The Environment, Transport and Regional Affairs
Committee has agreed to the following Report:
ENVIRONMENTAL IMPACT OF SUPERMARKET COMPETITION
1. The large increase in out-of-town supermarkets
has brought benefits, but it has also caused many problems. These
stores have reduced the vitality of town centres; they have led
to the closure of corner shops in towns and villages; they have
produced urban sprawl and the loss of much valued countryside
close to towns; and they have also encouraged the use of cars.
Faced by these problems, the previous Government introduced a
stricter planning regime in 1993 which aimed to curb their growth.
It was stiffened in 1996 when a revised Planning Policy Guidance
Note 6 (PPG 6) introduced sequential tests.
This policy has been maintained by the present Government, which
has strengthened the regime by clarifying various aspects of the
Guidance. Of course, the change in policy has not prevented the
many out-of-town supermarkets which were built in the 1980s and
early 1990s from continuing to have a deleterious effect on town
centres. Moreover, new out-of-town sites have continued to open:
some as a result of planning permissions granted before 1996;
and others have been granted permission since 1996 in circumstances
allowed under the guidance.
2. Although the revised planning guidance has only
been in place for three years, a number of threats to it arose
in the summer of 1999, notably:
- the Wal-Mart takeover of Asda and press speculation
that, at a private meeting with the Prime Minister, an agreement
had been reached to relax the planning regime.
- the Director General of the Office of Fair Trading's
referral of supermarkets to the Competition Commission with his
comment that there were significant barriers to entry which were
related to aspects of the planning system.
The desirability and effectiveness of planning policy
which is aimed at concentrating retail development in existing
areas was being questioned. Accordingly, we decided to hold a
short inquiry seeking views on the environmental impact of supermarket
competition. We received 32 memoranda covering a wide range of
environmental concerns. We took oral evidence from four sets of
witnesses. We are grateful to all those who gave evidence, and
to our Specialist Adviser, Richard Bate, for his expert guidance.
Since we began the inquiry, there has been concern about a new
threat to the planning guidance, namely:
- the Chancellor of the Exchequer's announcement
in his pre-Budget Report of the Government's intention "to
modernise the planning system so that it supports competition
and innovation and does not provide a barrier to the growth of
either new and existing companies"
We sought clarification of this statement and consider
3. In this report we concentrate on the main concerns
of the evidence:
- whether the main thrust of the planning guidance
in PPG 6 is right;
- what modifications are required to existing
Government policies to protect town centres and corner shops;
the threats to existing policy.
WHETHER THE MAIN THRUST OF PLANNING GUIDANCE IS RIGHT
Reasons For Introducing the Planning Guidance
4. The number of superstores increased from 457 in
1986 to 1102 in 1997.
Their share of total grocery spending increased from 29.9% in
1987 to 53.7% in 1996. Total grocery superstore turnover grew
from £9,188 million to £34,005 million over this period
(in current prices).
5. The consequences of this increase on other retailers
are striking. Witnesses drew attention to the way out-of-town
stores had brought about "a decline of traditional town centres"
and had played a part in producing a notable characteristic of
modern England, the demise of the corner shop. The number of independent
grocers fell from 116,000 in 1961 to only 20,900 in 1997.
Several witnesses provided us with vivid, but depressing examples
of this process. The Kirby Lonsdale Association told us that a
proposed supermarket in that town meant that "the survival
of village shops in the Lune Valley is at stake, as also the traditional
shops - butchers, bakers and greengrocers - in Kirby Lonsdale.
Our town is small with a population of only 1,600. A further 600
people live in surrounding villages".
As a result of a store opening in nearby Carnforth, eight small
village shops were forced to close. Robbo's Newsagents in Kirby
Stephen told the Committee of the enormous problems caused when
a supermarket in the town had begun to sell newspapers at half
price to all its customers.
Caroline Cranbrook informed us of the research which she had undertaken
in 1997 about the impact an edge-of-town superstore would have
on food retailing near Saxmundham. She interviewed 81 shops selling
food in the seven market towns and 19 villages within the supermarket
impact area. 61 of the 81 shops thought they would be so badly
affected by the superstore, that sooner or later they would go
out of business, some of them immediately.
6. These are not mere isolated examples. This evidence
is supported by the "most comprehensive assessment of the
retail and transport implications of foodstore development ever
undertaken", The Impact of Large Foodstores on Market
Towns and District Centres, which the DETR published in October
1998. It concluded:
"Our research has shown that large foodstores
can and have had an adverse impact on market towns and district
centres. The level, and consequences, of impact will vary depending
on the particular local circumstances of the centres concerned.
Smaller centres which are dependent to a large extent on convenience
retailing to underpin their function, are most vulnerable to the
effects of larger foodstore development in edge-of- centre and
The study found a particularly bad case at Fakenham
where the opening of an out-of-centre Safeway store had led to
a decline in market share for the town centre convenience sector
of 64%. At Warminster the decline had been even worse, 75%.
7. To address consequences such as these, Governments
have published planning policy guidance on shopping and town centres
(known as PPG 6). Three versions of this note have been issued:
the first was introduced in 1988 with "a clear
presumption in favour of new development";
this was revised and the second version in July
1993 provided more protection for town centres;
the third version published in 1996, following a
report by the Environment Committee (one of our predecessor Committees
in the last Parliament), introduced the "sequential"
test, which stated that the first choice for new developments
should be town centre sites, followed by edge-of-town and last
of all out-of-town sites.
Permissions for out-of-town stores would only be given when suitable
town centre or edge-of-town sites were not available.
Subsequently, the Department has issued clarification
in respect of extensions (they should be subject to the sequential
test) and need.
8. The evidence we received indicated very widespread
support for the PPG 6. We took oral evidence from CB Hillier
Parker, which is part of CB Richard Ellis, "the largest global
real estate adviser in the world".
The firm has advised most of the major food retailers on a range
of property and planning matters and regularly acts for a number
of retail developers across the UK. It has also acted for more
than 250 planning authorities and advised on the effects of more
than 50 new stores or store extensions in recent years.
" we consider that PPG6 and subsequent Ministerial
clarifications provide a coherent and relevant policy basis for
considering proposals for development of new food supermarkets
The written evidence of other witnesses, including
the Royal Town Planning Institute and the Local Government Association,
supported these conclusions.
9. With the exception of Safeways, the major supermarket
chains also accepted the planning guidance. They have started
to build "smaller local convenience food stores" in
urban centres and in the suburbs in response to PPG6. These stores,
such as Sainsbury's Central and Local and Tesco Metro and Express,
tend to serve "more discrete localised catchment areas which
places less dependence on access by car". Supermarket chains
which had made this investment now wanted a period of certainty
in the planning laws. We were informed:
"having now adapted our store development activities
to meet the aims of PPG 6 and related policy statements, Sainsbury
has been concerned by recent speculation about possible changes
to these policies. The company welcomed the statement made by
the Minister in June confirming the Government's commitment to
10. Existing planning policy guidance on Town
Centres and Retail Developments is widely supported. The evidence
is clear: leading experts on planning and retailing, planning
associations, local authorities and almost all the supermarkets
themselves, support the central thrust of policy laid down in
PPG6. We have rarely seen so much support for a Government policy.
WHAT MODIFICATIONS ARE REQUIRED TO EXISTING GOVERNMENT
Modifications to Planning Policy
11. As a result of the planning guidance there has
been a reduction in the number of new out-of-town stores. Nevertheless,
they have continued to be built. This is partly because of old
planning permissions given before 1996, but it is also because
supermarkets are still seeking to build or extend large superstores
within the terms of the planning guidance. Asda, for instance,
is proposing major extensions to three stores. In view of the
continued pressure to create larger stores and to give better
protection to town centres, some modifications were proposed to
the interpretation of PPG 6, largely to ensure a more consistent
interpretation of the guidance.
12. Paragraph 1.10 of PPG6 lays out the determinants
of where supermarkets should be built. It states
"in drawing up their development plans, Local
Planning Authorities should, after considering the need
for new development, adopt a sequential approach to selecting
sites for new retail development. Both Local Planning Authorities
and developers selecting sites for development should be able
to demonstrate that all potential town centre options have been
thoroughly assessed before less central sites are considered for
development for key town centre uses. If, however, there is no
need or capacity for further developments, there will be no need
to identify additional sites in the town."
It adds that where out of town centre developments
are proposed, a number of factors should be taken into account,
including "the likely impact of the development on
the vitality and viability of existing town centres, including
the evening economy, and on the rural economy."
In addition, planning authorities should take note of their accessibility
by choice of means of transport and their effect on travel patterns
and car use.
13. The application of the sequential approach caused
most concern. A key issue is the availability of appropriate town
centre sites for new stores. Paragraph 1.12 of PPG 6 states:
"Local planning authorities should be sensitive
to the needs of retailers and other town centre businesses and
identify, in consultation with the private sector, sites that
are suitable, viable for the proposed use and likely
to become available within a reasonable period of time."
14. In its Report in 1997 the Environment Committee
considered that the interpretation of the sequential approach
may require attention. It recommended that
"the Department of the Environment keep under
review the clarification of Planning Policy Guidance Note 6, with
particular reference to the interpretations of the terms "suitable"
and "available" as they are applied to town centre sites.
The Department should act swiftly in the event that Ministers
are persuaded of the need to issue such clarification."
Several witnesses believed that the time had come
for such clarification. There is a concern that inappropriate
planning permissions are still being granted for out of town centres.
15. Witnesses from CB Hillier Parker told us that
the definition of suitability was contentious. They said that
suitability "is normally taken by the supermarket operators
and developers to mean suitable for the size of store which they
wish to develop", ie. the size of unit required to meet the
retailers own commercial and operational needs and aspirations.
In contrast, "local planning authorities generally favour
the range of goods interpretation of suitability, which considers
the extent to which the proposed developments can be broken down
into its constituent parts, eg food sales, clothing sales, etc.."
We were also told "our concern is that this
interpretation will only encourage retailers to develop larger,
less flexible store formats in order to justify out-of-centre
sites. It must, therefore, be questionable as to whether this
would be consistent with Government policy to put town centres
16. Availability was the second concern of witnesses.
Some developers have suggested that where there is a need for
a new supermarket, out-of-town locations should be approved unless
alternative sites are available immediately. This proposal was
rejected by a number of witnesses, but, on the other hand, it
was not considered appropriate to oppose new developments on the
basis of an alternative, more central, location, unless there
were a realistic prospect of that site coming forward within a
reasonable period of time. It was suggested that what constitutes
a reasonable period of time depended on the urgency of the need.
As a minimum the authority should "be able to demonstrate
its, in principle, support for development on the site in question.
It should also be able to indicate what support it is prepared
to offer in the land assembly process, using its CPO powers if
17. The Environment Committee in 1997 recommended
that top priority be given to research on the cumulative impact
of retail developments.
It also called on the Government to insist that full impact studies
should accompany all applications for significant retail development,
in or around small or market towns.
CB Hillier Parker told us that, following their major research
project to quantify the effects of development on the vitality
and viability of nearby town centres, there was a need to improve
further the consistency and objectivity of retail impact assessments,
for example, by the more extensive use of up-to-date survey material.
Compulsory post-opening surveys should be introduced to measure
objectively the impact of new stores. Such a measure would make
it possible to identify the likely consequences when planning
18. We recommend that the Government clarify what
is meant by the statement in PPG 6: 'sites in town centres which
are suitable, viable and available within a reasonable time period'.
We consider unacceptable an interpretation which defines 'suitable'
as meaning suitable for the size of store and format which retailers
wish to develop and which could mean that they would seek to develop
sizes and forms of store which could only be met out-of-town.
Compulsory post-opening surveys should be introduced.
19. Although the larger supermarket chains have begun
to build smaller stores, companies such as Aldi and Lidl, which
specialise in small supermarkets, told us that they found it difficult
to get planning permission for their developments because "concentration
on curbing large scale out- of-town superstore development has
led to the adoption of a somewhat dogmatic approach by local authorities
in the assessment of all supermarkets".
They argued that there was a lack of recognition that their type
of store could help maintain the vitality of town centres and
While supporting the principal thrust of restricting out-of-town
development, they sought slight modifications of policy. In particular,
local authorities should ensure that they
identified sites for stores in urban areas in local
plans. If they did this and assessed sites for their position
in the retail hierarchy within the overall environmental objectives
of development plans, there was a greater likelihood that "sustainable
land use and transport objectives would be met".
Measures to Improve City and Town Centres
20. If town and city centres are to be vital and
viable, steps must be taken to make shopping in them more attractive.
Moreover, if more out of town sites are to be avoided, local authorities
must ensure that appropriate town centre sites are made available.
Planning Policy Guidance Note 6 gives a long list of measures
which should be taken to encourage appropriate investment in town
The Environment Committee also made a number of recommendations
about this subject. In both of its Reports it called for tax relief
to be given on private contributions for town centre improvement
Witnesses made similar recommendations: councils, "especially
in identified urban priority areas, should be helped by way of
additional funding support, perhaps via an appropriate regeneration
bank, to expedite land assembly and the urban regeneration process".
The use of Compulsory Purchase Order (CPO) powers was of particular
importance: "local authorities should be positively encouraged
to use CPO powers so as to regenerate declining centres and to
plan positively for new retail provision".
21. Supermarkets can play an important role "as
an anchor" in town centres.
They attract shoppers who will also use other shops in the centre.
Local plans must make adequate provision for supermarket sites
in town centres if stores are not to be built out-of-town. Local
authorities must use CPO powers to assemble suitable sites. The
Government should publish its CPO review as a matter of urgency.
22. In future, we expect that, in all but exceptional
circumstances, new supermarkets will be in urban centres or on
edge-of-town sites, which can be the best site in some historic
towns, where a supermarket in the town centre could be very damaging.
23. However, if we are to have more supermarkets
in town centres, they must be built to a much better design than
most existing stores. PPG6 includes a section on design.
It states that
"the design of proposals for retail development
should have proper regard to their relationship with their surroundings
and should, where appropriate, develop and enhance local character.
Design should avoid presenting blank frontages to town centres
or being inward looking. Designs which add interest and variety,
and which reflect local context, should be encouraged".
This advice is important and timely. We are pleased
that some supermarkets are placing more emphasis on design: Tesco
stressed its importance in its evidence.
Nevertheless, the Urban Task Force, headed by Lord Rogers, considered
that some developers had still been reluctant "to tailor
their proposals to fit the grain of existing buildings and available
sites in town centres" Moreover, "we have also suffered
from monotony of design that has much to do with corporate branding
and little to do with respect for local urban form". The
Task Force urged the Government to address this problem, "partly
through a revision of PPG6."
24. The Government and local authorities must take
steps to ensure that the supermarket chains improve the design
of town centre supermarkets. As the Urban Task Force proposed,
town centre supermarkets must be built to a better design which
is appropriate to the surrounding buildings and not to a standard
format which is much the same in each town. We note that PPG6
mentions the need for good design, but we are concerned that it
has not been sufficiently effective. We recommend that stronger
supplementary guidance to PPG6 be issued to make very clear to
local planning authorities and to developers the need for better
design for supermarkets which is appropriate to the surrounding
buildings. Similar advice must be contained in the long awaited
publication on Design in the Planning System.
Car Parking and Traffic Generation
25. PPG 6 acknowledges that out-of-town supermarkets
generate additional traffic growth. It also recognises that since
such stores offer very generous amounts of free car parking to
their customers they can have an unfair competitive advantage
over the town centre retailers.
This analysis of traffic generation, which was made by the last
Government and is accepted by this Government, was supported by
almost all witnesses, with the exception of Safeway. This company
"Fact: shopping as a category only represents
11% of average car mileage and food shopping is only a proportion
Fact: average family shop weighs around 80 pounds.
Public transport is not, and never will be, a viable option for
this type of shop, given that more than 70% of the population
own cars and most of those without one want one, car manufacture
and car ownership is an important part of the UK economy. It would
be unreasonable not to expect those that do own cars to use them
for food shopping.
Fact: town centre and out of centre location does
not appear to have a major influence in modal choice for shopping
travel. A study conducted in 1994 by JMP Consultants for a consortium
of highway authorities, showed the modal choice was car, 87% in
town centres and 93% in out-of-town centres".
26. DTI officials offered some support for Safeways.
Mr Hopson of the DTI referred to an article in Retail Week
by Vivian Nathan, which suggested that "the changes in car
parking arrangements and charges and all those kind of things
would not actually make very much difference at all to people's
shopping habits"; over 70% of people who had responded to
a survey in Retail Week, recently had said that they would
not change their shopping habits irrespective of car parking arrangements.
27. Most other witnesses, however, had different
views. The Countryside Agency told us that directing new supermarket
development to town centre sites made it possible to contain or
reduce car dependence. Mr Goddard of CB Hillier Parker explained
to us how the Safeway statistics could be accurate, yet perfectly
consistent with the accepted view of Government and other witnesses.
"the research clearly and consistently shows
that town centre and, to some extent, edge-of- centre stores achieve
a higher degree of linked trips, in other words people do more
than one thing at the same time and also a higher modal split
in favour of walking and public transport. I think the Safeway
research demonstrates another important point to bear in mind
which is that most people who have access to a car will use it
when doing their main food shopping. The two statements are not
28. Whilst we were undertaking our inquiry, the Government
issued a draft policy planning guidance note on transport and
planning, PPG13. The key feature of this note is that it introduces
minimum instead of maximum parking standards for new developments.
We questioned the Minister about concerns that the maximum standards
for out-of-town parking proposed of one space per 18 to 20 square
metres gross floor space appeared too generous. He did not give
us a direct answer to our questions on this subject, but replied
that in addition to the introduction of maximum limits, much more
emphasis was to be placed on access through all transport modes
to out-of-town developments. Furthermore individual local authorities
would have to adopt similar and more consistent policies "because
there has been very substantial inconsistency between individual
local authorities in their decisions".
However, he agreed that out-of-town stores would retain an advantage.
Nevertheless, "we can achieve a more level playing field
than we are seeing at the moment", he told us.
He added that there might be individual circumstances where local
authorities would seek to impose a charge on supermarket car parking
under a section 106 agreement relating to planning applications,
but that was "a matter for the local authority".
We welcome the proposal in the new PPG13 that there should
be maximum, rather than minimum parking standards. However, we
are very concerned that they will be too lax.
29. As the Minister pointed out, the new PPG13 will
apply to new applications (including those for remodelling or
redeveloping existing centres) but "they will not apply retrospectively
to existing centres that have been developed prior to PPG13 in
its revised form coming into application".
Our predecessor Committee was also concerned about this situation.
It noted that a "levy on out-of-town car parking might be
a straightforward way of levelling the playing field". It
also expressed concern about the application of the business rate
on car parks at out-of-town developments.
The large amounts of free car parking offered by existing out-of-town
supermarkets gives them an enormous competitive advantage over
city centre stores. In addition supermarkets at these sites generate
more car use, making the situation on already congested roads
worse. The situation needs to be addressed urgently. We
recommend that the Government outline, as a matter of urgency,
the measures it proposes to address this situation. One matter
it should consider was raised by our predecessor Committee: the
level of business rates at out-of-town and city centre stores.
The Wal-Mart take-over of Asda
30. Earlier this year the US retailer Wal-Mart bought
Asda. This has led to press reports speculating about its consequences,
in particular whether it would lead to a relaxation of planning
controls. The Minister for Planning assured the Committee that
the Prime Minister's conversations with Wal-Mart had not included
a discussion of this issue.
Asda also denied press reports both that it was intending to seek
a relaxation of planning controls or that it was seeking to buy
up and redevelop existing shopping centres. Its aim was to compete
on price. We were told "in essence, we still firmly believe
we want to operate within the PPG6 guidelines. We understand the
need for them and we want to operate within them."
31. Asda told us that it had plans to develop 13
stores. Only three of these it describes as being not in one of
the locations preferred by PPG6. Three are in inner city areas.
The 13 new stores would represent a 5% increase in selling space.
The proposals include three superstores which would be about 95,000
square feet. These would be extensions of three existing stores
which are currently around 75,000 square feet.
Subsequently, Asda announced plans to open up to 50 Asda 'Fresh'
small stores in the next five years, averaging 25,000 sq. ft.
The first opened in Tilehurst, Berkshire, with a second store
planned for Kingshill, Kent.
32. The Asda chain of supermarkets in the UK is very
different from those run by Wal-Mart in the USA. The average size
of the Asda store is 42,000 square feet, whereas the smallest
Wal-Mart store is 100,000 square feet, the biggest 200,000 square
feet and the average circa 140,000.
Wal-Mart have about 80% non-food and 20% food retailing; in Asda
stores the situation is the reverse.
We were assured that Asda had no intention of radically changing
the present balance: essentially in the last five years a mix
of square footage in the formats and ranges were "pretty
much the same apart from two or three key areas where George clothing
has expanded and probably health and beauty to a degree".
33. However, while the Asda witnesses refuted press
reportsthat they were seeking changes to planning regulations,
they did indicate that they were not speaking for Wal-mart. Moreover,
when asked whether the company would move to a different product
mix and a different development mix, we were told "Wal-Mart
are clear that they want us to experiment".
We also note that, although the witnesses from Asda refuted press
reports that the company would seek to relax planning controls
or buy up and redevelop existing sites, they could only guarantee
that the company's present policies would apply for the next 12
to 18 months.
The Competition Authorities
34. The revised planning guidance has only been in
existence since 1996, but the evidence is that it is working effectively
and it is widely accepted by those with any expertise in planning.
Nevertheless, there has been a strand of thinking which has been
critical of planning policy. It has been characteristic of those
who have emphasised the need for competition, while paying little
attention to the wider consequences of the growth in out-of-town
supermarkets. In 1998, the McKinsey Report, Driving Productivity
and Growth in the UK Economy, argued that planning controls
would increase productivity in the retail sector. It stated:
"If PPG6 were removed, UK food retailing would
be able to continue its evolutionary process. This would entail
further expansion of the modern format, especially large format
retailers - and further contraction of the traditional sector.
There are social arguments about displacing traditional high street
retailers. From a purely economic perspective, however, the benefit
would be a modest productivity boost and hence lower prices."
"In effect, PPG6 may be creating barriers to
the entry / expansion of the future's most productive retailers."
"Allowing food retailers to expand their store
size significantly would allow UK food retailers to expand their
non-food offer. While this may increase the productivity of the
food retail industry only marginally, it would allow food
retailers to challenge more aggressively general merchandise retailers,
and, perhaps, improve the performance of the broader retail
35. This analysis has been widely criticised by experts
on retailing and planning issues. Mr Goddard of CB Hillier Parker
"I think that some of the conclusions of that
Report are a little inconsistent. My reading of the Report is
that it highlights the food retailing sector in the UK as benchmarking
globally. In effect, in this country, we set the standards by
which retailing, both in the USA and the rest of Europe are judged,
and yet, there is the suggestion that the UK retail sector could
be more productive if planning restrictions were lifted."
The Minister, Mr Raynsford, observed that the McKinsey
Report itself indicated that the biggest single factor in relation
to the competitiveness of retail stores was labour productivity.
Both Mr Goddard and Mr Raynsford argued that planning restrictions
in this country had not significantly affected the productivity
of the UK grocery sector. Indeed, Mr Goddard considered they had
"actually engendered a more efficient and innovative retail
sector in this country".
36. Despite such criticisms of the analysis in the
McKinsey Report, in April 1999, under powers available under Section
50 of the Fair Trading Act, Mr Bridgeman, the Director General
of Fair Trading referred the supply of groceries from supermarkets
to the Competition Commission. He stated in a letter of 24 March
"Land and related transactions increasingly
impact on the cost structure of competing firms. I am particularly
concerned about escalating land costs, planning delays and site
development costs and the extent to which they contribute to the
cost structure of firms. Overall, I believe that significant barriers
now exist, so the potential competition from new entrants may
not be an effective constraint on the pricing behaviour and other
strategies adopted by the major grocery retailers".
We asked Mr Bridgeman what contact he had had with
officials of the Department of the Environment. He told us that
there had been discussions in the early part of 1999 which arose
from misleading press commentary to the effect that the OFT wanted
to vary DETR planning policy, as it was perceived to be a barrier
to market entry. He informed us in June:
"my officials advised the DETR that while the
existence of planning constraints were indeed relevant to our
consideration of barriers to entry, we did not intend to express
a view on the Government policy on the provision of out of town
supermarkets. We can, however, assess its effect on the process
What surprised us is that the OFT had made no contact
with the DETR until after the Director General had issued the
letter stating that he was minded to refer the supermarkets to
the Competition Commission. We subsequently (in November) asked
whether his officials had had contact with other planning experts.
We were told that the OFT had not consulted any planning specialists
or consultants, but had retained the services of King Sturge in
the capacity of property consultants. The Director General had
met chief executives of the major supermarkets who had made him
aware of "their view of the increasing importance of planning
when considering further developments".
37. The Minister of Planning expressed himself trenchantly
on the Office of Fair Trading's manner of proceeding. He said:
"we regret that the Office of Fair Trading did
not approach this Department before they made their comments,
but we have given our evidence to the Competition Commission and
that has set out the view that we have that planning is essential
for the preservation of our town centres and a proper framework
for retail in the future and that competition does exist and can
continue to exist within that framework".
38. The Competition Commission's investigation includes
an examination of land and planning issues. It has sent separate
questionnaires on these and related matters, first, to all the
multiple stores that are within its terms of reference and, second,
to around 80 local authorities with planning responsibilities,
seeking factual information and views on the operation and land
use planning system. The supermarkets are expected to reply by
mid-December and the local authorities by mid-January.
The Competition Commission is to report by April 2000, but may
well seek an extension.
39. Patricia Hewitt, the DTI Minister told us that
once the Secretary of State for Trade and Industry (Stephen Byers
MP) had received the Report, it would be for him to consider what
action to take.
Mr Raynsford told us:
"the Commission's findings will obviously be
presented to Stephen Byers, my colleague in DTI, and it will be
for him to decide on reaction to them. As far as planning policy
is concerned, I think I made it very clear that we would believe
the existing framework set out in PPG6, with the clarifications
that we have added in the course of the last two years, does provide
the right framework for the future, and that a relaxation of that
would be highly dangerous to the overarching policy of supporting
town centres and ensuring that we do achieve the urban renaissance
that this Department is working towards."
He added "I have made it quite clear that our
overarching policy has to be support and encouragement for existing
town centres. That remains a clear commitment."
40. We are uncertain what is to be gained from
the OFT's referral or the Competition Commission's investigation
in so far as they apply to the planning regime for the following
reasons. First, while it is well known that planning policy is
designed to restrict land use, and that, as a result, land prices
are higher than they would otherwise be if there were no restrictions
on their use,
the evidence is that the planning regime is not a significant
barrier to entry. Witnesses from CB Hillier Parker stated "planning
controls would be only one of a number of significant impediments
to new entrants coming in, in order to set up a new branch network,
but obviously the planning process has not been an impediment
to Wal-Mart entering the market".
These consultants observed that relaxing planning controls would
not generate a significant price reduction or bring about greater
price competition. There is already intense competition between
retailers on a national scale. We were told: "at present,
we have certainly the tightest planning regulations governing
new food store development and expansion of stores there have
ever been, and yet we are in the process of probably what is one
of the most competitive price wars in the grocery sector that
certainly I have ever experienced".
Mr Goddard added that the food retail market in the UK is now
a very well developed market. He believed that in practical terms,
new entrants into the UK market would now come through mergers
and acquisitions rather than through a retailer trying to set
up from scratch.
41. Secondly, we consider it likely that the main
beneficiaries of any weakening of planning control over grocery
stores would be the existing major supermarket operators. They
are well-positioned to take advantage of opportunities to develop
out-of-town sites which might be made available. This could be
expected to increase the share of the grocery market which they
hold, further driving out competition from smaller stores (which
are located in existing towns and villages). Furthermore, if substantial
numbers of additional new stores were allowed, this would enable
large supermarket chains to use space at some existing out-of-town
stores for non-food retailing, by taking advantage of permissions
some years ago without conditions to restrict sales to food items.
This could have very damaging consequences for town centres.
42. As PPG6 makes clear, policy is not intended to
restrict competition, but to ensure new sites are located in appropriate
locations, usually in town centres where they will promote the
vitality and viability of those town centres. The Minister's clarification
of PPG6 made clear that there was no need to show that there was
need for new retail development in a town centre. In a Parliamentary
Answer on 11 February 1999, Mr Caborn, the then Minister of Planning,
stated that "proposals for new retail or leisure development,
which accord with an up-to-date plan strategy or are proposed
on sites within an existing centre, should not be required
to demonstrate that they satisfy the test of need because this
should have been taken into account in the development plan".
43. Mr Raynsford told us that "The planning
system allows open competition between different retailers. It
does not distinguish between different retailers and it would
be improper for it to do so. It does seek to ensure that there
are lively town centres where competition can apply, where there
is a choice of different retail outlets".
He went on to say "Planning policies must have some impact,
but provided they are applied fairly that impact is shared equally
by every retail business, there is no partiality shown towards
one type of business or another, and it would be wrong for the
planning system to move in that direction".
DTI Ministers agree with this view.
We support the Minister for Planning's statement on competition.
It is a well-established principle of planning control that planning
decisions should not favour one company against another but should
be even-handed between firms. The task of planning is to regulate
the uses to which land may be put, not which firms should take
up the opportunities on offer.
44. Finally, even if planning restrictions were
a greater barrier to entry than the evidence indicates they are,
the relaxation would not be justified because the effect on town
centres and village shops would be far too damaging.
The Pre-Budget Report
45. Further uncertainty was created when the Chancellor's
Pre-Budget Report announced that the planning system was to be
modernised so that it supports competition and innovation (and)
does not provide a barrier to the growth of either new or existing
companies. It was unclear what this meant and the Committee sought
clarification from the DETR. The Department assured the Committee
that the references to planning and competition (referred to in
paras 3.57 and 3.58) in the Pre-Budget Report referred not to
PPG 6 or to retail policy, but to PPG 11 on Regional Planning,
and, in particular, to the Sustainability Appraisals of regional
plans, which will assess how plans are promoting economic as well
as social and environmental objectives.
CONCLUSIONS AND RECOMMENDATIONS
46. Out of town supermarkets have had serious and
undesirable effects on town centres and village shops. The
evidence overwhelmingly supports the existing planning regime.
It requires a little modification to ensure that it works more
effectively and gives town centres more protection. However, although
the new policy has only been in operation since 1996, the OFT
has created doubt and uncertainty by referring planning matters
to the Competition Commission. We are appalled that before referring
planning matters to the Competition Commission, the OFT took no
evidence from planning experts and did not consult the DETR. In
failing to take into account such expert evidence, it has behaved
irresponsibly. The Commission is to report in April 2000, but
may well ask for an extension. Its report will then be considered
by the Secretary of State of Trade and Industry. There is likely
to be uncertainty about planning policy until after the next election.
47. We commend Nick Raynsford MP, the Minister
for Planning, for his robust defence of Government policy. He
made clear that the DETR will not change its policy, whatever
the findings of the Competition Commission in respect of planning.
We must conclude that the Competition Commission's continued consideration
of planning policy is a waste of time.
48. We note that Mr Raynsford was supported by Patricia
Hewitt, the DTI Minister, who wanted to see vibrant town centres
and did not want to go back to the situation where they were threatened
by an ever increasing number of out of town sites. On the other
hand, she told us that if the Competition Commission were to make
recommendations or adverse findings in respect of planning issues,
that the Secretary of State for Trade and Industry would have
to discuss them with the Secretary of State for the Environment,
because the policy decisions would fall to that Secretary of State.
She added "the Director General of Fair Trading has raised
the planning question. It clearly falls within the terms of reference
of the Competition Commission and the progress report that was
published on Monday by the Commission indicates their awareness
of the need to complete the inquiry as quickly as they can".
49. Despite the DTI Minister's support for vibrant
town centres, we are concerned that the competition authorities
and some Treasury and DTI officials, who do not understand the
planning system, may now be seeking relaxations in it and may
hope that such a policy can be introduced after the report of
the Competition Commission. This would be disastrous. A relaxation
of the planning regime in respect of out-of-town sites would do
little to encourage new entrants. It would run the risk of returning
to the laissez-faire policies of before 1993, which did so much
50. We are also concerned about the Pre-Budget
Report's references to planning and competition. We are pleased
by the clarification provided to us by the DETR which indicates
that the references in that Report do not apply to the retail
sector and are not meant to change the existing situation whereby
the planning system allows open competition between different
retailers. However, if it is intended to encourage companies to
set up on out-of-town, greenfield, sites, the effects on urban
regeneration must be carefully assessed. This is a matter we intend
to consider in detail in our next inquiry into the proposed Urban
Our principal conclusions and recommendations are:
(a) Existing planning
policy guidance on Town Centres and Retail Developments is
widely supported. The evidence is clear: leading experts on planning
and retailing, planning associations, local authorities and almost
all the supermarkets themselves, support the central thrust of
policy laid down in PPG6. We have rarely seen so much support
for a Government policy. (Paragraph 10).
(b) We recommend that
the Government clarify what is meant by the statement in PPG 6:
'sites in town centres which are suitable, viable and available
within a reasonable time period'. We consider unacceptable an
interpretation which defines 'suitable' as meaning suitable for
the size of store and format which retailers wish to develop and
which could mean that they would seek to develop sizes and forms
of store which could only be met out-of-town. Compulsory post
opening surveys should be introduced. (Paragraph 18).
(c) Local plans must
make adequate provision for supermarket sites in town centres
if stores are not to be built out-of-town. Local authorities must
use CPO powers to assemble suitable sites. The Government should
publish its CPO review as a matter of urgency. (Paragraph 21).
(d) In future, we
expect that, in all but exceptional circumstances, new supermarkets
will be in urban centres or on edge-of-town sites, which can be
the best site in some historic towns, where a supermarket in the
town centre could be very damaging. (Paragraph 22).
(e) However, if we
are to have more supermarkets in town centres, they must be built
to a much better design than most existing stores. (Paragraph
(f) We note that PPG6
mentions the need for good design, but we are concerned that it
has not been sufficiently effective. We recommend that
stronger supplementary guidance to PPG6 be issued to make very
clear to local planning authorities and to developers the need
for better design for supermarkets which is appropriate to the
surrounding buildings. Similar advice must be contained in the
long awaited publication on Design in the Planning System.
(g) We welcome the
proposal in the new PPG13 that there should be maximum, rather
than minimum, parking standards. However, we are very concerned
that they will be too lax. (Paragraph 28).
(h) The large amounts
of free car parking offered by existing out-of-town supermarkets
gives them an enormous competitive advantage over city centre
stores. In addition supermarkets at these sites generate more
car use, making the situation on already congested roads worse.
The situation needs to be addressed urgently. We recommend
that the Government outline, as a matter of urgency, the measures
it proposes to address this situation. One matter it should consider
was raised by our predecessor Committee: the level of business
rates at out-of-town and city centre stores. (Paragraph 29).
(i) We are uncertain
what is to be gained from the OFT's referral or the Competition
Commission's investigation in so far as they apply to the planning
regime. (Paragraph 40).
(j) We support the
Minister for Planning's statement on competition. It is a well-established
principle of planning control that planning decisions should not
favour one company against another but should be even-handed between
firms. The task of planning is to regulate the uses to which land
may be put, not which firms should take up the opportunities on
offer. (Paragraph 43).
(k) Even if planning
restrictions were a greater barrier to entry than the evidence
indicates they are, the relaxation would not be justified because
the effect on town centres and village shops would be far too
damaging. (Paragraph 44).
(l) The evidence overwhelmingly
supports the existing planning regime. It requires a little modification
to ensure that it works more effectively and gives town centres
more protection. However, although the new policy has only been
in operation since 1996, the OFT has created doubt and uncertainty
by referring planning matters to the Competition Commission. We
are appalled that before referring planning matters to the Competition
Commission, the OFT took no evidence from planning experts and
did not consult the DETR. In failing to take into account such
expert evidence, it has behaved irresponsibly. The Commission
is to report in April 2000, but may well ask for an extension.
It will then be considered by the Secretary of State of Trade
and Industry. There is likely to be uncertainty about planning
policy until after the next election. (Paragraph 46).
(m) We commend Nick
Raynsford MP, the Minister for Planning for his robust defence
of Government policy. He made clear that the DETR will not change
its policy, whatever the findings of the Competition Commission
in respect of planning. We must conclude that the Competition
Commission's continued consideration of planning policy is a waste
of time. (Paragraph 47).
(n) we are concerned
that the competition authorities and some Treasury and DTI officials,
who do not understand the planning system, may now be seeking
relaxations in it and may hope that such a policy can be introduced
after the report of the Competition Commission. This would be
disastrous. A relaxation of the planning regime in respect of
out-of-town sites would do little to encourage new entrants. It
would run the risk of returning to the laissez-faire policies
of before 1993, which did so much damage. (Paragraph 49).
(o) We are also concerned
about the Pre-Budget Report's references to planning and competition.
We are pleased by the clarification provided to us by the DETR
which indicates that the references in that Report do not apply
to the retail sector and are not meant to change the existing
situation whereby the planning system allows open competition
between different retailers. However, if it is intended to encourage
companies to set up on out-of-town, greenfield, sites, the effects
on urban regeneration must be carefully assessed. This is a matter
we intend to consider in detail in our next inquiry into the proposed
Urban White Paper. (Paragraph 50).
5 Under the sequential test the first choice for new
developments should be town centre sites, followed by edge-of-town
sites and last of all out-of-town sites. Permissions for out-of-town
stores are only given when suitable town centre or edge-of-town
sites are not available. See below paragraphs 12 to 13. Back
Cm4479, page 41 Back
See letter from Mr Raynsford (SC 18A). He quotes the figures
from Verdict Research Limited who use a threshold of 25,000 sq
feet trading (ie net) floor space. Back
SC 19. Back
SC 16. Back
SC 19. Back
SC 01. Back
SC 02. Back
SC 08. Back
SC 19. Back
In producing their policy, this Government and the last accepted
many of the recommendations of the Environment Committee. These
were, in 1994, Shopping Centres and their Futures (HC 359,
1993-4), which concluded that the then Government Planning Guidance
Note 6 (PPG 6) should be revised and that the planning guidance
on transport (which had been published in PPG 13 in 1994) should
be clarified. The most significant proposal of the Committee
was the introduction of the sequential test for considering the
applications of new developments. These proposals were accepted
by the Government Response (Cm 2767, February 1995) and
a revised PPG 6 was published in June 1996 (Town Centres and
Retail Developments). In its next report in 1996-7 (Shopping
Centres, HC 210) the Environment Committee called for clarification
of the guidance because PPG 6 was failing to give town centres
the protection they needed. Back
HC Deb, 5 December 1997, cc. 401-2. Back
HC Deb, 11 February 1999, cc. 309-10. Back
SC 19. Back
SC 16 and SC 21. Back
SC 12. Back
PPG6, para 1.16. Back
HC 210 (1996-97), para 10. Back
SC 19 The witnesses added "the built-form approach enables
retailers to set their requirements as the basis for the sequential
approach. Given the dominant position of the major superstore
operators, and their continuing strategy to extend their offer
well beyond their traditional convenient goods function, if the
built-form interpretation of the sequential approach is accepted,
it will be seen as offering superstore operators a significant
competitive advantage". Back
SC 19. Back
HC 210 (1996-97), para. 46. Back
Idem, para. 20. Back
SC 06. Back
SC 06; we were told: "All too often, all forms of supermarket
development are viewed as inherently detrimental to high street
SC 09. Back
PPG6, paras. 2.1-2.6. Back
HC 210 (1996-7), para. 43. Back
SC 19. Back
Paras. 2.33-2.40. Back
SC 24. Back
Towards an Urban Renaissance, page 217. Back
Paras 2.30 to 2.32; see also Q 120. Back
SC 22. Back
Q 214. Back
Q 123. Back
Q 179. Back
Q 138. Back
Q 140. Back
HC 210 (1996-7), para 43. Back
Q 165.We also questioned witnesses from Asda about reports that
Wal-Mart had bought products from suppliers in South America who
were accused of the unethical treatment of their workforce. We
were told "I am aware of the detail in as much as those allegations
have been made, and I am also aware of the detail that Wal-Mart
have responded with in terms of the kind of inspections that are
carrying out and the very clear policy that if they find any suppliers
carrying out those kinds of actions, then they will be blacklisted
and will not supply products" (Q 91). Back
Q 2. Back
Q 11. Back
Q 88. Back
Asda Press Release, 15 November 1999. Back
QQ 17-18. Back
Q 8. Back
Q 86. Back
Q 96. Back
Q 126. Back
QQ151-2; 126. Back
SC 26. Back
Q 155. Back
SC 27. Back
QQ 226-7. Back
Q 162. Back
Q 163. Back
QQ 302, 305-6, 307-9. Back
Q 109. Back
Q 110. Back
Q 109. Back
HC Deb, 11 February 1999, cc309-310. Back
Q 146. Back
Q 153. Back
Mr Kim Howells MP, the Minister for Competition and Consumer Affairs
stated in a letter: "This Government believes in encouraging
the use of new investment to regenerate existing town centres
for economic, social and environmental reasons. Our policy is
set out in Planning Policy Guidance Number Six: on Town Centre
and Retail Development which is available from the Stationery
Office ISBN 0-11-753294-0 - tel 0870 6005522. The rules contained
in the Guidance are applied firmly, consistently and without favour
to particular investors." (SC25A) Back
The Minister for Small Business and E-Commerce recognised that
this might be the case (Q220). Back
Q 316. Back