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13 May 2008 : Column 360WH—continued
10.10 am
Philip Davies (Shipley) (Con): Thank you, Mrs. Humble; I will certainly be brief. I congratulate my hon. Friend the Member for Cities of London and Westminster (Mr. Field) not only on securing the debate, which we all agree is on an important subject, but on presenting his case in a balanced and very sensible way. I spent the 12 years before I entered Parliament working for Asda, so I perhaps have a vested interest in defending the honour of supermarkets. In my time in Parliament, I have been appalled by how many hon. Members, despite the fact that many of them hold surgeries at their local supermarket and that many of their constituents are employed by and are customers of their local supermarkets, tend to take the option of sticking the boot into supermarkets, perhaps because they see them as an easy hit. They may think that they can court some easy popularity by sticking the boot into big business. The debate that we tend to have in Parliament about supermarkets is very one-sided. That is why I think that my hon. Friend did a great service by restoring some balance to the debate.
It is important to consider why supermarkets have been so successful over the past 30 years. Why they have done so well is no secret: they offer low prices and great convenience to their customers, and they are very good at looking after both their customers and their employees. I was proud when I was at Asda that, for virtually every year, it was rated one of the top 10 employers in the country. It offers some of the best terms and conditions with regard to flexible working and the employment of older people, giving them an opportunity in the workplace that many of them did not think that they would have. Some of the employment practices have led the way and set a shining example to many other people. As my hon. Friend also said, supermarkets offer many free car parking spaces.
We should reflect on what the upshot would be if some hon. Members had their way on, for example, regulating alcohol prices, which the hon. Member for Selby (Mr. Grogan) feels strongly about, and on the issue relating to suppliers. The upshot will be that customers pay more for their shopping. Customers will pay more to buy alcohol at the supermarket. I sometimes wish that hon. Members would be much more honest and open about the upshot of what they are asking for. They are asking for their constituents to go to the supermarket and pay more for their weekly shopping than they otherwise would. It is important to make it abundantly clear that that is what some people are trying to achieve.
If we want to help smaller shops and the high street, one of the best things that we can do is to ensure that there is free parking in town centres and not such restrictive parking, with people told that they can park for only 20 or 30 minutes at a time. How on earth is anyone expected to support local shops when parking restrictions are so tight? One of the best things that we could do is to ease the restrictions on car parking in town centres. That would, in one fell swoop, do more for local shops than anything else, yet many hon. Members who bemoan the death of the high street are those who, supposedly for environmental and climate change reasons, are the ones asking for the highest car park charges to deter people from driving into town centres. Some people should reflect on what their top priority is when
deciding these matters. It is no good shedding crocodile tears at the death of high street shops when some of the parking restrictions and car parking charges are putting them out of business.
It is important to make the point clearly that supermarkets do not put small shops out of business. There is only one group of people who put businesses out of business—customers. When a supermarket opens in a high street, an out-of-town area or, indeed, anywhere, it does not use lassoes to grab people round the neck and drag them kicking and squealing into the shop against their wishes. The supermarket simply opens its doors, offers the customers what it thinks they want and sees what happens. If customers wish to maintain their local butcher, baker and greengrocer on the high street, it is entirely within their hands to do so, because all they have to do is keep shopping at their local butcher, baker and greengrocer and those businesses will stay open and continue to thrive. It is always easy to blame someone else; we have a “blame someone else” culture in this country. It is easy to blame other people for the demise of small shops, but the demise of small shops takes place only when customers themselves stop shopping in them. It is important to make that clear.
When I worked for Asda and we proposed opening a store in a particular location, small businesses and small shopkeepers were sometimes the most vociferous supporters of Asda opening in their area. The reason for that was simple: they knew that the supermarket would drive footfall into that area and that they could benefit from that increased footfall. In my constituency, the most dominant part of Shipley town centre is without doubt Asda. I would say to anyone that, without Asda in the town centre as the biggest local retailer, the town centre in Shipley would probably be dead because no one would do their shopping in Shipley at all. Local shops in Shipley benefit from the footfall that Asda brings to their area. In Bingley, another part of my constituency, which we are regenerating, one of the most crucial aspects of that regeneration is getting a supermarket as part of the new shopping centre that will be developed there. Supermarkets can help to regenerate shopping areas; they are not the kiss of death, as many people would have us believe.
It is important to touch on some of the comments in the Competition Commission report, because these things seem never to be mentioned. The report stated:
“UK grocery retailers are, in many respects, delivering a good deal for consumers... In many important respects, consumers are receiving the benefits of competition, such as value, choice, innovation and convenience.”
The commission made it clear that food prices were lower as a result of supermarkets:
“This decline in real food prices is likely to have delivered significant benefits to consumers as shopping bills for the same basket of goods would now be lower in real terms than was the case seven years ago”.
“had competition in more local markets been more intense, the decline in UK grocery prices...may well have been greater.”
With regard to dealing with suppliers, the commission said that
“the exercise of buyer power by grocery retailers is likely to have positive implications for consumers.”
We should clarify some of the benefits that consumers have had from their dealings with supermarkets. Not
that long ago, there was something in place called the net book agreement whereby publishers could basically set the price that they wanted for a book—and they often set very high prices. Asda challenged the net book agreement in court, with the consequence that books are cheaper now than at any stage in our history. It has delivered those benefits to customers. People would be paying much more for items such as books without supermarkets.
I am mindful of the time and will draw my remarks to a conclusion. I hope that we will end the one-sided argument that we have had in the past about supermarkets and acknowledge the great benefits that they provide both to their employees and to their customers.
10.19 am
Andrew George (St. Ives) (LD): It is a pleasure, Mrs. Humble, to have the opportunity to take part in this debate. I congratulate the hon. Members for Cities of London and Westminster (Mr. Field), for Stroud (Mr. Drew) and for Shipley (Philip Davies) on their contributions.
The reason why I am involved in the debate is that, during the Competition Commission inquiry, I chaired a group of non-governmental organisations, lobby groups and others, including the British Brands Group, the National Farmers Union, the National Farmers Union Scotland, the Association of Convenience Stores, Friends of the Earth and ActionAid, which came together to discuss the extent of the inquiry. They wanted the commission to take account of the impact that supermarkets have on suppliers and primary producers in the grocery supply chain, which was not initially included.
The main issue that I wish to raise today is the outcome of the evidence session that I had with Peter Freeman, the chairman of the Competition Commission inquiry, and his team on 13 March, the transcript of which is on its website. In particular, we dealt with the treatment of suppliers—an issue that has been touched upon by all the hon. Members who have spoken this morning.
The hon. Member for Stroud described me as the witch hunter general on this issue. I am sure that he intended that kindly, but I assure him that I am not coming at it from the perspective of the politics of envy or resentment, as the hon. Members for Cities of London and Westminster and Shipley suggested. Like others, I congratulate those in business who are successful; provided that it is done with endeavour, skill, hard work and so on, I share in the applause.
I argue that the supermarkets’ success is not built on being morally bankrupt or ethically unsound. They are not the product of the loins of the devil, and I do not look at them from that perspective. Their approach is entirely rational. If I were a supermarket chief executive, I would behave in precisely the same way. I would squeeze my suppliers for as much as I could, and I would swallow up smaller competitors as far as possible. If I did not and my three fellow competitors did—those left standing after decades of competition—I would
clearly lose my market share, and my shareholders would be incredibly disappointed with me.
Mr. Mark Field: The hon. Gentleman parodies the way in which avaricious business might operate. Does he not realise that supermarkets do not behave in that way? I realise that, at the margins, they clearly have a duty to maximise shareholder value. However, given the way in which they try to operate and the amount of scrutiny pushed upon supermarkets both here and in the media, they behave very differently from that parody. As for suppliers, there is a recognition that they need to be looked after, not least because of the work that the hon. Gentleman does in Cornwall. This is about getting that balance right. The arguments about milk upset the supermarkets over the past five years, because they were doing their best to try to encourage suppliers.
Andrew George: That is a debating point, and we obviously do not have time to take it further today. I spoke in a straightforward manner to get the point across. I would not describe it as a parody. However, if we had the opportunity, I would be happy to debate the matter with the hon. Gentleman at greater length.
I agree with the hon. Gentleman on the theme that he was drawing out in his speech and on the conclusions that he reached. I agree that we should use regulation only as a last resort. We, as legislators, are conscious of the fact that we do not want to surround businesses with red tape and regulation to the point where they are held back. When considering all the issues, but particularly the relationship between very large supermarkets and their suppliers, many of which are large companies, we must realise that any form of regulation is a matter of last resort.
I had various roles with the Liberal Democrats before chairing the cross-cutting group that gave evidence to the Competition Commission. For instance, I was involved in setting up the party’s policy on establishing a food trade regulator with proactive powers within the Office of Fair Trading, although I have many misgivings about the way in which the OFT operates. None the less, I believe that proactive powers are important when considering future regulation. We need to ensure that regulation has as light a touch as possible.
In 2000, the Competition Commission identified 27 practices that could distort competition. It recommended the introduction of a supermarket code of practice, to which the supermarkets eventually agreed. In its latest inquiry, which was concluded only a few weeks ago, the commission identified a number of practices that continued and extended the total to 43. It found that some practices are more prevalent than before. Those are the kinds of practice that I mentioned in an intervention. They include payments for shelf space, over-riders and late payments, the retrospective invitation given at short notice that suppliers should pay for a promotional campaign such as two for the price of one. Such practices are clearly identified by the commission as being anti-competitive. Those practices need to be driven out, and it will be ultimately to the good of the supermarkets if they are.
I understand, Mrs. Humble, that my hon. Friend the Member for Brent, East (Sarah Teather) is prepared to give some time to my hon. Friend the Member for Southport (Dr. Pugh). I have a question. I have debated
the matter with the Competition Commission and raised the issue of how to introduce an ombudsman with proactive powers. Following the evidence session in March, I corresponded with Peter Freeman on the implementation of that policy. He wrote to me on 21 April, saying:
“We indicated during the evidence session that we intend to recommend to the Department for Business, Enterprise and Regulatory Reform (BERR) that, in the event that the Ombudsman cannot be implemented by means of undertakings from the relevant retailers, BERR should take appropriate action for the establishment of the Ombudsman. The fallback option, should this recommendation not be acted upon, would be for the Office of Fair Trading to monitor and enforce the Code, and for suppliers and retailers to have recourse to arbitration of disputes by an independent expert, such as the Centre for Excellence in Dispute Resolution.”
“In cases such as this, our general view is that the choice of implementation instrument is a matter for government.”
The supermarkets may not be prepared to countenance the establishment of an ombudsman, but I would urge them to accept it, as it will provide some reassurance for consumers, suppliers and all who work in the trade that the supermarkets are prepared to be transparent—something that does not happen now. It would also remove the climate of fear from the marketplace. I hope that the Minister will indicate what response the Government will make if supermarkets are not prepared to accept an ombudsman, which is the clear recommendation of the Competition Commission.
10.29 am
Dr. John Pugh (Southport) (LD): I congratulate the hon. Member for Cities of London and Westminster (Mr. Field) on introducing the debate and on avoiding some of the mis-nostalgia that surrounds it. I can certainly remember being taken to lots of local shops as a small child, when there would be a conversation with every customer at every call, which took an enormous amount of time and caused enormous irritation—the same irritation that I enjoy now in the wrong queue at the supermarket.
It is a principle of democratic socialism that markets can be made to work for the good of communities, not that they necessarily will, hence the case for some sort of state regulation. The British retail market as a whole—not just the grocery market—is dominated by four supermarkets, one of which is especially dominant, so anybody with a watching brief must be aware that there can be problems, as indeed there are. Food is not cheap by European standards—the figures today show a 7.5 per cent. increase in prices—market shares are concentrated, competition is more apparent than real and town centres are genuinely struggling. To those things the UK has a limp-wristed response, in my view.
Such is the power and size of the supermarkets that they can kill competitors fairly and unfairly. One need only look at my constituency for an example of unfair competition, where every local small garage was more or less killed off by Tesco’s selling cut-price petrol. However, a few years later, those sites became Tesco Express shops and the price of petrol at Tesco went up.
Supermarkets have the capacity to destroy to town centres. The problem cannot be resolved by introducing free car parking because town centres need to ration car
parking; otherwise, retailers would arrive first thing in the morning and take every slot available and make it impossible for people to park. Supermarkets bully suppliers, make them pay for special offers and, unquestionably, add to the carbon footprint of shopping and retail in general. We must accept that all those things are bad for the community. Supermarkets also do good things, as has been highlighted. They increase the variety and quality of goods, reduce costs and improve the level of convenience for some shoppers, particularly young, mobile car owners who have limited time.
The proposed solutions to the problems are somewhat doubtful. To have an ombudsman to whom one can complain about the most dominant and powerful customer is about as good as asking people in Sicily to complain about Mafia protection rackets—it would have more or less the same impact. Supermarkets are not stupid. They stay close to the Government—we need not talk about Lord Sainsbury, but simply look at the role of the head of Tesco in various taskforces set up by the Prime Minister—but they are perfectly competent and ready to ignore local government because their profits and buying power are so huge, and to fund whatever planning appeals stand in their way.
It was suggested that Tesco is community-minded. I asked my local Tesco to do something to help recycling in the area and perhaps to provide a few more facilities in its enormous car park. However, it was worried by the litter that that would create and refused to spend even one penny on improving the recycling of what was largely its own product packaging.
Alcohol sales were mentioned. I went to my local Tesco the day after the Budget and the furore about reducing binge drinking to find that lagers, ciders and so on were on special offer and heavily discounted. It does not have an unblemished record. There is a case for better Government regulation of fair trading, competition and planning. Far be it from me to recommend democratic socialism to the Government, but I think that intelligent regulation would help.
10.33 am
Sarah Teather (Brent, East) (LD): I congratulate my constituency neighbour, the hon. Member for Cities of London and Westminster (Mr. Field), on securing the debate. The opportunity to debate the Competition Commission’s findings is welcome. It has conducted two inquiries in the past decade into supermarkets. We had a debate only a couple of weeks ago, but that preceded the publication of the report, so the debate today is welcome.
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