Tuesday 13 May 2008
[Mrs. Joan Humble in the Chair]
Mr. Mark Field (Cities of London and Westminster) (Con): The Competition Commission has just completed its third full-scale inquiry into supermarkets in the last eight years. The Office of Fair Trading continues periodically to delve into some more specific complaints regarding supermarkets. However, this House has not had the opportunity to discuss the OFT’s recommendations or to raise some of the genuine concerns that I am sure many hon. Members’ constituents have about the fast-changing patterns of high street shopping in recent years.
At the outset, I should perhaps say that I am neither here to bury nor unduly praise supermarkets; I certainly will not do the former, which I know is somewhat more favoured than the latter by some Members of Parliament. I say this because I believe that the time is now ripe to have a very broad debate here in Parliament on supermarkets, as well as an open discussion about how best we can balance the concerns of small retailers and suppliers with those of the supermarkets. In my view, that national debate should be conducted without the threat of new or excessive regulation; instead, we should allow supermarkets to recognise and react positively to public concerns.
In recent decades, the British weekly shop has undergone a revolution. One supermarket giant alone, Tesco, controls a quarter of the nation’s massive £128 billion annual grocery budget. Supermarkets now seem willing and able to provide us with everything—from televisions and insurance to clothing and credit cards—as we rummage through the vegetable aisle and pick up our everyday bread and milk.
However, with the rise of Tesco and the rest of the big four supermarkets—Sainsbury, Asda Wal-Mart and Morrisons—talk of our shopping habits seems to have taken on the type of language that is more appropriate to a horror story. People now bemoan the emergence of ghost towns; they decry the death of the local store, and they fear the looming, inexorable power of a monstrous monopoly that swallows land, spits out small businesses, destroys community spirit and ruthlessly subdues suppliers. Nowhere has there been a more effective and outspoken campaign than in the pages of my own “local” newspaper, the Evening Standard.
For my own part, while all is not necessarily rosy in our groceries market—I shall discuss some of my specific concerns later—I believe that supermarkets are all too frequently given a hard time. Their detractors seem to have an irrational and often downright hypocritical hatred of the success of big retailers. However, I myself am inherently mistrustful of a cause that seeks to punish success, hard work and good business practice. Let us
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make no mistake: supermarkets are one of this country’s great retail success stories. The idea of putting a penalty on such characteristics as success and hard work, borne out of misplaced resentment and unrealistic sentiment, is unhealthy for both the market and the consumer.
David Taylor (North-West Leicestershire) (Lab/Co-op): The hon. Gentleman rightly says that the supermarkets’ triumphs are often based on “success” and “hard work”, and then he added “good business practice”. However, is it not the case that even the suggestion in the Competition Commission’s report that there should be scope for an ombudsman in dealing with such concerns will not tackle the climate of fear that still exists for small suppliers, who do not wish to alienate their mega-customers, the big supermarkets? That was the problem with late payment legislation; will it not be a problem in this regard, too?
Mr. Field: I understand the hon. Gentleman’s point and I will come to the issue that he rightly raised about the disequilibrium between small suppliers and large, almost monopolistic, retailers, whom suppliers are obviously reluctant to do anything about, other than acting entirely as they wish. The ombudsman suggestion would be a retrograde step; it would be an added layer of bureaucracy and a move away from the transparency that is very much in the interests of all parties concerned.
As a young boy, I remember seeing pictures of life on the other side of the iron curtain. As you know, Mrs. Humble, I have forefathers—as I know you do yourself—from the part of Germany that is now in Poland. One of the most profound differences between life in the west and life under communism was the presence of long queues in eastern Europe for basic foodstuffs. To those of my generation, the well-stocked shelves of a supermarket represented the most visible signal of the success of free markets, choice and capitalism.
The Competition Commission’s most recent investigation sought to establish whether consumers are receiving the benefits of vigorous competition. After about 550 submissions, 65 hearings and the receipt of data from 14,000 grocery stores, the commission released its recommendations back in February. Its conclusions indicate an overall “not proven”—indeed, one would argue, “not guilty”—verdict for supermarkets on the charges of pushing competitors out of the market, bullying suppliers and limiting choice.
Some of the tactics adopted against suppliers have rightly been subject to widespread public scrutiny, and the “big four” supermarkets have agreed to make some material changes to their operations. However, many people felt that the commission missed the point. Too often, it obsessed about competition between the big supermarkets, rather than examining ways to protect smaller businesses and to freeze in time the British high street. It is indeed true that the commission’s recommendations have looked primarily at how to stop the domination of one big supermarket chain—Tesco—over the others. However, calls excessively to regulate and punish the success of the market leaders should not be indulged.
Among its recommendations, the commission proposed three main changes. The first is a “competition test”, which is designed to put a stop to new stores if they allow an operator to become overwhelmingly powerful
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in a particular area. The so-called “60 per cent. rule” would mean that a specific retailer would have a new store blocked if that store resulted in giving the retailer three fifths or more of the large-store floor space in the locality. Of course, the definition of what constitutes a “locality” is the nub of this sort of problem. Also, I fear that the new rule will not necessarily prevent the vast majority of proposed new stores from going ahead. It will simply result in consumers getting to choose between, say, Tesco, Waitrose and Sainsbury, rather than there being a Tesco superstore and a Tesco Extra store within half a mile of each other.
The second significant proposal to come out of the Competition Commission’s inquiry is a plan to combat land banking. This is a practice whereby retailers hold on to land and, indeed, place a restrictive covenant on it to prevent a competitor from joining the local market. Such tactics will now be banned and the “exclusivity” arrangements that have been in place for more than five years will have to be surrendered. In other words, retailers will not be able to retain undeveloped land with the express purpose of keeping out competitors. However, I fear that this proposal will also be a gold mine for lawyers, as the determination of proof of “express purpose” is an extremely high hurdle to overcome.
Thirdly, the Competition Commission has given a nod to the suppliers’ concerns by suggesting that the code of practice for dealing with suppliers should be tightened and incorporated into contracts. A grocery supply code ombudsman will now be appointed by the OFT to monitor that code of practice. However and as I mentioned earlier, I am not convinced that that is necessarily the right way forward.
Philip Davies (Shipley) (Con): Does my hon. Friend agree with me that the majority of suppliers to big supermarkets are, by definition—because of the scale of supplies that supermarkets need—big businesses in their own right? Many of them are multinational companies who themselves make huge profits. Therefore, any type of restriction on supermarkets in dealing with their suppliers will only lead to those suppliers making bigger profits and, at the end of the day, customers paying more for their products.
Mr. Field: My hon. Friend hits the nail on the head. One of the issues has been that the consumer has had a pretty good deal over the last 10 years. There is also no doubt that, over the last six to nine months, there have been some widespread increases in the prices of basic foodstuffs. However, that has been the exception rather than the rule, and we have all got used to the idea of relatively inexpensive food, but part of that inexpensiveness has been due to the work between suppliers and supermarkets to try to keep their costs down. We all rejoice in the idea of relatively cheap food, and now that we suddenly see food prices and inflation going up, we recognise precisely how the consumer could lose out if, on top of large-scale increases in the prices of basic foodstuffs, we were also to see ever more regulation that tightened the market.
Mr. Roger Williams (Brecon and Radnorshire) (LD): The hon. Gentleman is right to make a note of increased food prices. However, have not supermarkets become
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the victims of their own bad practices? In using uncompetitive processes to procure their food, they have driven down the amount of food being produced and now there is a shortage. If the supermarkets had only been a bit more far-sighted and worked with their suppliers a bit more productively, perhaps we would not be in this situation.
Mr. Field: As the hon. Gentleman is well aware—representing as he does an agricultural and very rural Welsh constituency, compared with my inner-city London seat—I perhaps have a different perspective and have perhaps had less direct lobbying from the farming interests. If I may, however, I will come to that subject in a moment or two.
The commission’s findings caused outrage in certain consumer campaigning quarters, and the investigation was branded a whitewash. Small businesses, environmentalists and even anti-poverty campaigners attacked the commission’s inquiry. They believe that in addressing only competition between big supermarkets, the commission to a large extent ignored smaller shops and the difficulties that they face, and that it did not heed concerns about supermarkets’ relationships with suppliers or the problems of the shops’ environmental impact.
I suspect that Tesco executives, despite mild protestations about the commission’s findings, will, on balance, be breathing a sigh of relief. Given the hostility toward Britain’s biggest retailer, Tesco might have expected more stringent recommendations regarding its future conduct than came to pass. For instance, many of the retailer’s detractors would have been happy to see the enforcement of the sale of stores in areas where it enjoys a particular dominance.
However, the analysis ignores the inescapable fact of the groceries debate: supermarkets are primarily successful not because of unfair or immoral practice but because consumers regard themselves as well served by them. It may be an unpopular view, but, as an inner-city MP without an agriculture lobby to pacify, I can articulate what others in rural seats cannot. By and large, supermarkets have been a positive force in an ever more frenetic world in which consumers increasingly demand convenience. They provide excellent value for money and a phenomenal choice of high-quality produce. They bring to shoppers goods that would not have been heard of only a decade ago.
Bob Spink (Castle Point) (UKIP): The hon. Gentleman is making a compelling case, but does he acknowledge that we have to get the balance right, and that perhaps the Competition Commission missed a trick in not dealing with the metro, Express and one-stop stores that are springing up in our communities? Perhaps it should have dealt with that, as well. We must get the balance right and preserve high streets, which offer services to vulnerable groups.
Mr. Field: The hon. Gentleman is absolutely right. Of course, the reality is that many of those high streets were already dying. In fact, the emergence of a Tesco helps to re-energise them, albeit without necessarily being able to counter some of the concerns about monopoly practice. That is particularly the case in the sort of constituency that he represents. One only has to
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look at several suburban London high streets that, because they are within a relatively short distance of Bluewater, Lakeside or another big shopping centre, are literally dying on their feet. What might seem perverse is that when a Tesco or a Sainsbury emerges, things suddenly begin to pick up, to an extent.
Some folk whimsically reminisce about the days when one separately visited the local butcher, fishmonger, baker and greengrocer, but most working people would admit that they have neither the time nor the inclination to queue at a range of stores on a Saturday or even Sunday afternoon. Even if they did, it is unlikely that local stores would have the capacity to serve the needs of our growing consumerist, fast-paced population; nor, too frequently, do such stores appeal to the desire of increasingly discerning consumers for innovation.
In Britain, we have been happy in recent years to perpetuate the myth that small and local equal good. The local store is a place where the quality of goods is high, the relationship between shopkeeper and customer warm and the benefit to the community immense. As Jay Rayner so wonderfully put it in The Observer:
“We love to imagine the rosy-cheeked, melon-bellied butcher who always has time for everyone and the greengrocer helpfully picking out the finest of produce for his customers.”
The supermarket, on the other hand, is portrayed as cold and clinical, and staffed by a down-trodden, unenthusiastic work force, but that parody is simply not true. Yes, some local stores truly offer a brilliant, personalised service. Upper Tachbrook street in my constituency is literally two minutes away from a flagship Sainsbury market store and three minutes away from Tesco, yet it has a couple of delicatessens and a specialist cheese shop. They do a tremendous job, and I admit that I never buy my cheese at Tesco or Sainsbury. I always go to the specialist shop, and I hope that other consumers do likewise.
It is true that elderly folk and young mothers value the genuine local shop where, in otherwise lonely lives, they may have a personal conversation with someone they know rather than being ushered through a check-out. Yet customer service may come down to individual employees as much as the shop in which they work. I hope that supermarkets will take that on board and try to encourage community spirit, particularly in the smaller Express-type stores. Furthermore, we have all been to as many well-stocked, quality corner stores as we have to disappointing mini-markets with a poor range of produce at high prices.
The supermarket may often be the only truly integrated place in a community with an ethnically and socially diverse customer base. Far from being uniform, supermarkets often cater to their unique market and provide a place where everyone in a community feels happy to shop. The aisles in the Sainsbury in Whitechapel, for example, accommodate the needs of the specific ethnic communities in the area and include Afro-Caribbean, Bangladeshi and Jewish produce. In my local Tesco in Pimlico, a small section is dedicated to Polish foodstuffs. As the son of a Silesian mother, such foodstuffs bring back wonderful childhood memories.
Supermarkets understand the intense competition in the groceries market and constantly look for ways to diversify and appeal to new customers to gain an advantage over rivals. As a result, they are generally receptive to the fast-changing desires of the consumer and lead the
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way in best practice. Marks & Spencer, for example, aims to be one of Britain’s most environmentally responsible retailers. It is phasing in a charge for plastic carrier bags and is beginning to use food waste to power some of its stores. Similarly, Asda Wal-Mart aims to cut its packaging by one quarter in this year alone in response to customer complaints.
Supermarkets are responsible for around one half of all the Fairtrade products sold in this country, and that proportion is rising quickly. Their size gives them the power to drive through positive change that smaller businesses may not be able to initiate but will, I hope, feel inclined to follow.
“Large retailers do not always get the best price from suppliers...convenience and specialist store numbers are not in such a state of decline to suggest that a waterbed effect exists...The evidence is that convenience stores and specialist grocers that provide consumers with a strong retail offer will prosper.”
Yet when supermarkets acted to promote UK milk producers by guaranteeing prices—to the detriment, at the margins, of consumer prices—they promptly found themselves subject to an extensive OFT inquiry that reported earlier this year and resulted in a huge fine for practising a cartel. That was a classic example. Many of the supermarkets involved were understandably sore about that. They felt that in trying to promote British produce in a sector such as milk, which had been under such difficulty in recent decades, they had lost out.
Andrew George (St. Ives) (LD): The hon. Gentleman probably misses the point when he concentrates on price and gives the example of the difficulties that the supermarkets got into as a result of their negotiations on the price of milk. The problem for suppliers is not about price at all but about retrospective changes to unwritten contracts: the payment for shelf space, the late payment of bills, the cost of using the supermarkets’ preferred hauliers, and packaging. That set of attached conditions, which are often retrospective, bears down on the viability of suppliers. The issue is not just about price. Will he not accept that?
Mr. Field: I will accept that; the commission went into great detail about the precise nature of some of those complaints. Certainly, I would never accept or defend retrospective changes to supplier agreements. That is very unfair.
We are missing some of the excitement around the Finance Bill this morning, and we will be heading to that debate after this one. The reality is that retrospective taxation and, indeed, retrospective arrangements along the lines described by the hon. Gentleman are entirely without justification.
Of key importance, too, is the area of newspaper and magazine distribution, where there are valid concerns about the potential domination of supermarkets over smaller retailers and publishers. One of the great strengths of our newspaper and magazine industry has been the rapid distribution of material to all corners of Britain. Under existing distribution agreements, newspapers and magazines are sent to retailers through a system of exclusive territories. The arrangement encourages a free and diverse press.
I appreciate that absolute territorial protection would normally be banned under competition law, and it is generally against my instincts to support such monopolies. However, I fear that dismantling that almost miraculous distribution system, which means that all our papers and magazines are sent to every corner of the UK and arrive the next morning, could curtail freedom of choice and seriously damage independent newsagents. I live in central London, so it is easy for me never to buy my newspaper from a supermarket, and to use only small, independent shops, as I do.
The breaking-up of the current distribution system will allow supermarkets to broker their own distribution deals. I suspect that distributors will then be tempted to abandon unprofitable arrangements with newsagents and if the supermarkets become the main outlet for buying newspapers and magazines, they are likely to drop a vast proportion of less well known publications in favour of a few big newspaper and magazine names. That would be a retrograde step, and I hope that supermarkets will play their part voluntarily in ensuring that the widespread choice to all consumers in the United Kingdom is maintained.
I return to grocery retail. The popularity of farmers’ markets in my constituency, notably in Marylebone high street and Pimlico green, has proved that smaller suppliers and stores can prosper if they are adaptable and tap into consumer demand. Howard de Walden Estates, which is a large local landowner, has done a tremendously good and well documented job in ensuring that Marylebone residents have access to the widest range of stores, from specialist food shops to delicatessens, and there is both a Waitrose and a Tesco on Marylebone high street. Smaller branches of the more high profile supermarkets could fit into that mix without damaging the prospering local shops that also serve my constituents so well.
Some small store holders in my constituency are anxious about the possibility of smaller, convenience-store-sized outlets being opened by supermarkets in the area. I know that the possibility of another small Tesco store in the Pimlico area has caused concern and it is only fair to say that I have received representations, not least from Mr. Waheed Ali of Standard Foods on Lupus street, who has expressed the worries of small business people in the area that such stores could have a serious impact on their livelihoods. Mr. Ali’s convenience store has served the needs of the local community for 25 years.
I acknowledge the fact that the possibility of large out-of-town developments ruining high streets is not something that central London’s small retailers have to worry about, given that so few large sites are available, and that congestion and less frequent car use mean that many constituents walk or use public transport to do their weekly shop. However, I appreciate that people in other constituencies have such problems, even though they do not necessarily apply in the sort of constituency that I represent.
There are real concerns, for which I have a great deal of sympathy. However, I contend that if the Government have a real desire to help smaller retailers, such as my
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constituent Mr. Ali, penalising successful, thriving larger businesses and their shareholders is not the way to go about it.
I suggest that reforming business rates to allow more small enterprises to set up shop and remain active would be a far better route to intensifying competition and diversifying the high street than heavy-handed restrictions on the bigger players. Smaller employers could perhaps be released from some of the bureaucratic shackles of the employment market if we made way for deregulation. If the Government provided an incentive, local councils could do their bit—I appreciate that they must do their bit—by keeping down the cost to the shopper of town centre parking, in contrast with free out-of-town supermarkets, and regenerating town centres.
Land banking, supplier relationships and competition with small businesses are of course important, and it is right that they are properly addressed. The Government should examine the tax system, employment laws and town planning to give smaller businesses a helping hand. However, despite those who believe that all problems require greater regulation and interference, the grocery issue will always boil down ultimately to consumer choice. Shoppers will vote with their feet and spend their money at the stores that cater for their needs.
On that principle, supermarkets will continue to be rewarded while they offer value, choice, quality and, increasingly, an ethically and environmentally sound approach to their practice. If smaller retailers similarly provide consumers with an array of choice and quality, independent local businesses can be assured and confident of survival.
Mr. David Drew (Stroud) (Lab/Co-op): I am delighted to take part in this debate, Mrs. Humble, and I congratulate the hon. Gentleman on bringing it forward. I shall try not to reprise the ground we covered in our previous debate on supermarkets when we successfully captured topical debate from discussion of plastic bags and environmental practice to move at least into the area of the then recently published Competition Commission report. We have had time since then to reflect on what the report says.
I have no reason to say anything other than that I was disappointed with what the report came up with, and I do not believe that competition alone will ever sort out the grocery market, let alone wider retailing. There were, nevertheless, some interesting facets to the report, and if what has been reported to me is true—that at least one chief executive officer of a supermarket chain was livid at what the report stated—some small improvements can and should be made to bring back some fairness to such a major area of our lives. With the globalisation of the food chain, we can see some of the political aspects as well as the economic and social aspects.
As always, I am indebted to the Association of Convenience Stores, which briefs us widely. Like the Minister, I am a Co-operative Member of Parliament,
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and I want to put on record the support that we receive from the Co-operative movement, which remains interested in retailing and wholesaling. With other organisations, such as the New Economics Foundation and the Rural Shops Alliance, we have tried to introduce genuine debate on the way forward.
The context of this debate should be not just the Competition Commission report, but the Government’s proposals to change the planning system. I, for one, will not agree with anything that dilutes the current arrangements to bolster planning policy statement 6, to ensure that we have a proper context for the high street and do not water down our allowance for out-of-town shopping, that the needs test remains in place, and that there is a realisation that the high street is so important that we should always be biased towards it rather than the alternatives.
David Taylor: I thank my hon. Friend and fellow Co-operative MP for giving way. Does he agree with the Competition Commission’s suggestion that the competition test is set too high? At 1,000 sq m, it would be easy for the big four to circumvent such a regulation. For example, Tesco would be able to carpet the area with varying formats of stores—local, metro, express and one-stop. Would not the impact be minimal if a competition test of 1,000 sq m were applied?
Mr. Drew: Yes, and I shall talk about that. One weakness of the report is that it concentrated on the large store end in terms of anti-competitiveness, and more or less ignored the fact that Tesco and Sainsbury in particular, and supermarkets in general, have assimilated many smaller stores and moved into the convenience end of shopping. For some reason, the Competition Commission did not seem to think that was important. However, it is crucial because one should measure not just the effect of large stores, but the overall impact. If my hon. Friend does not mind, I shall say more about that later.
Philip Davies: Does the hon. Gentleman agree that supermarkets find themselves in an impossible position? When they try to open an out-of-town supermarket, people complain that they are destroying town centres and high streets. When they then open stores on the high street, they are criticised for creating unfair competition for other shops on the high street. Will the hon. Gentleman say where he is happy for supermarkets to open, because they seem to be in a no-win situation?
Mr. Drew: It would be nice to have a level playing field, but we do not. The fact is that supermarkets are so important in our lives that they must be prepared to take such criticism, respond to it and, if they behave as we want them to behave in a moral sense, they may be able to persuade at least some of us that they are more rational in the way in which they respond to such accusations. [Interruption.] The hon. Member for Castle Point (Bob Spink) is shouting at me from a sedentary position.
As the hon. Member for Cities of London and Westminster, who initiated the debate said, it is about time that we had a proper debate on the issue because things are often not said. It is important that we at least have the opportunity to help.
Mr. Drew: That is by nature anti-competitive because none of the independents can compete, so it is an important point. I was just about to say that in the original report from 2000, the Competition Commission found some 27 anti-competitive practices. A number of them have been reaffirmed in this report and in other things that the Competition Commission has said. It is interesting that it is possible to find those practices. Accusations are made that such things go on behind closed doors and below the radar, so the fact that those practices have been identified is good in the sense that we can do something about it.
The hon. Member for Cities of London and Westminster referred to land banking. I do not want to say much about that. The emphasis of the report was supposed to be on land banking, and it is significant that it moved from that to considering the wider aspects of the way in which supermarkets behave. The issue of the ombudsman will get most of the publicity, which is not necessarily a bad thing. When the Select Committee on Environment, Food and Rural Affairs looked at the milk industry, some farmer organisations argued strongly for a regulator body—an “Ofmilk”—to be set up in relation to that particular trade. Some of us had misgivings about that because we did not think it would be powerful enough or willing to do the real groundwork. However, the matter is at least worth considering and if regulation is the way forward in dealing with anti-competitive practices, why not have it in that area? Energy and water are regulated so why not have a regulator for something that makes up an even more important part of people’s everyday life—their consumer purchases.
I have misgivings about some of the outcomes of the report because they rely on voluntarism. The idea that a stronger groceries supply code of practice—that phrase slips off the tongue easily—will make a lot of difference is somewhat naïve, although the fact that we now have such a code shows that supermarkets are not completely immune to the wider world and the political process.
I have a number of points that I hope my hon. Friend the Minister will comment on. The fundamental problem with what the Competition Commission has done—and what the Office of Fair Trading did previously—is that it looked at the evidence that it already had or was given. As I said in the earlier debate, there are questions in relation to who gave evidence, the evidence they gave and, more specifically, who did not give evidence and why. Behind the scenes, a lot of evidence shows that even the strongest suppliers are wary about saying anything critical about supermarkets—even in the confidential opportunity they were given as part of the process, and that must be borne in mind. Much of the opposition—somewhat inevitably—was led by the Association of Convenience Stores. However, the association could never match the ability of some of the larger
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suppliers to dish the dirt if they had wanted to. They chose not to and that is a weakness in what we have been presented with.
We do not have to look far to find accusations of price fixing. The last edition of The Sunday Times considered the effectiveness of the mark-up on some products across the board in supermarkets. Not surprisingly, the accusation is that when discounting takes place, it happens across the board. As I said in our previous debate on the subject, the argument regarding larger suppliers is not that their main brands would be removed from the supermarket shelves—supermarkets would not be stupid enough to do that—but that they put pressure on suppliers with any new or less popular brand. That is something that has been largely ignored and it needs to be examined.
The idea that the high street has not suffered—I know that is a paraphrase of the report—is somewhat tendentious. I heavily criticise the commission for the belief that competition per se compensates for the fact that the high street may have been weakened. I come back to an argument I have made before: it would be useful if the definition of a supermarket’s power was redefined. It is crucial to look at a supermarket’s impact on the smaller convenience market as well as on larger stores. The Competition Commission will have to keep looking at this matter and the next time it does so it should make that redefinition and carry out a more complicated analysis of the real impact. As the hon. Member for Castle Point said, the 15 per cent. advantage and the way in which supermarkets can use the supply chain to get value into their operations is clearly of immense value and puts independent operators at a strong disadvantage.
If one good thing has emerged, it is in respect of the power of the ombudsman. If we are to have an ombudsman, it must have teeth. The ombudsman must have sufficient resources to investigate and deal with any anti-competitive practice. It must also be able to report on such practices and do something about them. Since we have been through this process, the OFT has become much more aggressive. I do not know whether that has happened by accident or whether it is a good result, but there is some evidence of the OFT beginning to put the boot into practices that are clearly unacceptable.
I would like to think that this place also has a role to play because too often Parliament is an afterthought in the way in which such reports are considered. We could have an annual debate on the role of supermarkets and their practices. One of the things we could consider is the morality that we expect supermarkets to display. For example, we have had various debates about the selling of cheap alcohol—my hon. Friend the Member for Barnsley, Central (Mr. Illsley) mentioned it on a previous occasion. There ought to be a careful examination of the alcohol policies to which supermarkets adhere. That is worthy of proper investigation if we are genuinely trying to tackle law and order because we all know where the root of such problems lies. Likewise, we need to consider obesity, and what foods should or should not be sold.
Mr. Mark Field: Surely the hon. Gentleman will appreciate, as I hope all hon. Members would, that
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ultimately the customer—the consumer—must be king in relation to many of these matters. However, I entirely agree with his view that Parliament is the right forum to raise consciousness about these issues, although I hope we will not have more and more regulation as I do not think having an ombudsman is an effective way forward. Does the hon. Gentleman agree that over the past year raising issues such as obesity and alcohol deals has led to supermarkets changing their practice and being aware of those broader concerns? In many ways, Parliament having its say through an informal system is working quite well to the benefit of consumers, suppliers and the supermarkets themselves.
Mr. John Grogan (Selby) (Lab): On alcohol pricing, does my hon. Friend agree that it is significant that earlier this year Tesco admitted there would be low-cost selling for the first time? It called on the Government to consider legislation that would allow minimum pricing for alcohol. Does he agree that once the Department of Health study on the effects of low alcohol pricing is published in July it is incumbent on the Government to respond to that call from Tesco?
A further issue relates to gangmasters. My hon. Friend the Member for North-West Leicestershire (David Taylor) and I are members of the Select Committee on Environment, Food and Rural Affairs, which considered that issue some years ago. It was interesting that the supermarkets’ attitude was basically not to ask questions about how they source their materials. They have since learned that they need to be careful.
Before I conclude, I shall make a point that I mentioned in our previous debate on the subject. How do we use the Sustainable Communities Act 2007 to allow communities to begin to re-empower themselves to deal with the problems of clone towns and ghost towns? I would like us to debate that point properly in this place once the Act is fully in force, later this year. I hope that it will be another way for us to examine the operation of supermarkets and how we may need to curtail some of their market power.
I welcome what the hon. Member for Cities of London and Westminster has done, because it is right to have the debate at this time. Some of us will do more. I know that the hon. Member for St. Ives (Andrew George)—the witchfinder-general, as I lovingly refer to him—will have even more to say than me. I hope that we will begin to move in the direction that I have described and make people realise that there is at least a need for a debate and to hold the supermarkets to account. I hope that this is just one of many debates in which we can all take part.
Mrs. Joan Humble (in the Chair): Order. I notice that three hon. Members wish to speak. I intend to call Front-Bench spokespersons at 10.30 am, so if hon. Members show some discipline, everyone will be able to speak.
Philip Davies (Shipley) (Con): Thank you, Mrs. Humble; I will certainly be brief. I congratulate my hon. Friend the Member for Cities of London and Westminster (Mr. Field) not only on securing the debate, which we all agree is on an important subject, but on presenting his case in a balanced and very sensible way. I spent the 12 years before I entered Parliament working for Asda, so I perhaps have a vested interest in defending the honour of supermarkets. In my time in Parliament, I have been appalled by how many hon. Members, despite the fact that many of them hold surgeries at their local supermarket and that many of their constituents are employed by and are customers of their local supermarkets, tend to take the option of sticking the boot into supermarkets, perhaps because they see them as an easy hit. They may think that they can court some easy popularity by sticking the boot into big business. The debate that we tend to have in Parliament about supermarkets is very one-sided. That is why I think that my hon. Friend the Member for Cities of London and Westminster did a great service by restoring some balance to the debate.
It is important to consider why supermarkets have been so successful over the past 30 years. Why they have done so well is no secret: they offer low prices and great convenience to their customers, and they are very good at looking after both their customers and their employees. I was proud when I was at Asda that, for virtually every year, it was rated one of the top 10 employers in the country. It offers some of the best terms and conditions with regard to flexible working and the employment of older people, giving them an opportunity in the workplace that many of them did not think that they would have. Some of the employment practices have led the way and set a shining example to many other people. As my hon. Friend also said, supermarkets offer many free car parking spaces.
We should reflect on what the upshot would be if some hon. Members had their way on, for example, regulating alcohol prices, which the hon. Member for Selby (Mr. Grogan) feels strongly about, and on the issue relating to suppliers. The upshot will be that customers pay more for their shopping. Customers will pay more to buy alcohol at the supermarket. I sometimes wish that hon. Members would be much more honest and open about the upshot of what they are asking for. They are asking for their constituents to go to the supermarket and pay more for their weekly shopping than they otherwise would. It is important to make it abundantly clear that that is what some people are trying to achieve.
If we want to help smaller shops and the high street, one of the best things that we can do is to ensure that there is free parking in town centres and not such restrictive parking, with people told that they can park for only 20 or 30 minutes at a time. How on earth is anyone expected to support local shops when parking restrictions are so tight? One of the best things that we could do is to ease the restrictions on car parking in town centres. That would, in one fell swoop, do more for local shops than anything else, yet many hon. Members who bemoan the death of the high street are those who, supposedly for environmental and climate change reasons, are the ones asking for the highest car park charges to deter people from driving into town centres. Some
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people should reflect on what their top priority is when deciding these matters. It is no good shedding crocodile tears at the death of high street shops when some of the parking restrictions and car parking charges are putting them out of business.
It is important to make the point clearly that supermarkets do not put small shops out of business. There is only one group of people who put businesses out of business—customers. When a supermarket opens a store in a high street, an out-of-town area or, indeed, anywhere, it does not use lassoes to grab people round the neck and drag them kicking and squealing into the shop against their wishes. The supermarket simply opens its doors, offers the customers what it thinks they want and sees what happens. If customers wish to maintain their local butcher, baker and greengrocer on the high street, it is entirely within their hands to do so, because all they have to do is keep shopping at their local butcher, baker and greengrocer and those businesses will stay open and continue to thrive. It is always easy to blame someone else; we have a “blame someone else” culture in this country. It is easy to blame other people for the demise of small shops, but the demise of small shops takes place only when customers themselves stop shopping in them. It is important to make that clear.
When I worked for Asda and we proposed opening a store in a particular location, small businesses and small shopkeepers were sometimes the most vociferous supporters of Asda opening a supermarket in their area. The reason for that was simple: they knew that the supermarket would drive footfall into that area and that they could benefit from that increased footfall. In my constituency, the most dominant part of Shipley town centre is without doubt Asda. I would say to anyone that, without Asda in the town centre as the biggest local retailer, the town centre in Shipley would probably be dead because no one would do their shopping in Shipley at all. Local shops in Shipley benefit from the footfall that Asda brings to their area. In Bingley, another part of my constituency, which we are regenerating, one of the most crucial aspects of that regeneration is getting a supermarket as part of the new shopping centre that will be developed there. Supermarkets can help to regenerate shopping areas; they are not the kiss of death, as many people would have us believe.
“UK grocery retailers are, in many respects, delivering a good deal for consumers... In many important respects, consumers are receiving the benefits of competition, such as value, choice, innovation and convenience.”
“This decline in real food prices is likely to have delivered significant benefits to consumers as shopping bills for the same basket of goods would now be lower in real terms than was the case seven years ago”.
“had competition in more local markets been more intense, the decline in UK grocery prices...may well have been greater.”
“the exercise of buyer power by grocery retailers is likely to have positive implications for consumers.”
We should clarify some of the benefits that consumers have had from their dealings with supermarkets. Not that long ago, there was something in place called the net book agreement whereby publishers could basically set the price that they wanted for a book—and they often set very high prices. Asda challenged the net book agreement in court, with the consequence that books are cheaper now than at any stage in our history. It has delivered those benefits to customers. People would be paying much more for items such as books without supermarkets. I am mindful of the time and will draw my remarks to a conclusion. I hope that we will end the one-sided argument that we have had in the past about supermarkets and acknowledge the great benefits that they provide both to their employees and to their customers.
Andrew George (St. Ives) (LD): It is a pleasure, Mrs. Humble, to have the opportunity to take part in this debate. I congratulate the hon. Members for Cities of London and Westminster (Mr. Field), for Stroud (Mr. Drew) and for Shipley (Philip Davies) on their contributions.
The reason why I am involved in the debate is that, during the Competition Commission inquiry, I chaired a group of non-governmental organisations, lobby groups and others, including the British Brands Group, the National Farmers Union, the National Farmers Union Scotland, the Association of Convenience Stores, Friends of the Earth and ActionAid, which came together to discuss the extent of the inquiry. They wanted the commission to take account of the impact that supermarkets have on suppliers and primary producers in the grocery supply chain, which was not initially included.
The main issue that I wish to raise today is the outcome of the evidence session that I had with Peter Freeman, the chairman of the Competition Commission inquiry, and his team on 13 March, the transcript of which is on its website. In particular, we dealt with the treatment of suppliers—an issue that has been touched upon by all the hon. Members who have spoken this morning.
The hon. Member for Stroud described me as the witch hunter general on this issue. I am sure that he intended that kindly, but I assure him that I am not coming at it from the perspective of the politics of envy or resentment, as the hon. Members for Cities of London and Westminster and Shipley suggested. Like others, I congratulate those in business who are successful; provided that it is done with endeavour, skill, hard work and so on, I share in the applause.
I argue that the supermarkets’ success is not built on being morally bankrupt or ethically unsound. They are not the product of the loins of the devil, and I do not look at them from that perspective. Their approach is entirely rational. If I were a supermarket chief executive, I would behave in precisely the same way. I would squeeze my suppliers for as much as I could, and I would swallow up smaller competitors as far as possible. If I did not and my three fellow competitors did—those left standing after decades of competition—I would clearly lose my market share, and my shareholders would be incredibly disappointed with me.
Mr. Mark Field: The hon. Gentleman parodies the way in which avaricious business might operate. Does he not realise that supermarkets do not behave in that way? I realise that, at the margins, they clearly have a duty to maximise shareholder value. However, given the way in which they try to operate and the amount of scrutiny pushed upon supermarkets both here and in the media, they behave very differently from that parody. As for suppliers, there is a recognition that they need to be looked after, not least because of the work that the hon. Gentleman does in Cornwall. This is about getting that balance right. The arguments about milk upset the supermarkets over the past five years, because they were doing their best to try to encourage suppliers.
Andrew George: That is a debating point, and we obviously do not have time to take it further today. I spoke in a straightforward manner to get the point across. I would not describe it as a parody. However, if we had the opportunity, I would be happy to debate the matter with the hon. Gentleman at greater length.
I agree with the hon. Gentleman on the theme that he was drawing out in his speech and on the conclusions that he reached. I agree that we should use regulation only as a last resort. We, as legislators, are conscious of the fact that we do not want to surround businesses with red tape and regulation to the point where they are held back. When considering all the issues, but particularly the relationship between very large supermarkets and their suppliers, many of which are large companies, we must realise that any form of regulation is a matter of last resort.
I had various roles with the Liberal Democrats before chairing the cross-cutting group that gave evidence to the Competition Commission. For instance, I was involved in setting up the party’s policy on establishing a food trade regulator with proactive powers within the Office of Fair Trading, although I have many misgivings about the way in which the OFT operates. None the less, I believe that proactive powers are important when considering future regulation. We need to ensure that regulation has as light a touch as possible.
In 2000, the Competition Commission identified 27 practices that could distort competition. It recommended the introduction of a supermarket code of practice, to which the supermarkets eventually agreed. In its latest inquiry, which was concluded only a few weeks ago, the commission identified a number of practices that continued and extended the total to 43. It found that some practices are more prevalent than before. Those are the kinds of practice that I mentioned in an intervention. They include payments for shelf space, over-riders and late payments, the retrospective invitation given at short notice that suppliers should pay for a promotional campaign such as two for the price of one. Such practices are clearly identified by the commission as being anti-competitive. Those practices need to be driven out, and it will be ultimately to the good of the supermarkets if they are driven out.
I understand, Mrs. Humble, that my hon. Friend the Member for Brent, East (Sarah Teather) is prepared to give some time to my hon. Friend the Member for Southport (Dr. Pugh). I have a question. I have debated the matter with the Competition Commission and raised the issue of how to introduce an ombudsman with proactive powers. Following the evidence session in
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March, I corresponded with Peter Freeman on the implementation of that policy. He wrote to me on 21 April, saying:
“We indicated during the evidence session that we intend to recommend to the Department for Business, Enterprise and Regulatory Reform (BERR) that, in the event that the Ombudsman cannot be implemented by means of undertakings from the relevant retailers, BERR should lake appropriate action for the establishment of the Ombudsman. The fallback option, should this recommendation not be acted upon, would be for the Office of Fair Trading to monitor and enforce the Code, and for suppliers and retailers to have recourse to arbitration of disputes by an independent expert, such as the Centre for Excellence in Dispute Resolution.”
“In cases such as this, our general view is that the choice of implementation instrument is a matter for government.”
The supermarkets may not be prepared to countenance the establishment of an ombudsman, but I would urge them to accept it, as it will provide some reassurance for consumers, suppliers and all who work in the trade that the supermarkets are prepared to be transparent—something that does not happen now. It would also remove the climate of fear from the marketplace. I hope that the Minister will indicate what response the Government will make if supermarkets are not prepared to accept an ombudsman, which is the clear recommendation of the Competition Commission.
Dr. John Pugh (Southport) (LD): I congratulate the hon. Member for Cities of London and Westminster (Mr. Field) on introducing the debate and on avoiding some of the mis-nostalgia that surrounds it. I can certainly remember being taken to lots of local shops as a small child, when there would be a conversation with every customer at every call, which took an enormous amount of time and caused enormous irritation—the same irritation that I enjoy now in the wrong queue at the supermarket.
It is a principle of democratic socialism that markets can be made to work for the good of communities, not that they necessarily will, hence the case for some sort of state regulation. The British retail market as a whole—not just the grocery market—is dominated by four supermarkets, one of which is especially dominant, so anybody with a watching brief must be aware that there can be problems, as indeed there are. Food is not cheap by European standards—the figures today show a 7.5 per cent. increase in prices—market shares are concentrated, competition is more apparent than real and town centres are genuinely struggling. To those things the UK has a limp-wristed response, in my view.
Such is the power and size of the supermarkets that they can kill competitors fairly and unfairly. One need only look at my constituency for an example of unfair competition, where every local small garage was more or less killed off by Tesco’s selling cut-price petrol. However, a few years later, those sites became Tesco Express shops and the price of petrol at Tesco went up.
Supermarkets have the capacity to destroy to town centres. The problem cannot be resolved by introducing free car parking because town centres need to ration car parking; otherwise, retailers would arrive first thing in the morning and take every slot available and make it impossible for people to park. Supermarkets bully suppliers,
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make them pay for special offers and, unquestionably, add to the carbon footprint of shopping and retail in general. We must accept that all those things are bad for the community. Supermarkets also do good things, as has been highlighted. They increase the variety and quality of goods, reduce costs and improve the level of convenience for some shoppers, particularly young, mobile car owners who have limited time.
The proposed solutions to the problems are somewhat doubtful. To have an ombudsman to whom one can complain about the most dominant and powerful customer is about as good as asking people in Sicily to complain about Mafia protection rackets—it would have more or less the same impact. Supermarkets are not stupid. They stay close to the Government—we need not talk about Lord Sainsbury, but simply look at the role of the head of Tesco in various taskforces set up by the Prime Minister—but they are perfectly competent and ready to ignore local government because their profits and buying power are so huge, and to fund whatever planning appeals stand in their way.
It was suggested that Tesco is community-minded. I asked my local Tesco to do something to help recycling in the area and perhaps to provide a few more facilities in its enormous car park. However, it was worried by the litter that that would create and refused to spend even one penny on improving the recycling of what was largely its own product packaging.
Alcohol sales were mentioned. I went to my local Tesco the day after the Budget and the furore about reducing binge drinking to find that lagers, ciders and so on were on special offer and heavily discounted. It does not have an unblemished record. There is a case for better Government regulation of fair trading, competition and planning. Far be it from me to recommend democratic socialism to the Government, but I think that intelligent regulation would help.
Sarah Teather (Brent, East) (LD): I congratulate my constituency neighbour, the hon. Member for Cities of London and Westminster (Mr. Field), on securing the debate. The opportunity to debate the Competition Commission’s findings is welcome. It has conducted two inquiries in the past decade into supermarkets. We had a debate only a couple of weeks ago, but that preceded the publication of the report, so the debate today is welcome.
There is no doubt that supermarkets have changed how we shop. Most of us, including me, use them, and I am quite willing to admit that I enjoy using supermarkets. I like the convenience and the fact that I can turn up and get everything that I need in limited time, put it in my car and drive off. I confess to that, as most other Members of Parliament would if they were honest about it. However, I also like the convenience of using my local shop. I can pop out to the shop at the end of my road, which is open late at night, to buy things that I need, and I like the diversity of the high road. Like most other people, I have a kind of schizophrenic attitude to supermarkets. We perhaps need to begin by admitting that we want diversity in the high street, but that we enjoy using supermarkets. There is no point in pretending anything else. That is particularly the case for people
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with families who find it much easier to strap two kids into a trolley than to negotiate several shops with a couple of toddlers in tow.
The British public spend £130 billion a year on groceries, and the top four supermarkets share 75 per cent. of that market between them—independents are now at less than 3 per cent., and the Co-op at about 4.5 per cent. of the market. That dominance has both negative and positive consequences, which have been discussed in the debate. The negative effects are based on price and the perception of price caused by the ability of supermarkets to drive down the cost of supplies; the undoubted impact that they have on town centres; and the ability to wield huge power over suppliers, which has led to abuse—my hon. Friend the Member for St. Ives (Andrew George) discussed that in some detail. However, as the hon. Member for Shipley (Philip Davies) said, supermarkets can be major employers in an area and they often take flexible approaches to employing people with disabilities and older people, who might find it difficult to gain employment elsewhere. Some supermarkets are involved with their communities, and others are not. We heard examples of bad practice from my hon. Friend the Member for Southport (Dr. Pugh), but I have seen good and bad examples in my constituency.
The relationship between supermarkets and small independent shops is complex. The advent of a new supermarket may drive out local shops, depending on whether free parking in the high street is provided. Like my hon. Friend the Member for Southport, I believe that abolishing all restrictions on parking in town centres is probably a little silly and that it would not, in fact, solve the problem that the hon. Member for Shipley said he was trying to solve.
Huge market dominance also provides opportunities for supermarkets. Their brand recognition and trust would allow them to take a lead on things such as environmental policy, packaging, antisocial behaviour and alcohol, and to incentivise consumers to change their behaviour, but whether they choose to do so is another matter.
The Competition Commission looked at two issues: the impact on suppliers and the impact on consumers where there is a local monopoly. I was extremely disappointed that the commission did not look at competition between supermarkets and local shops, and that it focused exclusively on competition between supermarkets. I feel, as the hon. Member for Cities of London and Westminster said, that the report consequently missed the point. He mentioned the Evening Standard, which has a long-running campaign to protect local shops and high streets, for which I applaud it. The commission missed an opportunity by examining whether there was adequate competition between Tesco and Sainsbury’s, and not whether people wanted a diversity of shops on their high street.
There is no doubt that there has been an enormous loss of small shops. It is not a new problem and I do not want to say that it arrived in 1997: from 1991 to 1997, 4,000 food shops closed in rural areas; between 1997 and 2002, 50 specialised shops—butchers, fishmongers, newsagents and so on—closed in the UK every week; 25 corner stores close every week now; and almost one in
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six independent convenience stores have gone in the past three years. They are often the shops that sell local produce. We have seen examples of supermarkets trying to corner the market on farmers’ markets, ensuring that they sell more local produce, but in truth, if local shops go, there is not much chance of sourcing produce locally and following a regime of fewer food miles. Since 2000, a further 4,000 convenience stores have closed down and a further 5,500 have been bought out by major chains, which the hon. Member for Stroud (Mr. Drew) alluded to.
What can be done? I do not have much time left, so I will raise just a few points, to which I hope the Minister will respond. For some time, the Government have been promising to publish their new planning guidance—PPS6. The Competition Commission recommended maintaining the needs test, but other hon. Members and I believe that it is vital that it is not just a competition test and that it allows for some examination of diversity on the high street. I recognise the commission’s point about a supermarket having a monopoly in an area and therefore being able to raise prices, but it is also vital to take diversity into account.
We must also consider the flexibility of local councils with respect to planning issues. I want councils to be able to develop their own use class orders, so that they could, if they wanted to, require a change of use when a local independent shop was replaced by a multiple retailer. Moreover, there is the issue of the cost of appeals, to which my hon. Friend the Member for Southport referred. Making firms pay for their own planning appeals would make a huge difference in that respect.
It is a question of balance. Consumers want choice and like using supermarkets, but they also enjoy using their local shops. It is for central and local government to ensure that that balance is maintained.
Mr. Brian Binley (Northampton, South) (Con): Let me say what a pleasure it is to serve under your chairmanship yet again, Mrs. Humble. My only reservation is that I often do so in the morning, and my eyes are sometimes rather blearier than they should be. None the less, it is a particular pleasure to serve under you this morning.
I congratulate my hon. Friend the Member for Cities of London and Westminster (Mr. Field) on gaining the debate and on his balanced view of this situation, whose importance is growing considerably throughout the country. I was particularly delighted when he intimated that attacking one section of the market as against another would do us all a disservice. We need to create a balanced view. I took some exception, however, to his remarks about melon-bellied traders. I noticed that he glanced particularly in my direction when he said that, but I shall take that up with him privately later.
I speak as the chairman of the Conservative party’s commission into small shops in the high street, which has been looking into a number of issues that impact on the problems of our small shops. Increasingly, our conclusion is that balance is the word that we need to keep in our minds when discussing this problem and reaching conclusions. When my commission was gathering evidence, I met representatives of all the major
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supermarkets, and it is true that there appears to be a real problem of balance between the large supermarkets and independent retailers and between out-of-town and edge-of-town development over 30 years, which is a sizeable period. During that time, there has also been a commensurate decline in many of our community hubs, town centres and edge-of-city centres. It is a very complicated situation, but we must recognise that there is a connection. We must do something about that, not least because our communities’ hearts are just as important to them as our hearts are to our individual bodies—when they function properly, they are the essence of our communities and give them their robustness. It would therefore be silly to ignore the importance of those hubs.
Andrew George: The commission looked at the uneven playing field with regard to out-of-town supermarket car parking and in-town car parking, but many of us are not necessarily sure that the business rating system properly reflects the big business advantage that supermarkets have. Has the commission reached any conclusion on that? It considered the possibility of charging for car parking at supermarkets, but has any other conclusion come from that?
Mr. Binley: If the hon. Gentleman is talking about my commission, I am happy to tell him that all will be revealed in about four weeks. We certainly looked at the issue in some depth, and I hope that he will find our report favourable.
Bob Spink: Does the hon. Gentleman accept that Government policy plays a part in preserving our high streets, so that they can serve vulnerable groups and give them access? Does he accept that the move towards centralising GP services and introducing big pharmacies on Canvey Island, for instance, is threatening six pharmacies that serve people there and that that will reduce access for vulnerable groups on Canvey Island, as elsewhere?
Mr. Binley: The hon. Gentleman raises an important point, which my commission is considering at this very moment. There is a real issue about the availability of pharmacies, particularly in rural areas, and we need to consider that in greater depth. I therefore thank him for his remarks.
Hon. Members will be familiar with the key facts about the growth of supermarkets, so I do not need to rehearse them. I am sure that hon. Members know that the acquisition of land has become a sizeable problem and that the number of big stores owned by the supermarkets has doubled since 2000, which is a major concern. Hon. Members will also know that 2.4 million sq m of additional retail space—it is not all grocery space—will be added to the market between 2008 and 2012, bringing the total to 28.3 million sq m by 2012. However, only 40 per cent. of the new retail space that is planned over the next 10 years is for our town centres. When I say that it will be retail space as opposed to grocery space, hon. Members will see what a hit that will be for small shop provision in our town centres. We need to be very aware of that movement. As I said, this is a question of balance. Let me say to my hon. Friend the Member for Shipley (Philip Davies), who made a vigorous defence of supermarkets, that that balance is important.
We have talked about the other matters that the Competition Commission attempted to address, including the role of the competition test in larger planning decisions; the new strengthened code to extend groceries; a supply code governing supermarkets’ conduct with regard to groceries; action to prevent land agreements, which can restrict competitors’ entry into the market; and an independent ombudsman to enforce the code. I welcome those proposals in part, but we need to look at the issue of ombudsmen very seriously, because they often add to problems by lengthening the time that it takes to arrive at solutions. We must take that into account.
My right hon. Friend the Member for Suffolk, Coastal (Mr. Gummer) said that the needs test has the most direct relevance to the retail sector and the commercial balance of large and small retailers in any given town or village, and the Competition Commission noted the importance of that in its investigation. The test gives some protection to smaller businesses, particularly in town centres. We need to recognise that, and I shall ask the Minister about the issue when I conclude.
Small shops are the lifeblood of local economies in many of our small communities and provide a lifeline to local residents, and their survival is vital to the well-being of the community hubs that I mentioned. We must ensure that out-of-town developments work with the needs of local communities, not against them. In the light of the Competition Commission’s recent and final report, will the Government therefore review their position on the needs test? Does the Minister now agree that it should be retained?
The commission also recommended introducing a stronger groceries supply code of practice, which would be enforced by an independent ombudsman. Will the Minister furnish us with further details about that, bearing in mind the concerns that I have expressed?
Given that the burden of regulation that the Government have created over the past 10 years has seriously increased and tends disproportionately to affect small and medium-sized businesses, what do the Government intend to do to support those businesses, which operate mainly in our town centres?
The issue before us is about balance, but it is also about the health of our communities. We are discussing a wider social issue, which is important to many of our constituents, so I look forward to the Minister’s response.
The Parliamentary Under-Secretary of State for Business, Enterprise and Regulatory Reform (Mr. Gareth Thomas): I, too, congratulate the hon. Member for Cities of London and Westminster (Mr. Field) on securing the debate. I welcome the contributions that we have heard from both sides of the Chamber, not least the contribution of my hon. Friend the Member for Stroud (Mr. Drew). Among other things, he praised the continuing, excellent contribution of the Co-op retail sector and the benefits that it brings to consumers and to the strength of the high streets in which it operates.
The hon. Members for Shipley (Philip Davies) and for Southport (Dr. Pugh) made the most robust contributions to the debate, even though from slightly different perspectives. I listened with considerable interest to the concerns of the hon. Member for Shipley about town centre parking and found myself almost agreeing
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with him. Perhaps that reflects my experience and the experience of businesses in my constituency at the hands of the Conservative-controlled Harrow council, which has consistently failed to listen to the representations of businesses in south Harrow and Rayners Lane about the cost of parking there. That lack of listening might explain why the Audit Commission recently rated it as the worst-run authority in London.
The hon. Member for St. Ives (Andrew George) talked about development and highlighted the important contribution that supermarkets can make to encourage trade from developing countries into UK and European Union markets. I hesitate to provoke disagreement between him and the hon. Member for Brent, East (Sarah Teather), but she raised the debate about food miles—a debate that I find entirely erroneous. Many of those who highlight the need to reduce the number of food miles do not recognise that goods made in many developing countries are produced using fewer carbon dioxide emissions than goods produced elsewhere.
Notwithstanding her comments about food miles, the hon. Member for Brent, East struck the right note regarding British consumers. We want supermarkets to continue to function effectively, but we also want to benefit from the contribution that small shops make to our high streets. As the hon. Member for Cities of London and Westminster made clear in his opening remarks, supermarkets generate considerable passion in that context. We must separate the behaviour, or not, of supermarkets from the changes that have occurred in the past 10, 15 or 20 years to the way in which we live our lives and the way that we shop as consumers. As the hon. Lady said, as we lead busier lives, we want to do more of our shopping in one place. That has undoubtedly had an impact on markets.
We must recognise a truism that the hon. Member for Shipley discussed and that all hon. Members have picked up in various ways—supermarkets are a thriving and dynamic part of the economy, and their success benefits not only their shareholders, but local communities, their employees, their customers and our regional and national economies. In 2007, an estimated £110 billion-worth of grocery sales were made through nearly 100,000 grocery stores across the UK. It is true that the eight largest grocery retailers accounted for about 85 per cent. of total grocery sales, with the largest four accounting for just over 65 per cent., but it is important to recognise that some supermarkets play a vital, anchoring role in a number of town centres. Occasionally, they also play a crucial role in regenerating town centres. In the community of north Harrow, where I live, businesses and local people are desperate to have a supermarket back on the site of the old Safeway store, to help to generate new business and to create opportunities for vulnerable consumers in the area. Supermarkets provide much-needed
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employment and help to attract other, smaller retailers to set up shop in their shadow.
We should also acknowledge the contribution that British supermarkets have made in improving their ethical sourcing and environmental performance, whether on climate change or waste. I think it was my hon. Friend the Member for Stroud who talked about plastic bags. We look forward to supermarkets doing further work in that area.
We welcomed the Competition Commission’s thorough report, which was published on 30 April. The commission found that, in general, the groceries market is delivering a good deal for consumers, but it identified two key concerns. First, several grocery retailers have strong positions in a number of local markets, and that could lead to a poorer retail offer to the consumer. Secondly, the commission believes that the transfer of excessive risk and unexpected costs to suppliers has an adverse impact on investment and innovation.
To address those concerns, the commission proposed several remedies, mainly concerning the use of restrictive covenants and exclusivity arrangements on land sites, which it has the power to implement. Large grocery retailers will be required to notify the Office of Fair Trading of all acquisitions of large grocery stores. In addition, the commission has recommended to the Government that a competition test should be adopted and that the OFT should act as a statutory consultee in that process.
The hon. Member for Brent, East asked about the review of planning law, which is due for consultation. I am afraid that, at this stage, I can only say that we will soon publish our proposals for revisions to planning policy statement 6. When we bring our proposals forward, we will take full account of the commission’s recommendation on the competition test.
The commission also proposed that there should be a grocery supply chain code of practice. Such a code would expand the number of supermarkets that are covered by the existing supermarkets code of practice, and certain alleged practices by supermarkets would be prohibited as a result of the code. The commission is seeking voluntary undertakings from grocery retailers to establish an ombudsman to monitor and enforce compliance with the code. The ombudsman would gather information and could proactively investigate retailers’ records in areas in which there had been complaints. Guidance on the provisions of the code would be published, as would an annual report on its operation. I hope that gives my hon. Friend the Member for Stroud some reassurance regarding his worries about whether evidence would be produced to the ombudsman.
If the commission fails to obtain satisfactory undertakings from retailers within a reasonable period, the Government will be asked to step in and legislate. We are considering the commission’s report in detail, and we anticipate publishing our formal response, with a full plan of action, before the summer recess. I hope that I have dealt with the majority of hon. Members’ concerns on this issue. This has been a useful debate, and I look forward to returning to those concerns in due course.
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