Market Failure?: Can the traditional market survive? - Communities and Local Government Committee Contents


Examination of Witnesses (Questions 280 - 299)

MONDAY 20 APRIL 2009

MR GEORGE NICHOLSON AND MR JEAN-PAUL AUGUSTE

  Q280  Anne Main: You blame central government for that.

  Mr Nicholson: The central government issue is different. It is the pressure from the Treasury for local authorities to manage their assets. You will hear a lot about asset management, not all of which is bad, but in reviewing their property portfolios, as local authorities are bound to do, they have to within the current constraints view markets and market property in much the same way as they view other property that they own. Often they will look at the return from their markets and think they could get a better return or perhaps they will sell them off because they have pressure to sell off their assets.

  Q281  Anne Main: That is street markets.

  Mr Nicholson: Street markets are slightly different. I am talking about where a local authority owns an indoor market—Bradford, for example—a market which is a building with shops. A market in the centre of that would be classically what an indoor market would look like. In Bradford, as part of their asset management strategy, the local authority decided—although they did not go through with it in the end—that they would strip the shops out of the market portfolio and sell those with all the other properties which Bradford owned as a local authority under a tendering process for a private sector property company to manage all their properties on their behalf. You could argue that might have made sense but it stripped out the surplus from the market. The income from the shops was taken away from the market's budget. The market itself was then put in danger of not being viable. Shops are an integral part of a market. That is what I am saying about the Borough Market. The composite nature of these markets is that you do not just look at the street market separately from the street properties in the same way that you do not look at the stalls at the centre of an indoor market separately from the shops or the streets around it. That is not a tendency which is pushed by local government but the asset management side of things is something, I think you will find generally, where a lot of local authorities have found themselves facing these dilemmas as to how they manage their property portfolio in those situation. The markets and the rents they get, the values they have to put to them relative to the local property market, often put the market at a disadvantage.

  Mr Auguste: You have to understand that our competitors—for example, big supermarket chains—have a unique decision possibility. They have a staff and they can implement in every supermarket belonging to the company the same policy and attitude. We do not want every market to be a clone of another. To help you understand, central government can on some aspects give to so many city councils, so many markets, at least some very important help.

  Q282  David Wright: You said that there was a policy vacuum in Whitehall about markets. Do you think the government could be doing more? What should it be doing? What incentive is there for the government to do more in relation to markets?

  Mr Nicholson: Central government?

  Q283  David Wright: Yes.

  Mr Nicholson: We would concur that what the market industry needs in central government, wherever it is located, is a champion for markets which currently does not exist.

  Q284  David Wright: Should that be a minister or a civil servant?

  Mr Nicholson: It should probably be a minister and it should be BERR. Markets have an economic purpose. They are businesses. You could argue that they have a social purpose because historically they have existed in these places for a very long time but essentially they are business focused. If you are going to have a champion in government, which is what we need and do not have at the moment, it has to be in a department which has some relevance. Planning and regulatory things obviously do have a relevance. DCLG has played a part in PPS6 and promoting markets but essentially it is a business focus that it needs and the champion could and should come from BERR.

  Q285  David Wright: What happens in the rest of Europe?

  Mr Auguste: We have a champion in France. There is a sort of minister for small businesses. He is our contact within the government. There is a National Commission and each year there are some meetings, some preparatory action work, and we are having this in France.

  Q286  David Wright: What practical help does that minister provide?

  Mr Auguste: Last year in France there was unification work about business papers. The legislation was too complex for little businesses with tax problems, social problems, wages, authorisation to act as a commercial business in the public domain etc. Each trader was in the middle of having eight to 10 different documents. There was work to have different ministries merging the documentation in one.

  Q287  David Wright: So reduce bureaucracy?

  Mr Auguste: This is an example. The other problem was to help lobbying to Brussels. It is the World Union job now also. We had anxiety about the new rules. For example, there was to be a rule about stickers to be placed on every food product. A trader preparing some food—a charcuterie for example, a pa®té—would have been obliged to give at zero point something per cent the components of his pa®té on the market day. Tomorrow it is impossible to get the same composition each day if you are not allowed to work.

  Q288  David Wright: Would you say that that capacity is not available in the UK?

  Mr Nicholson: What helps clarify this to me is to think: where do markets sit in the chain of produce? Downstream from the market you have agriculture, if you are talking about food in particular. We have the Ministry of Agriculture that can deal with farming and all those kinds of things. Upstream you have the retail world. There is competition law, planning laws and all those kinds of things that apply. In the middle you have markets. That is where the focus needs to apply. Very little attention is paid to that key, pivotal role whether it is a wholesale or a retail market. That is why there needs to be a champion for that bit of the chain which is the market in the middle. We would argue it should be BERR. The essence of a market is about competition and commerce. It is much more logical that the energy from government and the focus are applied in that part of the chain.

  Q289  Sir Paul Beresford: You mentioned London was different. We have found that London is different within London as well. Particular mention was made of the London Local Authorities Act. What should be changed?

  Mr Nicholson: A lot was made of the London Act as being restrictive on London markets in a way that other markets are not restricted. That may or may not be the case. I think it is much more that London markets are not markets. Maybe there is legislation for markets outside London which means they are recognised as markets in a way they are not in London. In London it is just a licensing function. You have a street. You have pitches. The local authority issues licences. They are not actually markets. They are a selection of pitches which are let out. I do not think even that situation in London could or should stop the local authority who wants to promote or manage their market. If you take North End Road Market in Hammersmith for instance, it is a very big street market. There is nobody in Hammersmith Council responsible for managing that market. There is a person responsible for issuing the licences but no one on a daily basis or a weekly basis looks at what is happening in that market or manages that market.

  Q290  Mr Hands: As the MP for the area, it comes under the town centre manager for Fulham, which is not quite the same thing as a council officer dedicated full time to the market. It comes under the same person who is responsible for the retail frontage and other things.

  Mr Nicholson: That is a recent innovation. That is a wholly good thing. The town centre management function has suddenly now appeared on the radar and has taken up the mantel and filled the vacuum which was left by the fact that there were not market managers in the way that previously there had been.

  Q291  Mr Hands: I am slightly confused about the legislation. We have heard about the London Corporation Act. Others have told us about the London Local Authorities Act 1990 as amended. Do you happen to know which Act? Perhaps it is both Acts. People have particularly told us that one of the problems is that one Act or both Acts prevent any profit making by a local authority in its management of the market. Is that particularly the issue? My second question is about restrictive practices and whether, in your experience, some markets have problems due to restrictive practices preventing new entrants from coming into the market. You could have a rule for example that there cannot be a pitch within six pitches of an existing pitch that does the same product range, which effectively prevents newcomers coming into a market, which is sort of done in the name of protecting the market, but it can often have the perverse effect of preventing renewal of different people coming into the same market.

  Mr Nicholson: Jean-Paul manages East Street Market which is one of the big markets south of the Elephant and Castle.

  Mr Auguste: We are not yet managing the market so we have no influence right now. We have quite the same rule in France, it never prevented markets to be managed as markets, it never forbid newcomers in the markets. The rule in France is four metres which is close to the distance between two stalls. The legislation should be the same as in other cities and I agree with what George was saying about the London Act.

  Q292  Chair: You think the legal framework in London should be the same as in the rest of England?

  Mr Nicholson: Yes. I am not sure how much of an obstacle it is. It is undoubtedly not helpful because it effectively turns local authorities into licensing authorities, not marketing authorities. In relation to the issue of competition, that is quite a difficult issue. The nature of markets is to encourage competition. In building up the Borough Market from nothing to what it is today, we have a lot of people who apply to come to the market. By and large, there is no restriction except quality. If you have four fish stalls and someone else applies to be a fish stall holder in the market, you have to take some kind of management decision as to whether you think the customer base will support another fish stall within the market.

  Q293  Mr Hands: That is contrary to what the nature of a market is. You are essentially operating in a non-market way.

  Mr Nicholson: I do not think you are. The same thing would apply in a shopping centre or in any other kind of situation. These are businesses. It is not a completely open ended, free market situation. You have to manage these situations.

  Q294  Mr Hands: If you cannot have markets in markets, it seems to me it makes it very difficult. Surely somebody would have done their homework and thought, "I can sell fish better than the person four pitches away"?

  Mr Nicholson: It is not as simple as that. Then you have to make a choice because there are only so many pitches in any one market. On the face of it you would say, "Okay, your quality is sufficient to come into the Borough Market." We also have several hundred other applicants and you are making a balance as to whether you want another fish stall in that market or whether you want another stall selling meat, vegetables or whatever.

  Q295  Chair: I can see how this is in your interest managing the market but is it in the interest of the consumer? One of the things that individual members of the public like about a market is that you have lots of stalls very close together and you can wander around and get the best buy.

  Mr Auguste: This is a complex process. You have to understand the population, the clients. You have to adapt the merchandising of this stall. It is competing against others. It has to offer what the population is waiting for. You can make some mistakes but if you have the final clients in mind you will be close to the solution. You have to understand the merchandising needed on the site, as George was saying.

  Mr Nicholson: I think there is confusion as to what a market is. I do not know any retailer who operates a totally free market situation anywhere, except maybe somewhere in downtown Vietnam or somewhere. It does not exist in the United States, Europe or in this country.

  Q296  Mr Hands: There is no restriction that prevents barber shops being very close to each other. Very close to North End Road Market, there are about three barber shops. They have all set up. One is a break away from another and they compete. It is in the customer interest. Nobody has a problem with that. No town centre manager comes along and says, "There are too many barber shops here. We want to manage the process. Instead of hairdressing, we are going to have an extra cheese shop", do they? Why should that happen in your market?

  Mr Nicholson: Because we are running a market.

  Mr Auguste: I would give an image of some markets on the continent. The problem of a market is that it has many exits and entrances. A supermarket has only one door. You are obliged to go through that and you are obliged to go through a route within the store. They can organise the merchandising and the location of each product in the store. In a market you have to disperse different stalls in order to provoke within the clients' brain the need to go everywhere in the market. It is a different way of managing. We have experience of markets, apart from fishmongers, fruit and veg etc. Generally, they are working less than the markets where you are dispersing the products and obliging a promenade.

  Q297  Dr Pugh: Is it the case that a successful market requires, unless it is just a very specialised market that sells one thing like in a fish market, a diversity and you will not get that diversity unless you manage the situation so that you get the diversity in that market?

  Mr Auguste: Exactly. You need the diversity.

  Q298  Anne Main: You did mention PPS6 in passing. Do you think PPS6 should be improved, altered or amended in any way, shape or form? Do you have any concerns?

  Mr Nicholson: It is essential in the new, merged PPS6 and PPS4 and whichever other ones that are going to be merged with it—we will hear later this week or whenever, when the new, merged PPS comes out—that at the very least the paragraph in PPS6 should be carried through to the new document. It is a very important paragraph and recognition from government that DCLG, in issuing PPS6 in the first place, had a paragraph for the first time which specifically addressed in planning terms the importance of markets. It is important that that is carried through into the new guidance which emerges later this spring or summer.

  Q299  Chair: This is your opportunity to have your wish list. Is there something else that should be added to PPS6? The Minister is sitting behind you so if you do not say it now you have missed the opportunity.

  Mr Nicholson: I think what is in PPS6 is fine because it is a call to arms. It is asking local authorities to recognise that street markets and indoor markets have an important function within their towns, city centres and villages throughout the country.

  Mr Auguste: I agree with George.

  Chair: Thanks very much.






 
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