THE politician who signed Jersey’s 20-year-deal with DFDS has mounted a robust defence against criticism this week that it had driven up costs for Islanders.
Economic Development Minister Kirsten Morel was responding to a scathing attack by leading local retailer Tony O’Neill, executive chairman of SandpiperCI, who said the ferry operator DFDS’s freight charging structure had “increased costs and undermined transparency”.
Mr O’Neill added that he could “categorically state” that his company’s own freight costs had risen by 5.8% and he saw no evidence of the Government’s claim that retail costs would only rise by 0.4%.
However, Deputy Morel told the Economic and International Affairs Scrutiny Panel yesterday that local retailers would, in time, be pleased with the new regime. He added that Mr O’Neill was not comparing like for like with his analysis.
Deputy Morel said: “Mr O’Neill is saying that his freight costs have gone up by 5.8% but the Jersey Competition Regulatory Authority have said that freight costs make up just 7% of the total price of goods on the shelf – the ultimate price that you and I pay in the supermarket.
“So you need to calculate a 5.8% increase within the 7% part of the price, and that comes to 0.4%, which is exactly what the Chief Economist said that the cost of goods would increase by.
“I’m not saying the Mr O’Neill’s freight costs haven’t gone up by 5.8% but he is not comparing the same thing because freight costs and the price of something on the shelve, which incorporates wages, rent and all other costs, are different.
“The JCRA have also calculated that the ferry costs only account for 35% of that 7% logistics cost. 60% of it is entirely at the discretion of the freight operator.”
He added that the flat rate on freight charges with DFDS were “transparent” which was not the case with Condor – pointing to an 18% raise of its rate which came”out of the blue”.
“I personally hope that in five years time, with the RPI-based limit on increases in freight pricing, chairman of major retailers in Jersey may turn around and say this is a much better regime, because now we know where the pricing is going every year,” Deputy Morel added.
“They will be able to hold their freight services providers to account because they will be able to see if, for example, there’s been a 5% rise in ferry freight prices, so they can ask their freight provider ‘why has my bill gone up by 10%?
“They will understand whether their freight services provider is being fair to them, or they need to look around. It will improve transparency for those supermarkets.”
Deputy Morel said that freight prices would have gone up anyway this year because all the tender bids included rate increases.
He added that DFDS could increase their prices above RPI but it would be known beforehand and he was doubtful that it would be anywhere near Condor’s 18% increase.
