Israel's State Comptroller: Lack of Government Supervision Led to Dairy Price Rises

According to report, dairy products went up in price by between 10 percent and 38 percent, despite a period of some 20 months during which the price of raw milk actually fell.

The Finance, Industry, Trade and Labor, and Agriculture Ministries failed to consider the social and health implications or consumers’ welfare and interests when they reduced the levels of price supervision on basic items such as dairy products, the state comptroller said, in a report to be released on Wednesday.

According to the report, prices of dairy products went up in recent years by between 10 percent and 38 percent, despite a period of some 20 months during which the price of raw milk actually fell.

The full report will be made public at 4 P.M.

In his report, entitled “Supervision of Food Prices and Supervision of Dairy Prices,” State Comptroller Yosef Shapira wrote, “Reducing the [price] supervision on dairy products to the lowest possible level in a centralized market that had not yet developed the conditions for true competition, seriously harmed the economic interests of consumers.”

The ministries, Shapira said, conducted themselves poorly, given that “in the State of Israel there is a large population experiencing difficulties in making ends meet, and assuring itself necessary food products.”

This is the first report issued by Shapira, who assumed the post of state comptroller and national ombudsman in July.

Last year the Trajtenberg Committee had discovered that prices in Israel had been rising at a relatively higher rate, in relation to other developed countries. Following the Trajtenberg Report, the Kedmi Committee had investigated the food sector of the economy, and pointed out the role of the supermarket chains and the manufacturers in rising prices, recommending a series of steps to reduce prices and improve consumer awareness of those items under price supervision.

But Shapira’s report focuses on the government’s role in the rise of food prices, noting that between 2005-2011, food prices rose 10% in real terms, while the real income of most of the public decreased, leading to a squeeze on consumers, particularly among weaker groups.

Cottage cheese was highlighted in the report. Shapira determined that in July 2006 the Price Committee had advised the finance and agriculture ministers to reduce the level of supervision, contravening a government decision of August 2005. As a result, within a short time, the price of cottage cheese shot up by 35%, while the prices of other dairy products whose level of supervision was reduced went up by between 33% and 39 percent.

During this same period, the prices of dairy products that had remained under supervision went up only 10 percent. Moreover, the comptroller noted, between the beginning of 2009 and September 2010 there was actually a gradual drop in the price of raw milk. Yet there was no reduction in the retail price of dairy products.

When he was sworn in by the Knesset this summer, Shapira said that the previous summer’s social protests had been a harbinger of good tidings. Social justice, he said, is not an empty slogan, and it’s the government’s responsibility to work to correct distortions and to increase food security among the population in general and the weaker populations in particular.

The State Comptroller’s Office said yesterday that during his term, Shapira plans to give special attention to strengthening personal rights, particularly the rights of the weaker classes, and that this report was the first in a series of reports in that vein.