A leading local retailer has launched a scathing attack on the Government’s handling of the island’s new ferry contract, arguing that DFDS’s freight charges have driven price increases for consumers far in excess of the 0.4% rise stated by Ministers.
Tony O’Neill, the Executive Chairman of SandpiperCI – which runs all M&S stores in Jersey and owns, among others, the iQ Apple Premium Reseller and Card Factory shops – this morning published an open letter in which he pulls few punches, questioning the credibility of those who negotiated the ferry contract, berating the Government over extra port dues that importers and exporters now face, and criticising the business acumen of Economic Development Minister Kirsten Morel.
Mr O’Neill is also critical of proposals to increase the minimum wage next year, which he claims could add £500,000 to the retailer’s payroll, and says the government is wrong to suggest that charging GST on food would be too difficult to administer.
Express has asked the Minister and the Government for a response, while DFDS has issued a strong rebuttal to the claims.
Freight contract “error”?
In his letter, which Express has published in full below, Mr O’Neill says he has “no doubt” that DFDS’s new freight charging structure – based on £56 per lane metre for general freight and £45 per lane metre for commodities – has increased costs for the consumer.
He writes: “There is absolutely no doubt, that in spite of government protestations to the contrary, that DFDS’s freight charging structure is increasing costs and undermining transparency with significant knock-on effects for island consumers.
“Despite repeated requests, we have seen no evidence to support the government’s position that retail costs would ‘only increase by 0.4%’ with the new contract.
“I can categorically state that freight costs have increased by just over 5.8% for our company with consequent price increases far in excess of 0.4% for consumers.”
Mr O’Neill is also critical of extra port dues, which were retrospectively charged to freight handers by DFDS due to an initial oversight by the operator, but are now included on invoices. He argues that this ‘error’ equates to £2m-£3m a year of additional charges.
He adds: “To state the obvious, it seems clear that where you have one operator servicing both islands who was able to spread costs and gain synergies as was the case with Brittany Ferries. Now we have one operator for each island with consequent exponential price increases being seen in Jersey.”
However, responding just hours after the letter was published, DFDS issued a statement “firmly reject[ing] claims that our freight pricing structure is driving significant cost increases for Jersey consumers”, pointing to research commissioned for the government.
“The transparent flat rate requested by Government applies equally to all customers, large and small. This removes the complexity and inequality of preferential discounts that previously benefited a handful of larger importers, ensuring fairness, clarity and certainty across the board,” the statement read.
“Independent analysis for the Government of Jersey has shown that the effect of DFDS’s new structure on grocery prices is minimal when compared with the broader logistics, distribution, labour (including this year’s significant minimum wage increases) and energy costs that make up the majority of retail expenses. To present DFDS as the source of wider inflationary pressures is therefore misleading.
“DFDS’s commitment remains clear: to provide Jersey with a reliable, sustainable freight service that secures the Island’s supply chain for the months and years ahead.”
Wage rates “higher than central London”
Mr O’Neil also hit out at Government plans to raise the minimum wage to £14.10 next April.
“Jersey’s minimum wage is already almost £1-an-hour higher than central London’s. A further increase would make the island one of the highest wage jurisdictions in the British Isles,” he writes.
The impact of the change, he says, would be more than “£500,000 a year [added] to incremental payroll costs in Jersey (and that is on top of the extra charges from the freight charges which retailers will be charged and subsequently pass onto consumers)”.
GST on food
Later in his letter, Mr O’Neil points out that, contrary to previous claims by government, removing GST from food in Jersey – something which Reform Jersey and e-petitioners have asked for – would be straight-forward to administer.
“Finally, whilst I understand the argument for and against GST on Food, I would point out that contrary to what the finance minister recently said, it’s a simple process to reduce food prices by 5% as all food retailers in Jersey also trade in Guernsey and currently operate two price tiers reflecting a 5% differential in pricing (as GST not charged in Guernsey),” he said.
“There has been a lot of noise”
Explaining his motivation for writing the letter, Mr O’Neill told Express: “There’s been a lot of lot of noise, and all we’re getting, at the moment, to my mind, is the Government and Deputy Morel controlling the airways, giving their spin on it, and we have no one standing up and saying this is complete nonsense.”