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House of Lords

Friday, 22 February 2008.

The House met at ten o'clock: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of Liverpool.

Retail Development Bill [HL]

Lord Cotter: My Lords, I beg to move that this Bill be now read a second time.

Are we to wait to see our communities, our villages and our local neighbourhoods wither and die or can something be done about it? I do not think it is overstating the case to say that we are in danger of losing the heart and soul of this nation—a fact drawn attention to by reports produced in the past few years on Clone Town Britain and Ghost Town Britain.

Parts of the United States very much deserve the title “ghost town”. Where the US goes, do we follow? Noble Lords may like to know that there is a very interesting book on the US experience called Big-box Swindle: The True Cost of Mega-retailers and the Fight for America’s Independent Businesses by Stacy Mitchell. We can, through inertia, stand by and see the erosion of choice, diversity and, yes, competition. I refer of course to the decline in our small shops.

In the other place on 8 February 2005, I introduced a similar Bill—the Small Shops (Protection) Bill. We are three years on and the issue is still to be tackled. In the mean time, many thousands of businesses have gone to the wall. That is why I am presenting this Bill today. Its title is the Retail Development Bill but it is really all about communities, neighbourhoods and what people need. I and others will increasingly argue that we need to keep our local shops and that they are the backbone of the local community. The Bill aims to protect the future of small independent retailers and to ensure that the local community has a real voice in the retail development of an area.

Therefore, a key aspect of the Bill is the creation of retail development plans by the local authority, specific to each part of the country, taking into account local wishes and ensuring choice, diversity and convenience for local people and ensuring also that retail developments suit the character of an area. This should prevent the over-expansion of supermarkets where they are not needed or wanted and allow the local community to become involved in the future development of an area. When a supermarket has applied for planning permission, an impact assessment should be carried out to analyse the impact on the local community’s services.

In this connection, there is a need to assess the effect on the economic aspect of the local community. It is said that £10 spent in small shops is worth £25 to the local economy, compared with just £14 for supermarkets. In addition, 59 per cent of turnover from local retailers is returned to the local economy, compared with just 5 per cent from the large retailers. The New Economics Foundation has strong views and evidence on this. Indeed, it is also not true to say that

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supermarkets create jobs; in fact, small shops create many more. Therefore, emphasis is placed in the Bill on assistance being granted to initiatives taken by local people where, especially in villages, the local shop is forced to close. Local residents who want to form a co-operative to keep the business going, or who want to do so by other means, should receive advice and help. Another aspect of the Bill is an overseeing regulator to ensure that these plans are formulated and carried forward, and the Bill also allows for such a regulator to investigate any restrictive land covenants or land banks.

For many years now, there has been great concern over the business rates bill that small shops have to face, meaning that they pay a disproportionate amount. It is suggested that small shops can pay anything from 15 to 30 per cent or more of their turnover to meet the business rate cost, whereas it is said that supermarkets pay only 4 or 5 per cent. For the first time through this Bill, there will be the creation of three classes of shops. It will then be possible to examine this situation, and the Bill calls for a business rates review. Effectively, small shops will be class 1 and supermarkets class 3. The review will take into account how rates impact on the profitability of a business and its ability to support its owners and employees and whether the burden is disproportionate. Without anticipating a review, it seems fairly clear that at the moment it is disproportionate.

There are many other concerns, such as frequently expressed views on the unfair pressure placed on suppliers and farmers by the big four. Much has come out recently on that, and much work has been done by Friends of the Earth, producer groups, trade associations and many others. So there is a great deal of support for the Bill. The Federation of Small Businesses, the FSB, says that it supports the Bill because of the strong message that it sends to the Government. The Forum of Private Business, the FPB, said in support of the Bill that,

“this is a fantastic opportunity for the Government to lessen the impact that business rates have on small shops”.

We have an urgent situation which needs addressing. It is estimated that 2,000 local shops are going out of business every year, while the grocery market is being saturated by the big four supermarkets. They dominate 75 per cent of the market. A recent survey by the Association of Convenience Stores found that 69 per cent of people supported the idea of the local community becoming more involved with local planning decisions, a key ingredient of this Bill.

In this day and age, with crucial concerns about the impact of activity on the environment, it is relevant to question the distance that food travels to reach the public. That has been talked about elsewhere and is very relevant to our concerns. Whether food needs to travel the distance that it does and the impact on the environment of that needs to be looked into. A similar recent statistic indicates that the average person now travels 893 miles per year to shop for their food. Those are all relevant aspects of shopping today.

We have a great need for these issues to be addressed. In that connection, I shall refer to the fact that we have just had a preliminary report and recommendations from the Competition Commission,

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regrettably concentrating on competition between supermarkets—the big four—which is an issue, but they are still neglecting the small shops sector. A recent report produced by the FSB draws attention to the fact that France is the best example in Europe of getting the balance right between small shops and large retailers, with a balance of planning laws that allows fair competition and healthy communities. I would recommend those interested to study the detail and I hope that the Minister and the Government will want to study it also.

I speak briefly to the Bill because the case is there. There is much evidence, published in papers and elsewhere, and I know that many colleagues will have things to say. It is undeniable that we need to address the issue of small shops and communities. I think all would agree that there is an issue of great concern here. I am sure that other noble Lords will add their experiences to what I have said. I thank the Minister for attending today and I hope that the Government will take the matter seriously. It is easy to sidestep, but if firm policies are not followed, inertia will rule and we will see a continuing decline in our local shops at great cost to our communities. I commend the Bill to the House.

Moved, That the Bill be now read a second time.—(Lord Cotter.)

10.16 am

The Earl of Glasgow: My Lords, I thank my noble friend Lord Cotter for introducing this extremely important Bill and giving us the opportunity to take part in this debate. I support the Bill because I believe it is very important that small retailers and shopkeepers are given a fair chance to flourish. At present, most of them struggle to survive. In our rural market towns and among the vast sprawl of suburbia surrounding the larger cities, local shops are not just a convenience for local people but an important part of the community’s social life. Yet the corner shop, the newsagent, the butcher, the baker, the greengrocer, the chemist and the haberdasher are all under serious threat. As my noble friend has already said, about 2,000 of them go out of business every year. In most cases, the reason is that they cannot compete with the supermarket or the powerful chain store that has opened up in the neighbourhood.

We all tend to be a little ambivalent towards supermarkets. A recent poll showed that 70 per cent of us dislike them and yet nearly all of us use them. Why? Because on the whole the food is cheaper there and, like cars, they are extraordinarily convenient. All our shopping can be completed in 20 minutes instead of two hours going up and down the high street, doing what Margaret Thatcher used to call “shopping around”, and there is also the relief of not having to worry about parking.

As supermarkets provide 80 per cent of our food at very reasonable prices—that percentage is still rising—it is not surprising that so many small food retailers find it almost impossible to compete. But, why, we must ask ourselves, should we care if these small shopkeepers go out of business? Perhaps we should face the inevitable

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and move with the times. It is not because we mind, necessarily, about any individual shopkeeper going under, but because the small retail shop, by its very existence, provides an essential service to the local community. It is the retail outlet for dozens of other small local businesses: farmers, market gardeners, beekeepers, local potters and other craftsmen, even electricians, plumbers and signwriters, who rely to a large extent on the local shops for their livelihood. Local shops are the most important links in the chain that enables a local community to survive and thrive. If a local shop dies, the livelihood of so many small local suppliers will die with it.

By contrast, supermarkets and chain stores have their own suppliers that can be hundreds of miles away and their produce arrives in vast lorries that can barely negotiate the narrow streets of some of our market towns. Also, in many cases supermarkets do not even employ local people to work in their stores. Perhaps the most important contribution that small local shops make is that they enrich the quality of life in the community that they inhabit. Local shops are personal and more human places. People know each other, people chat there and they keep each other aware of the well-being of members of the community. Okay, they gossip, but they also get to know that Mrs Jones, or whoever, is unwell, and make certain that someone goes around to see that she is all right. Small shops are an integral part of small communities. Supermarkets are not. In fact, there is nothing more irritating than the checkout girl chatting to her friend and holding you up in the queue.

However, the Bill as I see it is not anti-supermarket. It is trying to ensure that supermarkets do not do serious damage to local traders in future and that their empire-building is more rigorously controlled. In the centre of towns, they can be a boon to small businesses. They can provide free parking to locals who will shop there, but also visit other shops in the high street. Sometimes, when fruit and vegetables come into season, for example, the local greengrocer can produce fresher fruit and vegetables at a cheaper price than the supermarket, whose produce is still coming from Spain or somewhere.

However, those supermarkets situated out of town inevitably drain the lifeblood of local shopkeepers in smaller towns within 20 miles of them. The local shops in nearby towns tend to lose business and close down. Their premises in the high street are taken up by the chain stores and a once-pretty market town begins to lose its character. Its high street begins to resemble that of hundreds of other towns: the same chain stores, the same coffee houses, the same fast-food eating places and the same brand names on the shop fronts. So many of our once-distinctive country towns have already been transformed into these clone towns, not unlike those in the United States. We must hurry to ensure that they do not all go that way.

Worst of all are the great out-of-town shopping centres, which not only are made up of supermarkets and chain stores but also provide entertainment and sporting facilities. There is one monster outside Glasgow on the M8, called Braehead. It is close to my idea of hell, yet people flock to it from miles around and I can

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only conclude that it is a popular success. Three or four specially scheduled coach-loads of shoppers leave for Braehead every day from my home town of Largs, nearly 30 miles away. Parts of the city of Paisley, an old cathedral town lying only four miles away—already depressed after the demise of its once-famous cloth-manufacturing industries—are now beginning to look like a ghost town. Do not, for goodness’ sake, take the M8 past Braehead between 4.30 and 6 pm, because the volume of traffic leaving Braehead at that time causes ghastly congestion and, usually, a 10 to 20-minute tailback on the motorway.

The trouble with supermarkets is that they do not care about the damage they do to local communities and will actively try to put a successful local trader out of business. Of course, their main competitors are their rival supermarkets, but this healthy competition hardly benefits the small shopkeeper. The trouble is that, despite internal competition with each other, they have all become too powerful. In several cases, when local authorities stand up to them and refuse planning permission, they take the local authority to appeal and, as in the cases of Ruthin in north Wales, Talbot Green in south Wales and Huntly in Scotland, Asda and Tesco won their appeals and the supermarkets went ahead against the wishes of the council and the local community. The Federation of Small Businesses—which, incidentally, supports the Bill—is now talking about “Tescopolies” and “Tesco towns”, in which one supermarket company has double the market of its nearest rival.

We all have reservations about establishing yet another regulatory body and all the bureaucracy that goes with it. However, if we want at least some of our small shopkeepers to survive against this ruthless competition, we need a regulatory body with teeth and enough power to stand up to these powerful supermarket chains: in this case, the proposed Office for Retail Planning. This will not mean that there will be no more supermarkets, although I hope that there will be a ban on more large supermarkets outside towns. Like David Cameron until he lost his nerve, I think that existing out-of-town supermarkets should be made to make their customers pay a parking fee. We need the Office for Retail Planning to make certain that future supermarkets are sited inside towns and never in places where they are likely to do irreparable damage to small, local communities.

10.25 am

Lord Cope of Berkeley: My Lords, the underlying aims of the noble Lord, Lord Cotter, in introducing this Bill as he explained it to the House just now and as supported by the noble Earl, Lord Glasgow, are admirable and I support them. Indeed, I have supported the preservation and encouragement of small businesses all my political life.

However, I have been reading the Bill, and I am afraid that I must tell the noble Lord, Lord Cotter, that I do not think that the actual methods it proposes to help small businesses stand up to scrutiny. They leave a lot to be desired. To begin with, I would not like even one more semi-government body to nanny and bully us all. I do not like local authorities being

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given ever more orders from the Government and their agencies. The Bill provides for the new agency to bully and overrule local authorities. The Secretary of State can already do that, as I shall say in a moment.

There are also far too many order-making powers in Bills these days about matters which are important to the working of legislation; this Bill is simply littered with them. Those drafting government Bills too often leave difficult matters to be dealt with in regulations and the noble Lord, Lord Cotter, has followed their bad example. There are at least 10 new order-making powers, one of which has 11 objectives, sprinkled throughout the Bill. The Bill tries first to define small, medium and large retail businesses. It does not actually define “retail”, but I take it that that means businesses selling goods and services to the general public rather than others in their trade. That leaves antique shops in a grey area, because they do a lot of the latter. Nor is there any definition of small, medium and large retail premises, which are to be singled out for different treatment.

Part of the definition is to be how many square metres of “retail sales floor” a shop has. Now, I know what the noble Lord means by “retail sales floor”, but a legal definition is not so easy. Is it where the customers go? In that case, is the area behind the counter part of the retail shop? It is certainly part of the display area in many cases, with the cigarette shelves and that sort of thing, so presumably it is. What about the stock room behind it? That is presumably not part of the retail sales area, although it is, incidentally, included in the definition of small shops for Sunday trading. In a café, the obvious bit of the retail sales floor is the counter for takeaway sales, but it probably also includes the bit where people sit to eat the meals they have bought. If it can include somewhere where customers sit down, what about a solicitor? Is the room where he sees his clients part of a retail sales floor for this purpose? Presumably the reception area is as well. Service businesses often have no retail sales floor at all. A plumber does not have a retail sales floor, because he goes out and does the plumbing in people’s houses and other premises. All this is to be left to regulations. It will not be clear to anyone who looks at the Bill what is or is not included.

The other half of the definition is to be based on annual turnover. Turnover is a valid method of comparing the respective sizes of two similar businesses, but not of dissimilar businesses. The relationship between turnover and profit varies wildly between different types of business and so does the number of employees, the size of premises and so on. Some businesses these days have a large part of their turnover in distant sales, via the web; that does not involve any sales floor at all.

I recognise the problem of arriving at a general definition of a small business in order to give small businesses advantages over larger businesses. I have long been concerned about it, and I do not think that the noble Lord, any more than other people, has solved it.

The new body that is to be created—the Office for Retail Planning—and the independent examiners who will back it up are additions to the overheads of the nation. We should be sure that they are of benefit. The Office for Retail Planning will sit somewhere between

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the Competition Commission and the Office of Fair Trading, both of which have the duty to “improve the market”, in shorthand terms. The Office for Retail Planning has the duty to further the interests of consumers in relevant markets, but its first duty is to further the interests of citizens in relation to retail planning matters. I find it a bit difficult to understand exactly what is the difference between us as consumers and as citizens in this respect. Our relationship with shops is really as consumers rather than as citizens.

The primary purpose of the new Office for Retail Planning is to take decisions away from local authorities and to hedge them about with extra guidelines. At the moment, the Secretary of State does that. He has the power to call in decisions and he gives pages and pages of planning guidance. There are books full of planning guidance that has to be to be followed by inspectors if something comes to appeal, and hence it has to be followed by local authorities. That guidance can be altered, and it probably needs to be altered because of the sort of decisions that we have just heard about where supermarkets are allowed even though local authorities do not want them. However, I do not think we need a new body and a different set of guidelines to add to the existing ones to stop local authorities deciding what they think is best for their towns. We should leave more decisions to local authorities, not take them away.

As the noble Lord said, the Competition Commission has just reviewed groceries. Its proposal for a new ombudsman and extra powers relating to supermarkets’ relationships with their suppliers has merit and provides benefits not only to suppliers but also to small firms that compete with the supermarkets. The commission’s headline proposal in the planning field aims at the competition between the big supermarket chains, not at the competition between supermarkets and small, local shops or convenience stores. That is the aspect that worries me and the noble Lord, Lord Cotter, not so much the competition between the supermarkets. I want the Secretary of State’s planning guidance to give more protection to smaller shops than it does at present. That is the way forward as far as planning is concerned. I do not want a new body to complicate everything further and add to the nation’s overheads.

The noble Lord, Lord Cotter, has taken up from the Competition Commission and others the question of landbanks. The Bill suggests a mechanism for the compulsory purchase of supermarket landbanks. I do not support that, but it is a slightly different matter.

Another part of the Bill concerns rates. It hints at the idea of lower rates for small businesses but, as the noble Lord said, it does not provide a solution, only a review. At present, the mechanism for deciding business rates is the rateable value. If small businesses in a town are struggling, rents, and hence rateable values, should eventually go down. That is the mechanism at the moment. I am not sure it is working as well as it should, but that is no reason for inventing a new mechanism, although it may be a reason for improving the mechanism that we have. As far as local retail plans are concerned, I would encourage local authorities to have an eye on local retail development in their own plans, which many of them do.

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Overall, the noble Lord, Lord Cotter, is right to draw attention to the problems. I support the message that he wants to send to the Government, as he explained a moment or two ago, but I do not think that the Bill proposes the right solutions. I thought that Liberals were supposed to support Mr Gladstone’s principles of free trade and that sort of thing, but the noble Earl, Lord Glasgow, did not seem to support them outside Glasgow, where the public seem to be voting one way and consumers a different way from him. The noble Lord, Lord Cotter, has taken his cue not from Gladstone but from new Labour: ever more nannies and a case of, “A word means what I want it to mean—see the statutory instrument”.

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