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Abolition of Service Charges in Restaurants

3.31 pm

Mr. Michael Fabricant (Mid-Staffordshire) : I beg to move, That leave be given to bring in a Bill to prohibit the levying of service charges in restaurants ; and for connected purposes. The Bill will amend the Consumer Protection Act 1987 and prohibit the imposition of service charges to restaurant bills.

I wonder whether you, Madam Speaker, have ever had the experience that I have had. [Laughter.] One goes into a restaurant with friends and orders the meal. Perhaps one gets good service. Perhaps one does not. The bill then arrives. It includes a hefty service charge. One proffers one's credit card, and back comes the credit card voucher for one to sign, but with the total left blank. One inquires of the waiter whether service was included in the bill, and he answers, "Yes, but we don't get to see any of it."

My Bill is designed to address that problem, which besets we British and foreign visitors alike. The Bill will not discourage good service ; it will encourage it. The Bill will not stop tipping : it will encourage it, but only as a reward for good service. Tipping for good service, not tipping for bad service, seems to me, dare I say, like getting back to basics.

I am well aware that, despite the Bill having the support of the Consumers Association, the Office of Fair Trading, trading standards officers and, last but by no means least, the Restaurateurs Association of Great Britain, there may be some lawyers in this place who will oppose it. Their argument, predictably, goes rather like this. Sure, a service charge is legally binding if it mentions the charge on the menu, but once one has sat down, started to munch on a roll and butter and look at the menu, if it mentions a service charge, one can always get up and leave--oh, come on!

Then they say that, if the service is so bad and if one does not want to pay the charge, one can always hire a lawyer and argue it in court. The lawyers would say that, would they not?

The Bill would bring to an end the battle of confusion, nerve and, frankly, sharp practice that so often causes heartburn and grief at the end of an otherwise mellifluous meal. The price of a meal would be clear on the menu, just like the price tag in a shop, with no extras added on later. That is vital, not only for us, but for the millions of foreign visitors to Britain each year who feel that they are simply being ripped off.

My Bill will end all that confusion. It will protect those who have gone for pleasant meals--in otherwise reputable restaurants--which have been soured by the addition of an unexpected 10, 12.5 or even 15 per cent. service charge at the end of the bill. It would end the optional service charge, which is not optional to any but the bravest of souls prepared to dispute the level of service received. It would cease the moral strife that haunts the diner who queries the suggested gratuity and is informed that it is used to pay staff wages. In what other industry would such an important overhead as staffing costs be left to chance payments by customers?

Making it absolutely clear that the price stated on the menu is inclusive of all charges should also stamp out what can only be described as blackmail--that open credit card slip. As the informed consumer knows, there is no need to

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leave a further tip or free will offering for staff if service is included--yet for some, and for many foreign visitors, it takes nerves of steel to argue the toss with the waiter or management. Let there be no doubt that the service charge is the tip. If all prices were stated net, there would be no confusion. The mutual degradation of anxious waiter and befuddled diner would be ended. I re- emphasise that I have no wish to stop free will gifts or tips but I want to end the informal pressure on people to pay a tip as an inevitable part of eating out, regardless of quality of service. I do not tip in pubs or fast food or cheap restaurants. Nor do I make a so-called free will offering to the stewardess on an airline, no matter what service she has given. Given that we do not tip in all those different circumstances, why should there be a virtual compulsion through service charges in restaurants?

The service charge is an anomaly left over from the second world war, when rationing and price controls led certain expensive restaurants to find ways around the restrictions. The law stipulates that all menu prices must be inclusive of value added tax. According to the Department of Trade and Industry code of practice on misleading price indications, any compulsory service charge should be included in the price for each item wherever practicable. In the four years or so that the code has been in existence, it has had little effect on the restaurant trade.

The House might find it hard to believe that in 1993, The Good Food Guide listed only 93 out of 1,400 restaurants that close credit cards by filling in the total, including the service charge. A survey by Which? in May 1992 showed that many restaurants made a compulsory service charge, leaving credit card slips open. Even worse, they presented credit card slips without the bill or anything else to remind the customer that service had already been included in the price of the meal.

That code of practice is simply not working, and discussions on its amendment have yet to have any impact. The code has little legal effect. Until it does, I suspect that the majority of restaurants will continue to avoid net prices on their menus, for the reason that it makes their prices appear cheaper and more competitive than other restaurants, which is most unfair.

A ban on additional service charges is supported not only by the many consumer organisations that I mentioned earlier but, I suspect, by my right hon. and learned Friend the Chancellor. I refer not to his dining habits but to the tax man, who should benefit from net prices and the removal of the supposedly optional charge that allows the restaurant to avoid VAT on that element.

As my colleagues know, I am not a regulator by nature--far from it--but tighter guidance is needed to ensure that the intentions behind the Consumer Protection Act 1987 stick. You will find this impossible to believe, Madam Speaker, but even the French have legislated to make all- inclusive restaurant prices obligatory. Now, every European Union member state except Britain and Greece has all-inclusive prices.

Recently, The Good Food Guide commented :

"The recession may have forced proprietors to reduce their headline prices to persuade customers through their doors, but some of them load the other costs to the point of virtual deceit. The public sometimes feels restaurants are combat zones.

My Bill will go some way towards ending that.

I realise that, in presenting this Bill, I face the gravest danger. Hon. Members on both sides of the House have

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drawn my attention to the risk of ground glass or worse. The Bill, however, has cross-party support, and it needs to be passed, for the sake of both equity and our tourist industry. I commend it to the House.

3.40 pm

Mr. Andrew Mackinlay (Thurrock) : I do not think that we should pass the Bill. Notwithstanding its superficial attraction, it should be seen against the backdrop of the current wage position : at present, we have no national minimum wage. It ill behoves the hon. Member for Mid-Staffordshire (Mr. Fabricant) to bleat on about people who can pay for their meals with credit cards. Many people who work in restaurants are, unhappily, dependent on tips to obtain their wages.

Dr. John Reid (Motherwell, North) : They are not getting them.

Mr. Mackinlay : No, they are not. Not only is there no minimum wage ; such people have no access to industrial tribunals, and thus cannot complain about the unreasonable behaviour of their employers. The hon. Member for Mid-Staffordshire mentioned the practice in France. In France, there is a basic minimum for people working in restaurants, and they are able to complain about unreasonable behaviour on the part of employers.

If the House passes the Bill, it will give satisfaction to those who can purchase meals with credit cards, but it will do nothing to improve the lot of restaurant workers receiving low wages, who often have no national insurance or pension rights, and are paid skivvy wages.

The House should concentrate on introducing employment protection, especially for people on low wages. We should ensure that such people have a right, and remedy, to complain about employers who withhold money to which they are entitled. The House should take such action, rather than placating people with bits of plastic in their wallets who can afford to pay more.

Question put, pursuant to Standing Order No. 19 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business) :--

The House proceeded to a Division, but no Member being willing to act as Teller for the Noes, Madam Speaker-- declared that the Ayes had it.

Question accordingly agreed to.

Bill ordered to be brought in by Mr. Michael Fabricant, Mr. Tony Banks, Dr. John G. Blackburn, Mr. Robin Corbett, Mr. Quentin Davies, Mr. John Gorst, Mr. Gerald Kaufman, Sir James Kilfedder, Sir Fergus Montgomery, Mr. Bill Olner, Dr. John Reid and Mr. John Sykes.

Abolition of Service Charges in Restaurants

Mr. Michael Fabricant accordingly presented a Bill to prohibit the levying of service charges in restaurants ; and for connected purposes : And the same was read the First time ; and ordered to be read a Second time upon Friday 4 March, and to be printed. [Bill 34.]

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Scott Inquiry

3.47 pm

Mr. Bruce Grocott (The Wrekin) : On a point of order, Madam Speaker. I wish to make a brief point of order which goes to the heart of what we try to do in the House. It is about ministerial responsibility.

Yesterday, at the Scott inquiry, the gist of what the Prime Minister had to say was that he could not possibly know all that was going on in the Department of which he was the head. Every time we work with Ministers in the House, at Question Time or in debates, we have to work on the assumption that Ministers are here speaking and responsible for the work of the Departments over which they preside. If they are able to offer as a defence, "It is nothing to do with me ; I could not possibly have known what was going on ; far too much work is covered by my Department and far too many pieces of paper go through my office," that makes complete nonsense of the notion of ministerial accountability.

The House needs to know whether a Minister speaking from the Dispatch Box speaks with knowledge and authority, having been properly briefed by his Department, and whether he is accountable. In that sense, "accountable" means that, if things go wrong, Ministers will do the honourable thing and resign. Or will they always simply offer us the defence that they gave us a misleading answer or a duff performance, but that that is entirely explicable because, in modern government, it is impossible for Ministers to be responsible for their Departments. If that is the case--

Madam Speaker : Order. This is a long point of order, and barely a matter for me. I advise the hon. Gentleman to read the response that I gave to a similar point of order yesterday, so that I do not have to be tedious and repetitious with the House. Perhaps the hon. Gentleman will look at yesterday's Hansard, in which he will find my answer to a similar point of order.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley) : Further to that point of order, Madam Speaker.

Madam Speaker : I will take no further point of order. I have dealt with the matter.

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Orders of the Day

Coal Industry Bill

Order for Second Reading read.

Madam Speaker : I have had to place a 10-minute limit on speeches between the hours of 6 and 8, because of the great interest in the Bill.

3.48 pm

The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Michael Heseltine) : I beg to move, That theBill be now read a Second time.

In our election manifesto, we pledged to privatise British Coal. Last spring, in our White Paper "Prospects for Coal", we renewed that pledge. Before I deal with the specific measures in the Bill, it is worth spending a few moments on the wider issues of nationalisation. The British coal industry is one of the last major industrial sectors left in the public sector. Nationalisation of our industries was a central feature of post-war Labour Governments. It was resisted fiercely by the Conservative Opposition of the day, and there are few people left who would deny that, as a policy, it imposed intolerable economic and legislative burdens on our country and contributed to the decline of our regional economies.

The policy was designed to transfer the commanding heights of the economy to state control. The naive political rationalisation at the time was that control would be vested in the people. In reality, power rapidly shifted to monopoly providers and monopoly producer unions. What power the people possessed was exercised by civil servants, who rapidly became both protector and confidant of the industries' self-interest, and, worse, by the political convenience of the party in power.

The traditional--and, in the end, the only effective--disciplines of the marketplace were replaced by ill-disciplined compromises and cash-consuming delay. The objectives of enhanced efficiency, increased productivity and a high quality of service played little part in the day-to-day practices or assumptions.

Industrial management, hitherto widely dispersed throughout the regions of the United Kingdom, was replaced by top-heavy bureaucracies that were located largely in London. Perhaps most damaging of all, in virtually every case our key industries withdrew from or were denied access to the markets of the world. I say this to reinforce the case for the Bill, if such reinforcement were necessary. Today, the concept of state ownership is bankrupt. Across the world, country after country is turning to the discipline of the marketplace as each seeks to dispose of its nationalised industies. Even the Labour party has lost the will to fight for this arcane concept of industrial organisation and management. Of course it parades and re-parades the weary arguments that a tiny body of its constituents, and of course its union paymasters, want to hear, but it knows that the tide of freedom that we have brought to the nationalised industries is now as irreversible here as it is in so many countries, under Governments ranging from the socialists of China to the right-wing Government in France.

Mr. Dafydd Wigley (Caernarfon) : Does the Secretary of State accept that one of the worries of many

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ex-coalminers and miners' widows is that the benefits and agreements that they had with the National Coal Board will not be continued after privatisation? Will he give a categorical assurance on the matter?

Mr. Heseltine : I shall deal with the specific objects of concern case by case, as I consider the detailed contents of the Bill. Before I leave the overwhelming case in favour of privatisation at large, which rests behind the Bill, I must point out that, as hon. Members will know, the facts are stark. In 1979, the nationalised industries were costing the taxpayer £50 million per week in losses. Today, they pay £60 million per week in taxes on the profits that they earn as private sector companies and, most chilling of all for the Labour party, 6 million shareholders are willing to testify and to vote for the success that privatisation has brought.

What are the facts about the nationalisation of the mines? At the time of nationalisation in 1947, there were 720,000 mineworkers employed by the National Coal Board. By 1980, that figure was down to 230,000--a reduction on average of around 15,000 a year. The rundown was as much a characteristic of Labour as of Conservative Governments.

The number of operating pits also declined throughout that period. Opposition Members will recall, for example, that between 1964 and 1970, and between 1974 and 1979, the number of producing pits fell by 313. Indeed, since 1979, it is a Conservative Government who have injected by far the largest support for British Coal in the history of British Coal-- nearly £20 billion.

Mr. Ronnie Campbell (Blyth Valley) : That was redundancy pay.

Mr. Heseltine : Yes, the Conservative Government made very generous redundancy payments. However, the hon. Gentleman is not prepared to face up to the fact that £8 billion of that £20 billion was capital investment in the industry. So, since the war--

Mr. Campbell : I can give the Secretary of State one example of what happened in my colliery. A transport system, which cost £300,000, was bought, put in the timber yard, hapt up and kept there, and charged to that colliery when it closed. That is only one example. What happened at the other collieries in which the Government invested?

Mr. Heseltine : The hon. Gentleman can quote his £300,000 example, but does the House seriously believe that it stands up against the £8 billion that has flowed into capital investment in the Coal Board since 1979? The Opposition talk as though they cared about the industry, but they ran it down. There has never been such a large investment programme in the coal industry as under Conservative Governments since 1979.

Mr. John Evans (St. Helens, North) : Is the Secretary of State aware that, at Parkside colliery in my constituency, a £6.5 million investment in a new face, which was in production for a fortnight before it was closed down under his regime, is now rotting in the ground?

Mr. Heseltine : The hon. Gentleman might ask himself whether the decision to invest such large sums of money was justified in the face of a falling market for the product. That is an example of precisely the lack of discipline that I have been referring to--a lack that was characteristic of nationalised industries throughout the post-war period.

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Mr. Eric Clarke (Midlothian) : The accounts of the National Coal Board show that it repaid to the Government, at a very high interest rate, loans that it had received over some years. The money that the right hon. Gentleman was crediting the Government with investing in the industry was paid back before the so-called profit was decided. The Secretary of State can investigate that fact if he likes.

Mr. Heseltine : The hon. Gentleman must understand that most of the £20 billion invested in the National Coal Board since 1979 will be written off, which means that it will be charged in perpetuity to the taxpayer. I admire the fact, however, that he is now a director of a private sector coal company. I know that the House will wish him all the very best good fortune.

Mr. Clarke : I am not a director of a private company : the right hon. Gentleman has been misled. I am an adviser to a company which has the involvement of the Scottish trade union movement.

Mr. Heseltine : I would not wish to misrepresent the hon. Member. If his advice is successful, however, he might soon be a director of the company.

Since the war and nationalisation, the coal industry has lost its market for producing town gas, it no longer sells coal to the railways or mines coking coal, and it has lost the greater part of sales of coal for home heating and industrial use. During the debates of the past year or so, we have been all too familiar with the fact that British Coal is now very dependent on sales for electricity generation, and we are equally and starkly aware that it is coming under increasing pressure in that market as well.

Mr. Derek Enright (Hemsworth) : If there is no market whatsoever for coal, can the President please explain why five applications are being processed for opencast coal mining in my constituency, when the opencast coal will be dearer than that from Grimethorpe?

Mr. Heseltine : The explanation is entirely a matter for those people who have submitted the applications to carry out the mining. It seems extremely unlikely to me that people are bidding to take on onerous responsibilities for mining coal in an opencast field when they could get it cheaper from the deep-mined industry. However, that is a judgment for those people who are prepared to invest their money in the process.

The Government's position is clear. We have given an undertaking to ensure that the Coal Board offers to license the deep mines to the private sector, and I am glad that there are a number of cases in which agreements have been reached or the negotiations are well advanced. I much admire all those Opposition Members who are playing a role in facilitating negotiations and encouraging the prospects that those pits might find an alternative life in the private sector.

Several hon. Members rose --

Mr. Heseltine : I cannot give way to three people at once, but the lady must of course have preference.

Ms Joan Walley (Stoke-on-Trent, North) : Will the President tell us exactly why he is not prepared to set up a target for the amount of opencast mining, and why it is that in, north Staffordshire, Trentham and Silverdale have been

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closed, and we now expect even more opencast mining to go ahead? Why are not environmental issues at the heart of his energy policies?

Mr. Heseltine : The hon. Lady mentions a most important subject, and she must be aware that consultation is now under way on mineral planning guidance 3. It is a matter for my right hon. Friend the Secretary of State for the Environment, but it raises important issues of balancing the environmental and economic arguments that are--superficially at least--in conflict. I have great sympathy with the hon. Lady's arguments.

Mr. John Cummings (Easington) : The right hon. Gentleman has confused me. I agree with him that successive Governments, Labour and Tory, have invested heavily in the mining industry during the past 30 years. Indeed, with the closure of Easington colliery, tens of millions of pounds of taxpayers' money have been left in a flooded mine. Is it not obligatory for the President to underpin that £20 billion-worth of taxpayers' investment by assisting in working a market for the benefit of a British industry, providing British coal?

Mr. Heseltine : The hon. Member has obviously missed the point : that, with the approval of the House, we offered to put more taxpayers' money behind the production of deep-mined coal if people would come forward and find an additional market for that coal. In some cases, negotiations have been concluded or are proceeding. It would be wrong for me to give artificial assurances that I can sustain economic activities for which there is no market justification.

Mr. Terry Lewis (Worsley) : Will the President explain the logic of taxpayers' money subsidising the acknowledgedly inefficient Spanish coal industry through the European Union?

Mr. Heseltine : I challenge that logic constantly. My department, as the custodian of much of the trading interest of this country, has the responsibility of constantly challenging the existence of subsidies. The aim is not for us to introduce them into our economy ; it is for us to try to eliminate them from the rest of the European Union. That is the task in which we are engaged.

Mr. Paddy Tipping (Sherwood) rose--

Mr. Heseltine : Will the hon. Gentleman forgive me? Madam Speaker, you introduced a ten-minute limit, and I suspect that I am beginning to intrude into rather more speeches than I would wish to do. I must ask hon. Members to allow me get on to the detail of the Bill. There is one last point that I wish to record about my judgments on the industry. I have not the slightest doubt that our coal industry would be in a much healthier position today if the adjustment which has taken place under every Government, and too late, had taken place in the post-war period of economic expansion, when the

diversification of the economy could have proceeded faster and when the highly desirable employees of the coal industry could have found jobs in growth industries of that time.

I will go further. I have little doubt that, if the coal industry had had to face the challenge of the marketplace much earlier, it would have achieved productivity gains which recently, and under pressure, it has begun to achieve, but it would have achieved those productivity gains in time

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to head off at least part of the dash for gas, and thus it would have secured for itself a larger share of the marketplace than is today realistic.

Mr. Simon Hughes (Southwark and Bermondsey) : If the President is arguing that a secure future for coal required privatisation some time ago, there have been 14 years of his government during which that could have happened. Is not the criticism the same--that a lack of strategic energy policy has been the consistent feature of every year of his Department and its predecessor since 1979? That is why coal is in difficulty ; it has never known what place it would have and never been given any security as part of a diverse market supply, as the best resource that we have available.

Mr. Heseltine : That was an interesting intervention by the hon. Member from the Liberal party. I do not pretend to have been shadowing with great care Liberal policy statements for the earlier part of the past decade, but I do not remember, Madam Speaker--perhaps you do, and perhaps I owe the hon. Member an apology--the Liberals making a major demand in all those years that we should privatise the coal industry.

Indeed, if the Liberals had ever come forward with any firm demand at all, especially one that might contain any element of controversy, it would have come as a surprise to me. The Liberals would demand privatisation of the coal industry only in sections of industry, or of the electorate, where there was no coal industry, for fear that otherwise they might offend someone. That is a classic example of the Liberal Democrat party waiting until all the policy options have been closed, and then asking, "Why don't you do it some other way ?"

Mr. Dennis Skinner (Bolsover) : Will the President of the Board of Trade give way ?

Mr. Heseltine : I cannot resist.

Mr. Skinner : The right hon. Gentleman has not been following Liberal policy closely enough. I know that he has been ill and has been missing, and that for a long time he was not a Cabinet Minister. However, if he would check the facts, he would find that, in true Liberal Democratic fashion, that party was in favour of privatisation before the general election, but is now against it.

Mr. Heseltine : The hon. Gentleman reveals the sort of inconsistency on doctrine that we have come to expect from the modern Labour party. I congratulate him on having read the documents. It shows that he is preoccupied with "back to basics", and has learnt to read effectively after all this time.

Mr. Bill Etherington (Sunderland, North) : I took great note of the right hon. Gentleman's long diatribe against nationalisation. Is he prepared to tell the House how many private companies have made as many gains in productivity as the Coal Board has made over the past two years ?

Mr. Heseltine : The hon. Gentleman will know that British Steel is now a world-class company, that British Gas is trading in more than 45 foreign countries, that British Airways is now one of the most successful airlines in the world, and that our electricity, our power and our telecommunications industries are straddling the world in the best interests of Britain.

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Why? It is because we privatised the companies that have made that possible. Let us remember that we did that in the teeth of the opposition of the Labour party. If it had had its way, we would still have huge bureaucracies of politicians and civil servants suffocating the entrepreneurial zeal that the Conservative party has let loose on the world market.

Mr. Jack Thompson (Wansbeck) : Will the Secretary of State give way?

Mr. Heseltine : For the last time.

Mr. Thompson : I have followed the right hon. Gentleman's argument closely for the last few minutes, and he rightly claims that £20 billion has been put into the industry in the period concerned--£8 billion in capital investment. But does he recall that the Conservative party has been in power for the past 15 years, and that he and his predecessors were responsible for policy? Surely policies could have changed over those 15 years so as to accommodate the situation that has developed now.

Mr. Heseltine : If I had to plead guilty to the hon. Gentleman's accusations, I would have to say that I wish that we had privatised the coal industry in the early 1980s. I must make that clear. However, the implication is that, in doing so, we would have gained the serried support of the Labour party, whereas actually it was encouraging the National Union of Mineworkers in any obdurate political action that it could devise to stop the modernisation of the industry. The coal industry has found itself at the end of the queue. More's the pity, and, I suspect, more's the price that the coal industry has paid as a result.

The Bill contains the Government's proposals for restructuring and privatising British Coal. It sets out the necessary provisions for safeguarding pension rights and concessionary fuel entitlements, and those affected by mining subsidence. It also reflects our determination to ensure that the high safety standards in the industry are maintained or improved in the light of the advice of the Health and Safety Commission.

We believe that a competitive energy market is the best guarantee of secure, diverse and sustainable energy supplies in the forms that people and companies want, and at competitive prices. Electricity and gas privatisation have changed the nature of the energy market from a producer- led to a consumer-led market. We have made it a priority to establish a range of substantial privately owned energy companies free to take strategic decisions within a proper framework of regulation. The time has come for the coal industry to enjoy the same freedom.

We examined the prospects for coal within the energy market very carefully during the coal review. On the basis of all the evidence that was presented to us, we had to conclude that there was every prospect that the market would continue to be difficult.

Despite that, it remains the case that coal accounts for over half of all fuel used for electricity generation. On any calculation, coal will continue to be one of the chief sources of energy for the electricity supply industry in the years ahead. The House will remember that we accepted the key recommendation of the Select Committee and have introduced a subsidy for additional sales for electricity generation from deep mined coal. However, the real test is the rate at which the industry can improve its competitiveness.

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