free. This is an interesting point which could be taken up.

There is a captive audience. In the main people purchase duty free items because they are there. They have £10 or £20 in their pockets. This is not a large amount of money nowadays. The goods are in front of people, they are delectable and the opportunity exists to buy them. These purchases are associated with travelling. There is a huge benefit. Not for any one individual or corporation. We have not expressed this point. The benefit exists for people who use airports, workers, industry and the country. It is not that any one company is becoming massively rich as a result. The benefit is spread so that landing charges and fares are kept at a reasonable level, people are kept in employment and there are opportunities for expansion. The points on an all'party approach and the terminology are very useful.

Mr. Sargent: I welcome this discussion which allows for a more detailed analysis than would be possible in the Dáil. Some hard political views have been expressed but they are pertinent to the situation. My party and I see the value of and support the retention of duty free sales. I hope the Minister is successful in the campaign, notwithstanding the cold shower and the abuse mentioned. It will be a difficult campaign.

It must be recognised that the Maastricht Treaty and the measures voted upon were not a one way street. They had disadvantages as much as advantages. From the Green Party’s point of the view they will have more long-term disadvantages than advantages. The repercussions for duty free were one of the reasons why the Green Party felt that it was not in Ireland's long-term interest to adapt the Maastricht agenda without amendments. Having said that, we are where we are and we must take it from here. Whatever about Fianna Fáil's ability to forget the past, it is surprising that the 1992 package is not more familiar to the Minister. It is fundamental to the campaign that we have the details at our fingertips.

Mrs. O'Rourke: I am aware that it was couched against the background of tax harmonisation. I do not have the words of the text and that is what we hope to get.

Mr. Sargent: We need that.

Mr. Currie: Can it be circulated to the Committee?

Mrs. O'Rourke: Of course.

Mr. Sargent: We need the text to be able to argue the case in full. Hopefully, that will be provided without delay. Am I right in thinking that the decision was taken in the context of pressure on Ireland to agree to a unanimous decision and with Ireland resisting the derogation carrot was offered and that seemed enough to put off the day of reckoning and provide for a harmonious political outcome? We are now living with the consequences. That must be clearly understood. That is my understanding. I do not wish to do anyone a disservice.

When the Minister states that a unanimous agreement is needed among her colleagues, the Finance Ministers and the Commission, is that decision needed for the abolition or retention of duty free? The Minister mentioned that the UK Government, although it will be affected by the abolition of duty free, did not seem active.

Mrs. O'Rourke: As yet.

Mr. Sargent: Might I suggest that we concentrate our diplomatic efforts on the UK , first and foremost, given that it holds the Presidency and its relative island status. Of all member states, the UK ought to be most in sympathy with Ireland's position. As one of the larger states in the EU, the UK carries enormous clout. Is it the Government's strategy to focus most pressure on the UK? If so, what strategy will follow from that?

Mrs. O'Rourke: The Green Party took a view on Maastricht and continues to do so. That is its right. The text will be furnished to the Committee. Our ability to tease out questions is one of the advantages of this Committee. That would not be possible in the Dáil as the Ceann Comhairle would be doing his duty and telling Deputies to shut up.

The text is very important. The Deputy asked about the possibility of a unanimous decision at ECOFIN and the Commission for the derogation. The decision remains to abolish the status and that is the decision that will be returned to. The derogation was obtained. If there were a reversion it would be to abolition. That is to say, the derogation period would have passed and we would be back to abolition. I hope there will be a full debate on the matter and that it will be settled before then.

The Deputy asked if the Irish delegation in 1992 was holding out and whether the decision to give a derogation was offered to the Irish in the hope of getting agreement. I do not know. The Deputy will be aware that many find it a feature of the European system that the feel of a debate is not apparent, just the result. The toing and froing does not become apparent. I think we should get the full background, including the text and the spirit of the meeting, so to speak, which may be available from documents. This Joint Committee was set up by and is responsible to the Oireachtas and, therefore, has the clout to bring more information into the public domain. We will endeavour to get the relevant information, including, if possible, the flavour of the meetings.

With regard to the position of the UK Government, I have an outstanding commitment to meet Mr. John Prescott and I hope to meet him during the course of the UK EU Presidency. The Deputy's idea of concentrating on the UK is important because they have quasi island status. The UK Government is committed to employment and it holds the EU Presidency. That may be a useful combination of factors.

Senator Cassidy: I thank the Minister for her support on this important issue. It concerns jobs and revenue. We have an island economy, unique in the EU. At the beginning of this decade Ryanair did not exist, the number of people using Dublin Airport was about 3 million - it has increased since then to 10 million - and there were far fewer hotels and guest houses. In 1991-92 the then Government decided that tourism was a sector in which we could make progress. Successive Governments have supported this approach. There has been a high level of investment in visitor accommodation in the last few years. Is the EU indicating to us that the great work we have done in tourism must stop?

In the past the tourist season was five months long and it has been extended to eight months because the airlines are marketing Ireland, offering reasonable fares and carrying thousands of people. This development comes at a disastrous time with regard to the generation of tourism business. The airlines bring in thousands more than promotion campaigns by Government agencies, which do not have sufficient resources, thanks to the cheap air fares. In the past young emigrants from my parish used only come home once a year. Now they can come home every three or four weeks to follow the local hurling club if they wish. They bring home money which they spend and invest in Ireland.

From the tourism and island economy perspectives, we do not want an extension of a year or two for the duty free status. Our experience of the last seven years would indicate that we want that status to remain until there is EU wide tax harmonisation. That was the aspiration of the 1992 agreement.

Airport prices were referred to earlier. They are without doubt much cheaper than elsewhere. My experience is that prices are 20 per cent cheaper on most goods at Dublin Airport. The big advantage in airport sales relates to the AB class purchasers. These people seldom go into the megastores. They are business people who find it convenient to buy whatever gifts they need at the airport when they are travelling. Such purchases can be expensive and they are able to acquire the products they require at the airport. It is worth bearing in mind that 18 per cent of the sales of one our best known liqueurs are made at the airports. It indicates the limited amount of business here for such brands and the significance power of duty free sales.

I congratulate the Minister, Deputy O'Rourke, for what she has done. As Leader of the Seanad, with the Minister's agreement I hope to have a full day's debate on this issue, following from the Committee's example. I thank the Minister for attending today.

Deputy O'Rourke: Senator Cassidy speaks with experience on this matter. I agree with his points on tourism and its importance as a growth industry. Reasonable fares are available and people can come home more frequently or holidaymakers can have relatively cheap access to Ireland. There has not been an increase in landing charges for ten years, which must be unique internationally. Such action had to be taken in order that people might have relative ease and without undue financial constraint.

The Senator also referred to the AB purchasers at airports. I agree with him, but a point I made at the forum in Brussels is that air transport is not just for the few. The Senator made the point about the young people coming home for hurling matches. We have many constituents who are ordinary folk and who are able to take package holidays and take their families. They make duty free purchases when they travel and they might not class themselves in the AB category.

The Senator referred to the prices. I noticed while shopping before Christmas that the prices of bottles did not appear to be reduced or any different, and there certainly is a difference in that price.

It is a captive audience. One has a few pounds in one's pocket and one makes a purchase. In so doing, one is helping to preserve other people's jobs.

Senator Cassidy: One is in the mood.

Deputy O'Rourke: Yes. If one is returning, one does not want to go home with money because it is like a test of virility to say that one spent all one's money. If one is departing, one is flaithiúlach.

Senator Cassidy: That is quite true. In Australia one can purchase on arrival and departure, and on departure is more advantageous by far.

Deputy O'Rourke: Then one has money left. One can make a few purchases on the return flight.

Deputy Currie: I do not want to delay the proceedings of the Committee because I notice our numbers have diminished considerably already, but there are two points to which I wish to refer. We have already accepted that we require more information about the 1992 decision and this will be provided to us, but the 1992 decision, among other things, was a derogation. Therefore, we would need the background to that also so that we will have all the detail and be able to consider it in context. Perhaps that could be arranged so that we have the full story in relation to the matter.

Second, I agree that the British and ourselves would appear to have a common interest in this matter which ought to be followed up, and the Minister has spoken of meetings with her British counterpart in that respect. Reference has been made to a Committee similar to this one. I do not know whether any of the other Members of the Committee know much about the Membership of that particular Committee. However, there is one body of which quite a few Members of the Oireachtas have some knowledge, that is the British-Irish Interparliamentary Body, the Membership of which is split equally among Members of both Parliaments. Its British Membership of Members of the House of Lords and the House of Commons includes people of considerable experience, including former Ministers.

I have been a member of the British-Irish Interparliamentary Body since its inception in 1990, except for the period when we were in Government, and I know that matters of this nature are discussed by the body.

Deputy O'Rourke: I had thought that body concerned itself in the main with the question of the North. Does it discuss matters such as these?

Deputy Currie: Very much so. The body has four subCommittees, only one of which deals with the political and security issues; the others deal with economic and social matters and our position in the EU. I could co-operate with the secretariat in this regard to find out a few things. It may be that this matter was discussed over the two and a half years when I was not a member of the body, but I doubt it. It would certainly seem to be a matter which should be on the agenda of the British-Irish Interparliamentary Body and we might be able to proceed and co-operate in that regard.

Deputy O'Rourke: Those are pertinent issues. We have already decided on the decision making background to 1992, but the British-Irish Interparliamentary Body would be a good conduit for the conveyance of the news. I would think that the Committee should make contact with its comparable select Committee of the House of Commons also. Both of those issues are important.

Chairman: There has not been much mention today of Irish Ferries and the maritime ports.

Deputy O'Rourke: No, because it is not my business. The Committee is well able to do its own business, but I know the ferry companies feel they will be discommoded more than most if this measure is introduced. That matter would come under the Department of the Marine and Natural Resources. This is an issue which will be of interest to more than one Committee so perhaps a joint Committee would be useful.

Chairman: We can meet jointly with other Committees if we wish.

Senator O'Dowd: I welcome the Minister. First, to quantify the volume of business, Aer Rianta estimates that at 1995 prices there is £71 million worth of duty free goods purchased, £50 million of which is sourced in Ireland. Therefore, this has a major impact on the economy.

Second, 60 per cent of the profits made at Dublin Airport are accounted for by duty free. Cork Airport is a special case because intra-EU sales account for 95 per cent of all duty free sales there. The airports at Cork and Knock, which was mentioned earlier, are special cases.

Ireland will be more isolated as a result of the abolition of duty free. It will impact on people from the periphery in particular, where fares from Cork, Knock, etc., will be more expensive.

Deputy O'Rourke: Those fares have already been subsidised by successive Governments. There is a subsidy of between £10 and £12 on each seat so the Deputy can imagine how difficult it will be.

Senator O'Dowd: The answer to the question I was going to ask may not be within the compass of the Minister’s brief. Aer Rianta must have a strategy for dealing with this matter. What is it?

Is there anything that the Government or local authorities could do? For instance, local authorities could offer rates relief to these airports. Is there a designation or special development incentive status which the Minister could grant to airports or areas adjacent to them? Shannon Airport was set up originally with such designation. Can we fund the obvious reduction in the income of these airports by other means? I appreciate that we will fight for the maintenance of duty free to the bitter end, but are there other strategies which the Government or local authority strategies could implement?

Deputy O’Rourke: I thank Senator O’Dowd. I am very glad to meet him. I do not think we have spoken to each other before as I have met him only a couple of times in the House.

The figures he quoted are correct. They are huge when one sees them set out like that - £50 million of the £71 million is sourced in Ireland.

Deputy O'Flynn stated that Cork Airport had a surplus of £2.5 million last year. One can imagine the effect of any loss on that airport. I know of the situation at Knock Airport because I have spoken to somebody about it.

On the question of whether the Aer Rianta, local authorities or the Government have strategies to reduce the overheads or infrastructure costs of these airports, I see the Senator's point but I do not know if that would be the best way to approach the matter. One would be giving a subsidy for what had been a good commercial venture. If the worst came to the worst - I hope it does not - the airports' best hope is the strategy of diversification into hotels and other matters which they have been pursuing. If there never was a threat, there lies the best market for expansion and increased employment. If local authorities were to subsidise rates, it would be a prop-up job.

Senator O'Dowd: I understand the Minister for the Environment and Local Government is looking at special designated areas under the Planning Acts in which it would be easier to develop business. This would make a great deal of sense because of the severe impact this measure would have on employment at these airports. It could only be constructive and positive for the Government to act on those lines.

Deputy O'Rourke: That is another matter. I thought the Senator was talking about rates.

Senator O'Dowd: It could include rates. We will fight the measure all the way in Europe. However, if we do not win that battle, we must use every possible method to make these airports viable.

Deputy O'Rourke: The Senator is quite right. The question is coming up now with Aer Rianta due to the Bill which is to be introduced. I saw where Fingal County Council was talking about the fact that the airport will have to pay rates to it, and the council was looking forward to it. I do not know about propping it up in that way. Cork Airport are discussing establishing a business park around the airport.

Deputy Daly: The Minister's colleague, the Minister for Finance, has had discussions with the Commission because there are some objections to that development.

Mrs. O'Rourke: I saw the Deputy's remarks in a different light when he expanded on them.

Chairman: This meeting was effective and worthwhile. I thank the Minister for the free and open way in which she gave details to the Committee. It is acknowledged there is a crisis for us regarding costs, jobs, the special position in relation to charters, our status as an island, regional airports etc. It has to be recognised that we must join together. While the necessary political banter is always existent, we should be conscious of the fact that this is a battle which must be fought. In getting further details on the 1992 package, we want to know if the package is different now in the context of harmonisation because the ground rules may have changed and the delegation was in a different context. I understand the Minister of Finance is conducting an independent report.

Mrs. O'Rourke: Yes, KPMG were commissioned in between the terms of office of both Governments, to do an independent study on the impact of the abolition of duty free sales. Regardless of the results of that, which should be submitted at the end of January, we should press on and make our case.

Chairman: Perhaps the Committee should consider inviting Aer Rianta and IBEC and the Revenue Commissioners to address it - it is important to know what they can do to evaluate the impact on Irish tax revenue. It might not be possible for the Minister to get the specific figures because it is a tax matter. We mentioned a similar Committee to this one in the British parliament, as well as the British-Irish Parliamentary Body. Does Belfast Airport have a status?

Deputy Currie: Yes.

Chairman: In the British and Northern Irish context, that is important and is another platform we can advance on.

Perhaps the Committee will also consider that if there is a visit by the appropriate Commissioner to Ireland, we might take the opportunity of meeting with him or her. All of this will not happen at once.

Mrs. O'Rourke: The Chairman is right. The matter demands a full blooded approach along many fronts, as well as a planned agenda.

Chairman: In the light of that, the Committee at its next meeting should look at how we will prioritise the approach we will take in unison to advance the cause of something which is vital to our economy. It is worth noting that the Minister is making a case for an open-ended derogation. Is it possible not to set a time limit?

Mrs. O'Rourke: I am doubtful as to whether that will happen. I thought it was a good position to start from. Perhaps the secretariat will circulate the minutes of today's meeting and the ideas proposed.

Chairman: We will conclude that business. I thank the Minister.

Appendix 1

Appendix 2

List of Members of Joint Committee on Public Enterprise and Transport

* Deputy Pat Carey substituted for Deputy Dick Roche.

** Senators Donie Cassidy and Tom Fitzgerald substituted alternatively for Senator Des Hanafin.