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Small Shops

Volume 447: debated on Tuesday 13 June 2006

Motion made, and Question proposed, That this House do now adjourn.—[Liz Blackman.]

I am pleased that the Minister for Trade will reply to the debate and feel flattered that a Minister of such seniority is staying up late to do that.

The debate is important because it is about small shops, which are a vital part of not only the small firms sector but the rural communities that they serve, as well as suburban and urban communities. They are often the focal point of the community, especially when a shop is combined with a post office and probably a newsagent. Villages and urban wards that do not have village shops or a shop at the centre of the community lack something important, which goes to the core of community spirit.

There has been a substantial decline in the number of community stores—indeed, 2,000 closed last year. As I go round my constituency, I see shops that have closed and villages with no shop. Not long ago, villages such as Pentney near King’s Lynn had a shop, a pub and, indeed, a garage. Now there is nothing left in that village and the heart has been taken out of it. I am afraid that such occurrences are all too regular. Let us consider the number of closures of unaffiliated independent stores: there were 35,500 stores in 2000 whereas there were 25,893 a month ago—a reduction of 10,000 in a relatively short time.

Many hon. Members from all parties, but especially Conservative Members, have shown a great deal of concern about post office closures. In my constituency, 10 closures have happened in the past five years. Four closures of urban post offices happened under the urban post office renewal scheme. Those four closures in King’s Lynn had a significant and debilitating effect on the local community.

I want to consider the different sorts of shops and some of the threats to them, and perhaps examine the more promising points for the future. Most proprietors of small shops, newsagents and small pubs are innovative and proud people. The role of the small shops sector within the small firms sector is also important. Indeed, 90 per cent. of all businesses are classified as small businesses, and 75 per cent. of the entire work force are employed in small to medium-sized enterprises. That is important, particularly at a time when dark clouds are beginning to gather over our economy. I will not go into too much detail about that, but we know that the trade figures for the last quarter were shocking—the worst on record. We also know that the United Kingdom has fallen in the World Economic Forum’s rankings from fourth to 13th, that business investment is at an all-time low and that productivity is falling.

I do not believe that the extra jobs being created in the public sector will be sustainable in the short to medium term, so we shall have to look to the small firms sector to provide the employment that is vital to this country’s economy. That is why it is important that Her Majesty’s Government do everything in their power to make life easier for small firms, and for small shops in particular, but I submit that they are not doing that.

Let us take small post offices as an example. They have been hammered by the Government’s decision to introduce automated credit transfer. There was a time when our constituents could go into post offices in villages, suburbs and towns to draw out their benefits and perhaps spend that money in the shop on sweets, groceries or newspapers. Now, they are forced to have that money paid into their bank account. We warned the Government that that would lead to post office closures but they took no notice whatever. They set up the Post Office card account, but that is to be abandoned in five years’ time. What a shambles.

We are not asking the Government to give post offices large grants. We are simply asking them to use their power as a provider of services to locate as many of those services as possible in post offices. That is where the Government can help the small firms sector and small shops. We know how much pressure those shops are under from the competition from superstores.

That brings me to the Competition Commission’s inquiry into the United Kingdom grocery market. There are many concerns involved here, including the vast market power of the four largest retailers, their ability to sell at way below cost, their tendency towards predatory pricing, their buying power and their inordinate power over suppliers. All of us who represent farming constituencies or constituencies near to farming areas know the power of those retailers over suppliers and growers and over the rural economy. It is an invidious power, and it is very damaging.

That power is combined with the power of those retailers to get planning permission and to build up large land banks. We all know that when they are turned down for a planning application, they apply again and again until they get planning permission. They have the power and the finance in their shareholders’ funds to drive the system into despair and to get what they want.

I congratulate my hon. Friend on securing a debate on this important topic. Does he share my concern that the supermarkets’ latest tactic is to buy the small shops and turn them into local supermarkets? That is destroying another part of our heritage.

My hon. Friend is right. That is happening in all our constituencies. When it first started to happen, we thought that perhaps the Tesco community stores, or some of the other community stores that were taken over by the large retailers, might be a good idea. But now we have seen a number of traits such as predatory pricing and below-cost selling, and that has a damaging effect on the surrounding shops.

It is important that the Government widen the scope of the Competition Commission’s inquiry. As I understand it, its scope is to be limited mainly to planning and land banks. That is far too narrow, and I hope that the Minister will comment on that.

Does my hon. Friend share my concern, with regard to the ongoing investigation, that the Office of Fair Trading differentiates between a local community store such as a Tesco Metro and a hypermarket, which might be only a mile away? It considers them to be operating in different markets even though they have the same economies of scale and supply chain issues. What does my hon. Friend think of that?

That is an important point. I am grateful to my hon. Friends for supporting me in the debate, because it shows how strongly they feel about the issue. The Minister will have to take away those points and I hope that he will be able to answer them in about 10 minutes’ time.

I should like to make a quick point about the Sunday trading legislation. The Sunday Trading Act 1994 may well have been good for the consumer, but it certainly was not good news for small shops. It tipped the balance of retailing power decisively in favour of the multiple stores and the out-of-town sheds. HMG are in the process of reviewing the legislation with a view to extending the trading hours of large retailers. I can tell the Minister that there is overwhelming opposition in my constituency to any change to the legislation. I have received hundreds of cards and letters from people who work in shops and on stalls and a very large number of representations from organisation such as the Association of Convenience Stores, the Federation of Small Businesses, the Rural Shops Alliance and the National Federation of Retail Newsagents. The overwhelming feeling among those in the small firms sector is that there should be no extension of the legislation. Furthermore, it would be daft even to consider legislation while the Competition Commission inquiry is ongoing. I hope very much that the Minister will consider that.

There are other concerns as well. I should like to mention the impact of smuggling and counterfeiting. One of the less savoury phenomena of recent years is the rise of the rogue traders who sell counterfeit goods and smuggle tobacco and alcohol. Indeed, I saw the other day that one fifth of all cigarettes sold in the UK are illegal. That is having a damaging effect on the small shops sector and I hope that the Government will take it on board and address it.

Regulation gives rise to huge concern—we could debate it for many hours—and I want to make two very quick points about it. I am concerned about the rise in regulation. The British Chambers of Commerce’s “Burdens Barometer”, which is an ongoing measure of the accumulated combined total cost of regulations on business, has now hit £50 billion since the Government came to power. That excludes the minimum wage, which Conservative Members support. [Interruption.] We do indeed support it; we are on record as saying so. [Interruption.] I was not a Member then, and I do not think that any of my colleagues who are present were Members then. We support the minimum wage, and when I was shadow Minister for small business and employment, I made it very clear that we supported it. There is no question of a flip-flop; we have a firm policy.

A change in the Whitehall culture is needed, because the Government have presided over larger and more intrusive government. The bigger the Government get, the more task forces they spawn, the more agencies grow up around them and the more they interfere. Why cannot they send a signal straight away? Rather than having a Better Regulation Task Force, let us have a deregulation taskforce. Let us include sunset clauses in much of the legislation that is introduced. Let us put an end to gold-plating as soon as possible. If we do that, we might just change the culture of Whitehall in relation to the small firms sector and ensure that the Government start to think about small business, rather than just emphasising their credentials in the big business and larger business community, where, quite frankly, there is a totally different agenda.

I want to say a quick word about garages. Nothing is more depressing than driving through a village and seeing a once-thriving local garage standing empty, probably soon to be replaced by upmarket housing. There are numerous examples in my constituency. Villages such as Grimston, Brancaster and Magdalen had thriving village garages, with shops attached. In some cases, a post office was attached as well. Many other garages are hanging on by their fingertips. I went past a garage the other day where fuel was being sold at £1.06 a litre. Most of those garages have stopped selling fuel, but HMG could consider the whole planning regime relating to small garages and their change of use. Could not HMG also examine closely the fuel supply arrangements for smaller independent outlets that do not have the buying power of the multiples?

The outlook for small shops is bleak. The Government have ignored that crucial sector of the economy. One brighter light on the horizon, however, is the farm shop movement. In my constituency, several small farm shops have opened recently. There is one at Knight’s Hill in South Wootton run by the Melton family. There is another in Bircham run by the local publican, William Poole, in conjunction with the Carter family. The Sandringham estate at West Newton is also about to open up a farm shop, which will incorporate a butcher’s, village shop and post office and which will sell meat from its red poll herd.

Public demand is changing fast. The public are getting more and more fed up with supermarkets refusing to label food properly, especially beef, pork and bacon. They are getting fed up with the crazy lack of concern for the environment shown by large retailers who source products from far-flung destinations when there are home-grown alternatives. They are also fed up with retailers having a cavalier attitude and a total disdain for the organic movement. That is why many members of the public up and down the country are beginning to speak with their pockets and demand higher standards. They are not getting those standards in supermarkets and large retailers, but they are getting them in farm shops. That is why the increase in farm shops, particularly in rural areas, is very healthy.

I congratulate my hon. Friend on a brilliant analysis of the threat to small shops in our country. Did not Napoleon Bonaparte say that England was a nation of shopkeepers? Is not it a shame that, 200 years on from when he uttered those words, we should have the need for such a debate in the House of Commons?

My hon. Friend’s remark is perceptive. Small shops and their proprietors are often the backbone of our communities. They are the people who provide the social focus in villages, towns and suburbs and who care about the community. The service that they offer can also be social, as they provide a place where people meet, converse and feel that they are part of a thriving community. The Government do not properly understand that.

With the exception of what is happening in the farm shop movement, the outlook for small shops is bleak. It will be even bleaker if the Government do not start to listen to what is being said by organisations such as the Association of Convenience Stores, the Federation of Small Businesses, the Forum of Private Business and the Rural Shops Alliance. The Minister is new to this job. He is back in a senior position in the Department of Trade and Industry, and I welcome that. I am sorry that he is no longer in the Cabinet, but perhaps he will have a chance to return to it before too long. Perhaps if he really grips this issue, runs with it and becomes a champion of small shops, he will build up his credentials as someone who cares about the small firms sector. If he does that, and the Government start to listen, there may be more grounds for optimism than I have outlined tonight.

I congratulate the hon. Member for North-West Norfolk (Mr. Bellingham) on securing this debate. I am glad to have the opportunity to discuss the issues that he raises. As a Conservative Member, however, he has some selective amnesia. He said that he supports small businesses, but we should remember that one small business went bust every minute of every day under the Conservative party in government. He said that he supports the national minimum wage, but the Conservatives said that the national minimum wage would cost 2 million jobs. We created the minimum wage and we also created 2 million jobs. As for support for rural post offices, his party closed 3,500 rural post offices in its last period in government. Let us have the debate and discussion, and I hope that I will be able to demonstrate that the Government not only value small shops but small businesses generally in the community and in society.

Retail is of great importance to the prosperity of the United Kingdom economy. Eleven per cent. of our enterprises are retailers: more than 102,500 stores. UK retail sales were worth approximately £249 billion in 2005. Retail is also important in providing employment opportunities. Just under 3 million people in the UK are employed in retail—one in 10 workers. Small retailers have a vital role to play in the success of the retail sector and the provision of jobs. Of course large businesses are important—very important—but small retailers contribute to a vibrant and diverse sector.

The convenience store sector is thriving, notwithstanding what the hon. Gentleman said. The Institute of Grocery Distribution, a key research organisation for the sector, estimates that sales in convenience stores—stores measuring less than 280 sq m, about the size of a tennis court—represent about 20 per cent. of total grocery retail sales in the United Kingdom. The IGD forecasts that convenience stores’ share of the total grocery retail market is likely to continue to rise, increasing from 20 per cent. to nearly 24 per cent. by 2010.

Enterprise is vital to a growing and dynamic economy. To encourage and assist enterprise, we need to create the right support mechanisms. The Government provide a range of support measures for small businesses, including small shops—something that the hon. Gentleman conveniently forgot to mention. Small businesses can obtain grants, funds, loan guarantee schemes and advice through our network of business links. In addition, we ensure that the valued experience and knowledge contained in bodies representing smaller retailers is captured through involvement with our key retail forums. I hope that I am right in thinking that the hon. Gentleman indicated that the Conservative party would support those forums and their continuation.

The retail policy forum and the retail innovation group give small businesses a voice at the heart of Government, and they use it in an effective way. Together the Association of Convenience Stores, the British Hardware Federation, the Horticultural Trades Association and the British Retail Consortium are working with the Department of Trade and Industry. About 70,000 small shops are involved. Recent informed exchanges on the possibility of extending Sunday shopping hours demonstrate the importance of the relationship.

Members of the Virtual Retail policy forum are partners with the DTI’s retail unit. They include the National Federation of Retail Newsagents, the Rural Shops Alliance, the Independent Retailers Confederation and the Giftware Association. At every level, small business in each sector is involved in a real business partnership with Government. The Small Business Service, an agency of the DTI, is a specialist centre of expertise in Government to champion the sector and help small businesses to flourish. It is a shame that the Conservative party is still committed to abolishing that service. The purpose of the SBS is to help produce an enterprise society, to ensure that Britain remains the best place in the world in which to start and grow a business, and to promote enterprise and a climate in which small businesses can flourish.

The Federation of Small Businesses supports the continuation of the SBS. A recent National Audit Office report quoted it as saying that it

“wholeheartedly would like to see SBS succeed because it is the only real answer for small businesses.”

That was said on 18 May this year. The Conservatives, however, still cling to their policy of opposing the SBS.

Small shops have been quick to take advantage of the support that the SBS has to offer. The small firms loan guarantee scheme is a good example. It helps small companies with good business ideas to obtain loans when their lack of the collateral normally required as security by the lender would otherwise make borrowing impossible. Since the SFLG began, about 100,000 loans valued at more than £4 billion have been guaranteed, and since 2003-04 nearly 20,000 loan guarantees have been agreed under the scheme. I suspect that the Conservative party would not continue to support such measures. Current monthly use amounts to about 650 loans, with a total value of around £40 million a month. The average loan tends to be about £70,000.

Small retailers have benefited. The scheme was strengthened considerably in April 2003, when changes were made that brought retail and other local services such as garages and hairdressers into the scope of the scheme. The number of small firms loan guarantees offered to the retail sector since April 2003 stands at 2,925. Between 2002 and 2005, 218 loans, valued at £13.6 million, have been granted in the hon. Gentleman’s county of Norfolk. On his own doorstep, we are providing direct resources and funds to support the creation of small businesses or enable them to be sustained. Perhaps he would give some recognition to that.

Another key area of business support is the Business Link service, which is a crucial part of the Government’s campaign to promote enterprise. Business Link will fast-track customers to the expert help that they need—whatever the issue. Its service is delivered through advisers in customers’ local areas. Over the past four years, the number of customers using Business Link has doubled. The customer satisfaction level—I emphasise that we are talking about small businesses—is at a record 91 per cent., and 96 per cent. of customers are willing to recommend the service to others. Again, the Conservative party has shown no desire to continue with this direct support for small businesses.

The hon. Gentleman raised the issue of the Office of Fair Trading grocery market reference. He will be aware that I cannot directly intervene in such matters, but it will be useful and appropriate if I respond where I can. The UK competition framework has established the OFT and the Competition Commission as independent statutory bodies. The Government wished to remove politics from competition decisions, allowing expert independent competition bodies to take decisions on mergers and markets. I am sure that Members in all parts of the House will recognise the benefits of that revised structure.

On 9 May, the OFT announced its decision to refer the grocery market to the Competition Commission for a market investigation. The evidence compiled by the OFT suggests that the planning regime acts as a costly barrier to entry, making it difficult for new stores to open and to compete with those already in the market. In addition, big supermarkets have significant land holdings, which could aggravate barriers to entry or otherwise harm consumers. In some instances, supermarkets have attached restrictive covenants when selling sites. The OFT also found that there is evidence to suggest that the big supermarkets’ buying power has increased, and that some aspects of their pricing behaviour, such as below-cost selling and price flexing, could distort competition.

Although the OFT has been specific about the issues that it feels could present a problem within the market, the Competition Commission investigation is not limited to considering only those issues identified in the reference document. They could include competition in the food supply chain—farmers are an example—and/or non-groceries sold by supermarkets. It is for the Competition Commission to make that decision.

The supermarket code of practice, which regulates the relationship between the big four chains and their direct suppliers, is not affected at this time, and remains in place until the companies bound by it—Tesco, Sainsbury’s, Asda and Morrisons—are released from the undertakings that form the basis of the code. It will be for the Competition Commission to make recommendations in its report on whether it believes that the code should be maintained, amended or repealed.

I turn now to rural post offices. The Government recognise the important role played by post offices in the delivery of services to rural communities, and have taken steps to maintain their presence. In November 2000, we directed Post Office Limited to prevent avoidable closures of rural branches, and since 2003 we have supported the rural network to the tune of £150 million per year. That subsidy helps the company to maintain the network of rural branches. That is in stark contrast to what we inherited from the Conservatives in 1997. Between 1979 and 1997, the previous Government presided over 3,500 closures, and produced no policy on how to ensure that the network could continue to remain relevant into the 21st century. In addition, about two thirds—900—of directly managed Crown branches were converted to franchise status with no clear strategy.

It did not take long for this Government to recognise that, following decades of decline and under-investment, drastic action was necessary to get the business on track and to secure its long-term future. We set about producing policies that would help achieve that—something that the previous Government had totally failed to do. We set about reversing the decline. Some £500 million was injected to help fund the “horizon” IT infrastructure, and since 2003 the Government have not only committed £150 million a year until 2008 to support the rural network; on top of that, we have put £210 million towards the urban reinvention programme, including some £30 million of investment grants to improve and modernise remaining branches. Not a single penny went to the post office network under the Conservative Government. Indeed, year in, year out, of the profits made by the Post Office, almost 95p in every pound was taken by the Conservative Chancellor to be reinvested in other parts of the public sector. One example was paying large-scale unemployment benefit, instead of reinventing the Post Office to provide a modern service. I will not yield to any Conservative on investment, and future investment, in post office services. This Government have invested the amazing sum of more than £1.4 billion in the past few years in modernisation and retooling of both the directly managed Crown network service and the rural and urban network services.

The Government’s policy of preventing avoidable closures in rural areas has benefited the constituency of the hon. Member for North-West Norfolk over the past 12 months—something that he either does not know about or has just ignored. Both the Brancaster and Syderstone branches reopened in late 2005, and the Brancaster Staithe branch is due to reopen later this month on 22 June. There are two temporary closures at Walpole St. Andrews and West Newton, and Post Office Ltds rural transfer advisers are working hard to fill the vacancies. I will advise the hon. Gentleman further on the reopening of those two post offices.

We have had a debate about Sunday shopping, and the hon. Gentleman will have to wait a little longer, as I am still reviewing the issue in terms of the consultation that has taken place.

If anyone is thinking about opening a small business, they should do it now. There is no better time under a Labour Government achieving the world’s most stable economy. Vote Labour and get yourself a small business!

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes to Eleven o’clock.