Comptroller: Ministries allowed prices to skyrocket

Yosef Shapira attacks government over rising food, dairy prices between 2005-2011: Social justice not just an empty code word.

By YONAH JEREMY BOB
State Comptroller Joseph Shapira 370 (photo credit: Marc Israel Sellem)
State Comptroller Joseph Shapira 370
(photo credit: Marc Israel Sellem)
State Comptroller Yosef Shapira on Wednesday slammed the Finance; Energy and Water; Industry, Trade and Labor; and Agriculture ministries for failing to control skyrocketing food and dairy prices during the years 2005-2011.
“Social justice is not just an empty code word,” he said, declaring that the ministries in question ignored social justice considerations in determining their regulatory policies.
Shapira emphasized that the government must address the “defects” in policy that he had noted and ensure that the basic food needs of the country were protected.
The conclusions were published in a 58-page report, against the background of protests and public outcry about the rise in food and dairy prices, among other problems falling under the “social justice movement” umbrella.
Coming on the heels of the government-commissioned July 2012 Kedmi Report on similar issues – named for Industry, Trade and Labor Ministry director-general Sharon Kedmi – the document was the first Shapira had published since becoming state comptroller in July.
While the report does not necessarily give an acrossthe- board picture of what Shapira’s style and the main focus in his new post will be, he certainly did not shy away from harsh criticism of the government ministries. He held them primarily responsible for the prices of food spiraling out of control.
Shapira also said he would be vigilant in addressing “social justice” issues in the future.
Specifically, the state comptroller said that this report was only the first of many that he would publish to ensure oversight of the country’s social justice problems.
Shapira also noted that at the time that he testified before the Knesset as a candidate for comptroller, he emphasized that he believed the social justice protest movement was a positive development addressing serious issues confronting society.
His predecessor, Micha Lindenstrauss, made a name for himself as practically establishing a fourth branch of government.
Lindenstrauss showed that the State Comptroller’s Office was capable of investigating almost any issue and struck fear into the most powerful politicians when they found themselves in his crosshairs.
The report said that the real price of food during the period in question rose around 8 percent, while the average real net wage nationally fell.
The higher price-to-wage ratio hit the economically disadvantaged the hardest, according to the report.
Among the harshest criticisms aimed at the ministries was that it had not remotely considered the social or health-related impacts on society as a whole by allowing the prices to rise out of control.
Opening with the words, “Food is a basic and fundamental need of human beings,” the report said the ministries essentially had not weighed the interests of consumers as a factor in their regulatory decisions.
Moving on from food prices in general to dairy products – on which the report said consumers spend NIS 9 billion annually, Shapira said the Finance and the Energy and Water ministries had allowed an even worse scenario to develop.
Shapira criticized the ministerial deregulation of the dairy market without first ensuring there was sufficient marketplace competition to keep prices down – had this been the case, deregulation might have forced sellers to keep prices low.
But without such a market in place, the only beneficiaries of deregulation were the sellers, who simply raised prices without having to worry about regulation or competition, said the report.
In two glaring examples of what Shapira’s report characterized as actions ignoring the public interest, the ministries ignored a 2005 government decision maintaining certain regulatory standards and a 2008 Health Ministry recommendation regarding a person’s basic food needs.
Instead of complying with the above directives, the ministries reduced oversight of cheese and cottage products’ pricing in July 2006 with no regard to the impact on basic food needs.
Within a short time, said the report, prices jumped around 35%. Other dairy prices also went up between 33% and 38%.
In contrast, other dairy products that were still under the same supervisory rules only saw a rise in price of 10%.
All of this happened in parallel to a 10% reduction in the gross price of milk to producers, from the start of 2009 until September 2010.
The report slammed this finding, saying that customers did not see any sign of this price reduction in the costs that they had to pay.
The report also criticized the Finance Ministry for fighting attempts as late as January 2012 – months after the social protest movement had erupted – to reinstate greater price regulation by a new food prices regulator.