Select Committee on Economic Affairs Fourth Report


7.1. The relationship between consumer spending and age falls well within the remit of our inquiry, but the need to concentrate on a limited number of topics has meant that we have not dealt in detail with the impact of ageing on spending patterns. We do, however, have evidence that suggests some degree of market failure and discrimination. That gives rise to several questions that we feel we have a duty to raise. In particular, we feel that this is an aspect that the competition authorities should address.

7.2. People's consumption habits change with age. This is true of both the goods and services people buy and the places in which they buy them. Some of the changes are connected with preferences and needs, and others are dependent on circumstances.

7.3. The circumstances are frequently economic in nature, the obvious example being that the scale and source of incomes varies with age. Also, of course, retired people have more leisure, and may demand more leisure goods. But it is important not to ignore the change in non-economic circumstances, such as the probability of living with dependants, or of being dependent on others. Above all, of course, average health status deteriorates with age, although most older persons remain fit and active.

7.4. The subject of age discrimination in retail markets was raised by representatives of Age Concern (Q292), who referred to the difficulties that older persons experience in hiring cars, and argued that those difficulties were the result of discrimination. They also referred to insurance companies whose premiums for homes and their contents are set too high for older, poorer people. Age Concern has worked to rectify this failure of the market, and has successfully entered the insurance market (QQ293, 296). Age Concern also said that firms that sell products such as information technology equipment and motor cars rarely address their designs or their marketing at older consumers. Its representatives claimed that businesses do not fully recognise the purchasing power of older people and exaggerate the risks involved in selling to them in the case of, for example, travel and motor insurance, and therefore forgo possible profitable sales.

7.5. A particular problem that confronts some older people is the location of shops. To the extent that shops are concentrated in places that require access by motor cars, this will produce difficulties for those who can no longer drive, and will make them dependent on others. The problem is exacerbated if in rural areas, for example, local shops are disappearing and public transport is infrequent or non-existent. Supermarkets often sell a wider range of products at lower prices than independent high street shops, and in so far as older people find access to out-of-town supermarkets difficult, they are likely to face a higher overall cost of living than that of the population at large. Given the restricted mobility of some older people, a matter of greatest importance to them is the possible disappearance of local retail pharmacies, to be replaced by pharmacies in supermarkets.

7.6. References to these problems are to be found in the Competition Commission report Supermarkets and the Office of Fair Trading report The control of entry regulations and retail pharmacy services in the UK. The Competition Commission took evidence from Age Concern, and states: "A decline in smaller retail outlets serving a local community could be especially detrimental to elderly people, some of whom may rely on them for a lifeline of interaction … We raise elsewhere in this chapter a number of supermarket practices that bear on access to groceries by low-income and elderly consumers".[81]

7.7. The OFT report on pharmacy services recommended that the control of entry regulations for community pharmacies should be ended.[82] Objections were raised to easing entry on the grounds that doing so might reduce the viability of high-street pharmacies and adversely affect older people. The Government rejected the full thrust of the OFT's recommendations, saying in a parliamentary statement: "We do not believe that simple deregulation is the best way to achieve our aims. The OFT made a strong case that the current control of entry rules impede competition and reduce benefits for consumers. But given the current shortage of pharmacists, which will persist for some years until measures which we as a government are taking increase supply, and the Government's desire to see pharmacies given a new and strong role in the modern NHS, the Government does not believe that this is the time to move to a fully deregulated system. It therefore intends to move cautiously in the direction recommended by the OFT."[83]

7.8. Because we have not explored these questions in the detail they deserve, we do not make any substantive recommendations relating to them. Instead we draw the attention of the Office of Fair Trading and the Competition Commission to the possible existence of discrimination and market failure as it affects older people.

7.9. One last example of apparent market failure which arises in the public sector relates to the age limit on the availability of student loans. Presumably the age limit is based on the assumption that entrance to higher education must be judged in narrow economic terms, and is not valuable in its own right. It is perhaps assumed that older undergraduates and post graduates will not re-enter the labour force and earn an income high enough to repay the loan. Such an assumption is contrary to the Government's stated policy goal of increasing the economic participation of older persons. Furthermore, it should be noted that younger age groups also contain people who will neither re-enter the labour force nor earn enough to repay the loan.

7.10. We conclude that the restriction of student loans to people below the age of 54 is blatant discrimination.

7.11. We recommend that the Department for Education and Skills should explain why age discrimination exists in the provision of student loans.

81   Competition Commission, Supermarkets (2000), Volume 2, p 311, and Volume 1, p 55 Back

82   Office of Fair Trading, The control of entry regulations and retail pharmacy services in the UK (2003), p 6 Back

83   Parliamentary statement on community pharmacies, July 2003, Back

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