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David Taylor : My hon. Friend rightly pays tribute to the quality, range and price successes that Tesco has enjoyed. He noted that Tesco is the third largest retailer in the world, but does any other retailer in that top 10 have such a dominant position in its home market?
Keith Vaz: That is an easy question: the answer is no, not as far as I am aware. It is a unique form of domination. As hon. Members have noted this evening, the relationship between the dominant supermarket, Tesco, and the suppliers is a source of concern. In today's Financial Times, it is reported that supermarkets rely on their suppliers for free finance to fuel their growth. An investigation into the accounts of supermarkets in today's paper shows that the amount owed to Tesco's creditors has risen by £2.2 billion in the past five years, compared with a £700 million increase in stocks, giving Tesco £1.15 billion to help to fund its business. There are no written contracts between supermarkets and suppliers, which means that supermarkets have the power to refuse stock at their convenience. Those in the bakery industry have suffered especially greatly.
Keith Vaz: The hon. Gentleman is absolutely right. Suppliers are terrified about making a complaint. Ministers say to me, "Where is the evidence? Bring it on." However, suppliers do not want to complain because if they do so, they will not be able to sell their goods in the shops, which will create problems for their businesses.
Mr. Hoyle: The dominance of supermarkets keeps the farming industry on edge all the time, so its survival is touch and go. It is the same story for the beef and dairy industries. They are teetering on the edge because they cannot get sustained long-term agreements.
My hon. Friend is absolutely right. This is not just a question of the nervousness of the industry and its inability to plan, because as suppliers try to meet
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the margins that Tesco and others demand of them, they will cut costs, pay lower wages and standards will decline, which is unacceptable.
Mr. Michael Foster: I am sure that the Minister fully appreciates that my hon. Friend is being generous with his time. Dairy farmers face a problem because as they try to compete and produce at a cost that is effective for them, the size of their herds is growing at a phenomenal rate. A former chairman of the National Farmers Union from my constituency tells me that a dairy herd of 1,000 cattle is not unheard of. A herd of such a size means that huge environmental problems must be dealt with, including just disposing of the huge quantity of manure that the cattle create.
Small shops are the very life blood of our community. They provide opportunities, jobs and vital services to local people. Small businesses are finding it difficult to compete on price to offer the variety of goods that citizens want. I quote Mrs. D. Raj, who owns a business in Rushey Mead in Leicester, which is in my constituency. She said:
Consumers are spending on average 25 per cent. more on identical goods in supermarkets than they would on the street market. The street market is a popular option among my constituents because they enjoy the personal service. The street market allows one to get to know people, enjoy that personal relationship and get to know the traders. One can also get products in the packaging and size that one wants, whereas everything in supermarkets is pre-packaged. Pre-packaging limits choice and is wasteful.
My hon. Friend the Member for North-West Leicestershire (David Taylor) raised the problem of out-of-town shopping centres. I shall cite one example tonight: Tesco and its development at the Hamilton district shopping centre in my constituency. My predecessor as Member of Parliament for Leicester, East, Mr. Peter Bruinvels, and I were united by our concern about the way in which the Hamilton estate was developing. Tesco wanted to build a superstore. As soon as it received planning permission, it dug in its heels and delayed other shops from being established. It wanted to dominate; it did not want a partnership. A review of the planning laws, which my hon. Friend the Member for Worcester (Mr. Foster) mentioned, would prevent people and businesses from operating in such a way and disrupting the process for others.
Until this evening, I thought that my hon. Friend had nothing in common with his predecessor. However, in relation to town-fringe stores, is not it the case, as my hon. Friend the Member for Worcester (Mr. Foster) said, that the picture painted in
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the planning applicationespecially in economic termsis often seriously adrift a year down the line? The jobs that the supermarket said it would create may well be in place, but jobs will be lost, not just in the small shops that might otherwise have sold the goods concerned, but in other shops in the town centre, because people are less likely to go there to buy their newspaper, have their shoes repaired and so on. Let us have a post-planning permission audit in economic terms as well.
What would the independent regulator do? He or she would be able to take independent confidential evidence, which Ministers cannot do because every day they have to deal with both sides of industry. It is important that we have a figure and a body that is seen to act with integrity when dealing with such situations. The supermarket regulator could consider loyalty payments, slotting fees, which are charged to buy shelf space, fees charged for artwork and the repackaging of products, and the way in which supermarkets like to manage the public statements of their suppliers.
A supermarket regulator could consider the concept of "reasonableness" in the contract terms that are agreedif any arebetween the suppliers and the supermarkets. The renegotiation of those contracts should be determined absolutely by price and quality of service. The president of the National Farmers Union Scotland, John Kinnaird, said:
"The public silence amongst supermarket's suppliers speaks volumes. It is of absolutely no surprise that the OFT has received virtually no evidence of breaches of the Supermarkets Code of Practice. Many of the companies that we contacted required repeated assurances from us that any comments they made would never be attributed to them. That kind of fear within the food supply chain is totally unacceptable. An independent regulator is required to police the trading environment. It needs power to act".
This morning I met the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Bradford, South (Mr. Sutcliffe), who is responsible for consumer affairs. He would have responded to the debate but, as the House knows, he is in Brussels because we hold the presidency of the EU and he has business there. My hon. Friend said to me on a personal basis, not a ministerial basis, that he supported establishing an independent regulator, but that it is not the Government's policy to do so. He also said that he saw what was happening from his experience in Bradford and that his Department had been dealing with the issue for 25 years. That honesty and openness is refreshing among Ministers. I believe that, after 25 years, it is time to act. I had a good meeting with my hon. Friend, and he was prepared to listen. That is half the battle.
With a turnover of £37 billion, Tesco ranks about 53rd in the World Bank's listing of 184 national economies, putting it ahead of Bolivia, Belarus and Bulgaria combined. In the very near future, we will discuss scrapping our Sunday trading laws, which Tesco and others already breach. When people go to the Tesco Express near me on a Sunday night, it is not just to buy petrol and to pick up a bag of sweets, as in the old days, but, in many cases, to do their weekly shopping because
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the main supermarkets closed at 5 o'clock. Opening hours become yet another obstacle for smaller independent retailers and another aspect of competition difficulty.
Having one or a few dominant players in a market goes against all theories of healthy competition and will, in the end, affect consumers and the supply of goods. I believe I speak on behalf of many when I argue that the British people want a diverse market, with a variety of choicesomething that will not happen if we only have one option, which is Tesco.
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