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House of Lords

Tuesday, 17th November 1998.

The House met at half-past two of the clock:

The LORD CHANCELLOR on the Woolsack.

Prayers--Read by the Lord Bishop of Blackburn.

The Lord Chancellor: Leave of Absence

The Lord Chancellor (Lord Irvine of Lairg): My Lords, before business begins, I take the opportunity to inform the House that I am to deliver the Long Fox Annual Lecture at the University of Bristol on Wednesday 18th November, when the House will sit. Accordingly, I trust that the House will grant me leave of absence.

Product Price Anomalies

2.36 p.m.

Lord Cadman asked Her Majesty's Government:

    Whether they are satisfied that the prices paid by British consumers for foodstuffs and other commodities, which are reported to be higher than those in other European Union member states, are consistent with the existence of a single market within the European Union.

The Minister of State, Department of Trade and Industry (Lord Simon of Highbury): My Lords, the European Single Market is designed to provide for the competitive supply of goods and services across the Community. It cannot guarantee uniform pricing, although this may to some extent occur as a result of consumers being able to choose the cheapest source of supply where this is practicable.

Lord Cadman: My Lords, I thank the Minister for that Answer. However, is he aware that it is not only foodstuffs that are involved but also many other things, ranging from motor vehicles to beer and from rail and bus fares to the cost of money? Does the Minister agree that these anomalies, within what I have always taken to be a single common market, are likely to get worse and result in this country becoming the most expensive in the EC? Therefore, would it not be appropriate for the Government to start working towards achieving some convergence?

Lord Simon of Highbury: My Lords, as the noble Lord is aware, prices are made up of many constituent parts and they vary because of issues such as the exchange rate, taxes, wages and costs. I do not believe that there is any evidence to suggest that we are totally out of line in pricing across a very broad range of goods. There are certain areas involved. If the pricing is uncompetitive for reasons which are against the law, it will be examined and investigated by the Office of Fair

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Trading. There is no evidence to show that we are becoming the most expensive source of products in Europe.

Lord Borrie: My Lords, in the spectrum between perfect competition at the one end and imperfect competition at the other end, does my noble friend the Minister agree that, at present, we are far closer to the end marked "imperfect competition" in the European Union as regards a whole range of consumer goods?

Lord Simon of Highbury: My Lords, as I said in answer to a previous question--and I shall repeat it to my noble friend--if there is evidence to show that we are moving towards the imperfect competition end of the scale which strays from being imperfect to the state of being illegal, such matters can be challenged by the OFT. I should point out to noble Lords that the new Competition Act, which, if I may say so, was sensibly passed by this House, will give the OFT far stronger powers to pursue these cases. I believe that that is all to the good. Indeed, I hope to see us moved up to the more positive end of my noble friend's spectrum in the very near future.

Lord Cockfield: My Lords, as foodstuff is zero-rated for VAT in this country while in most countries of the European Union it is charged to VAT, can the Minister say why foodstuff is not a great deal cheaper in the United Kingdom than on the Continent?

Lord Simon of Highbury: My Lords, some foodstuffs are a great deal cheaper, but not all. As I said, if there were evidence to suggest any illegality in that respect, I am quite sure that the OFT would seriously consider the matter. Indeed, as noble Lords know, it is at present considering the profitability of supermarkets. If that is shown to be more than adequate due to any illegality, action will be taken over pricing.

Lord Jenkins of Putney: My Lords, can my noble friend the Minister say when imperfection becomes illegal?

Lord Simon of Highbury: My Lords, I shall leave that matter to my legal friends rather than trying to identify any particular stance at this stage. I feel more comfortable leaving such matters in the hands of experts.

Lord Jacobs: My Lords, is the Minister aware that The Sunday Times carried out a comparative analysis between Britain, France, Germany and Holland at a shopping-basket level in supermarkets and that, in every case, we were by far the most expensive? Indeed, in the case of the comparison with Holland, which also has sales tax, we were more than 25 per cent. in excess. Is that not evidence to suggest that there is something wrong with the pricing structure in the UK?

Lord Simon of Highbury: My Lords, I am aware of such surveys. I believe that the Express and the Standard have carried out a survey; and, indeed, the noble Lord may

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be correct to say that The Sunday Times has done so. If there is evidence to show that we are out of line in terms of the profitability of our major supermarkets due to some improper actions on pricing, no doubt the OFT will come to that conclusion. However, it is far too early to draw such conclusions. At this stage, I should also fall back on the answer that my noble friend gave last week to a similar question--namely, that these surveys are by no means statistically valid.

Lord Elliott of Morpeth: My Lords, the Minister has talked about statistics, but has he noticed a recent report which suggests that the average household in the UK has gone from spending 33 per cent. of its income on food to 10.9 per cent. at this time? Does the noble Lord agree that the British food chain is under greater surveillance than ever before and that food scares are almost a daily occurrence?

Lord Simon of Highbury: My Lords, if the noble Lord's statistics are correct--naturally I do not carry those in my head--and the percentage spend on food has dropped, given the fact that we are becoming a nation of bon viveurs, that would suggest that food prices are falling rather than rising. I regard that as extremely good. As regards safety in the food chain, we are trying to improve our performance and our vigilance on that safety. That, too, is all to the good of the consumer.

Lord Bruce of Donington: My Lords, is the noble Lord aware that there can be no law applicable to these particular circumstances either in the United Kingdom or originating in the Community? Is he aware that only on Saturday last I succeeded in obtaining stewing lamb, which is the cheapest form of all meats in that field, for £4.59 per kilo, while the price available to the farmer for the whole animal was under £1? Can he reconcile that difference or does he agree that there is no law at all in this field?

Lord Simon of Highbury: My Lords, it is difficult to apply law to raw material cost within a system which has a long supply chain through to the retail outlet. It would be unwise of any government to try to opine officially on values, costs and prices within a chain. I agree with my noble friend as regards that matter. I hope that he had an extremely good luncheon of stewed lamb.

Baroness Miller of Hendon: My Lords, apart from the current investigation that the OFT is carrying out on prices and profitability in domestic supermarkets, are there any plans to investigate prices charged by supermarkets on the Continent? I do not wish to add to the anecdotal or unscientific evidence from any of us as regards the things we have bought. However, from our home in the country we frequently travel to Calais. The saving gained on the purchase of just a few items more than pays the cost of the car journey and we have a super lunch in France too.

Lord Simon of Highbury: My Lords, I am not aware of any further study being undertaken into supermarkets abroad. If such a study is undertaken I shall inform the

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noble Baroness of it. If the consumer can find attractive prices abroad--there is evidence of that--goods will be imported into that market to compete against our own. That is the wonderful free choice that we have and the advantage that the European Union gives us. Long may it continue.

House of Lords Reform: Consultation

2.46 p.m.

Lord Phillips of Sudbury asked Her Majesty's Government:

    Whether they will require the forthcoming Royal Commission on reform of the House of Lords to undertake a campaign of information and consultation with the general public.

The Lord Privy Seal (Baroness Jay of Paddington): My Lords, the Government made clear that one of our main reasons for favouring the approach of the Royal Commission to consider long-term reform of the House of Lords is to enable the widest possible consultation and debate to take place within a structured context. Although obviously it is not for the Government to prescribe the exact procedure for the Royal Commission to follow, we would expect it both to inform and consult the general public on the issue of House of Lords reform.

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