Skip to main content

Supermarkets

Volume 476: debated on Wednesday 4 June 2008

It is pleasure to serve under your chairmanship, Mr. Atkinson, and to initiate this debate. I did not realise that I would be awarded one in the middle of my Select Committee proceedings. It is an unusual time for me to have to leave my Committee, but it is a pleasure to be here and to introduce a debate on an issue close to my heart.

Many years ago, before coming into politics, I was a university lecturer. When I worked for a living as an academic, I lived in a community where I became very interested in co-operatives—not the normal, retail co-operatives that everyone thinks about, but individual co-operatives of owner-workers who owned their businesses and operated them. It became quite a hobby of mine and I initiated a great deal of work in the field. I was keen on that sort of industrial enterprise, because the notion of people owning their own enterprise and investing and employing people in the local community always attracted me. My relationship with the broader co-operative movement as time went on and I became more active in politics is on record.

Today’s debate, however, is on a subject that I care deeply about: the diversity and sustainability of local communities. The community that I represent, and which most colleagues from all parts of the House would want to represent, is a diverse and sustainable community that boasts its liveability. We all have an idea of what that means. I was trying to work out what I aspire to for my town and my constituency. In a sense, perhaps, it involves harking back to the past, but there are still many towns with a thriving mix of independent shops—butchers, fishmongers, newsagents, pubs, bookshops, greengrocers and family-owned general stores. Most of us, if we have a community where that exists, are pretty happy about it. Increasingly, however, we see the enormous power of supermarkets to move into towns and cities and take over their retailing.

I shall describe the situation in this country. Some 75 per cent. of the market in food is dominated by four retailers. The four big supermarkets dominate the food industry in this country, which has implications in terms of supply—where they get it—and in terms of their enormous power over British farmers, consumers and, I have to say, elected local authorities. Once one has dealt with a great supermarket that wants to expand into one’s town or constituency, one realises the sophistication of the process and the efficiency of those organisations. Nothing I say today is to denigrate the efficiency of the great supermarkets; in fact, one real problem is that they, of all our industries, are absolutely world-class. They absolutely know what they are about. When one of those supermarkets decides that it is going to be the dominant retail player in one’s area, it moves in a way that would bring credit to any military operation anywhere in the world. They are the finest, and one can understand how they work.

I want to use the debate to dispel a myth: that co-operative retailing started in a place in Lancashire called Rochdale. Everyone claims that the first co-op shop opened in 1844 in Toad lane, but actually, we in Huddersfield had a number of co-operative shops well before that date. A man called Thomas Firth, from Huddersfield, could only go around the country talking to people about the wonders of the co-operative commonwealth if a hall accommodating 1,000 could be found. He is buried in Trinity church in the centre of Huddersfield. In those days of the co-operative commonwealth, it was believed that one owned the shops in one’s community. In Huddersfield, it was said that there were more than 100 co-operatives. If one stood on the top of Castle hill, one could see 100 communities with their own co-operative shops.

I do not want to go back to a golden age, but I do worry, because when one looks at a town, one wonders where the wealth is going. Mr. Atkinson, you and I have known each other for a long time, and people accept that I am not known as the most left-wing member of the parliamentary Labour party, but when we get down to the fundamentals, we have to ask: what happens to the wealth of our communities?

Going back 100 or 50 years, towns such as Huddersfield had many more local businesses. Huddersfield is often used by television and radio people because it is the average town in England. If one looks at us in a triangle, we are two thirds of the way up the centre of England, halfway across the M62 between Leeds on one side and Liverpool on the other, we have the average number of migrants, and our education and skills performance is average rather than awful or excellent. Many people do programmes about Huddersfield being the average town, but that average town has changed dramatically over the years that I have been its Member of Parliament.

Gone are the days when ICI employed 6,000 people, and David Brown, Brook Motors and a range of manufacturing companies employed most people. Today, the largest employer in my constituency is the university of Huddersfield. In the local authority area of Kirklees, health and education are the biggest employers in terms of numbers, but in Huddersfield, it is the university. The beauty of, and my great luck in, having a university in Huddersfield, is partly down to a former Member, Harold Wilson, who was born and brought up in Huddersfield. He did the town one enormous favour: he gave polytechnic status to what is now the university of Huddersfield. It has grown into a university that employs 6,000 staff, has 25,000 students and was voted the new university of the year last year. It is a vibrant and important part of our community. Indeed, its chancellor, Patrick Stewart, the well-known Shakespearean actor, who is also from Huddersfield, celebrates the fact that the university brings more wealth into the town and keeps it in the community.

On the one hand, there is a history of co-operation and small co-operatives keeping business in the community; and on the other, the university also plays that role. But I want to compare that with what the big supermarkets do. We have all the big four supermarkets in Huddersfield, and as we know, in this country, £1 in every £7 is spent in Tesco. That is true of my constituency, and if we add to that statistic Sainsbury’s, Asda and Morrisons, we can imagine just how much money is spent in all the supermarkets. Most managers in those stores have on average about £5,000 to give back to the local community directly—a bit to charities, local efforts and so on. I have often presented computers for schools for Tesco, but I have done so always in the knowledge that Tesco is not giving vast amounts of money to schools, but promoting its own products. The coupons and vouchers are not given away; they are a percentage of the money that is spent in the store.

There is a real problem with the power of supermarkets in our communities, because most of the money that is spent drains straight out of the community and straight out of the town. It goes on wonderful salaries for the leading members of the corporation. Sir Terence Leahy earns £20 million a year with share options, and Dame Lucy Neville-Rolfe—they all have knighthoods or are dames—is on £2 million a year. I understand that they are very well remunerated indeed, but not their employees, most of whom are employed part-time. Their average salary is about £11,500 a year. They are not wonderful salaries. Sir Terence Leahy earns 415 times more than the average Tesco employee.

What worries me about that is the effect on the community. The community does not benefit from any reinvestment in its town or even in its region. In Yorkshire, we have 10 major campaigns against Tesco developing mega-stores in or around—usually outside—the main shopping areas of towns. We have a particular problem in Huddersfield. As I said, when one comes up against Tesco, it is like meeting a fine military operation. First, the small Tesco shops open up on every entrance and roadway into a town. They have different names depending on their size. The smaller stores are the Metros and the very large ones are Tesco Extras. Even a small community such as Dalton, which is in the heart of my constituency, has a Tesco in Long lane, one in Broad lane and a one-stop-shop in Mold Green. Just around the corner, a 24-hour shop has opened, which gives an enormous percentage of retailing to Tesco. At the moment, the worry is that a massive Tesco Extra will open.

Many people believe that Tesco Extra is just another food shop. They say, “Why are you so concerned about another Tesco? It is just another big supermarket.” However, that is not the case; it is a department store. Between 50 and 60 per cent. of the goods sold in a Tesco Extra will not be food. They will be white goods, cookers, televisions, hi-fi systems, clothes and anything that a household needs. In other words, everything anyone else sells in Huddersfield will be sold in Tesco Extra.

The new store is not to be built in the centre of the town. We have a ring road around Huddersfield. Over many years, I have been part of an organisation that encourages people to invest in the town centre. In order to get anchor tenants in our lovely Kingsgate shopping centre, we have had to beg, and wine and dine potential investors. We have been successful in pushing Huddersfield up the list of desired shopping destinations in Yorkshire. We have said, “Come into Huddersfield. Invest in Huddersfield and we will look after you by giving you good sites and all the rest and you will add to the lustre of our retail effort.” The present application is for a site outside the town centre. The store will take up to 100,000 visitors a week, and it will be outside the town centre, so they will not be walking past the other shops—the little shops.

I congratulate the hon. Gentleman on securing the debate. I thoroughly support the main thrust of his argument. I am concerned, however, with the robustness and health of town centres and the fact that independent retailers, which are so vital to their well-being, have been driven out. We cannot stop the march of supermarkets. In fact, I use them myself, and I am sure that everyone in this Chamber does. They have provided a massive service to the people of this country. However, we should encourage them to develop a code of practice, help to start small businesses and do something about loss leaders. I wonder whether the hon. Gentleman will address those points quickly, because they are the ones that count.

I was just coming to those points, but I wanted to get this description quite clear. When a large retailer—I cite Tesco because it applies to my constituency—comes into an area, they have enormous power and experience. However, I wonder whether officers in small local authorities—or even substantial ones such as my own—are experienced enough to deal on an equal basis with a massive company that has made planning applications and built up stores in many other places. Also, I have worries about local democracy and the planning process. In my own patch, there is a strategic agreement between Tesco and the local authority that is secret; it is commercially sensitive. There is no way of knowing what the deal is between the organisation and Kirklees council, which is a Conservative-controlled council supported by Liberal Democrats—I am not trying to make a political point. The fact is it is a secret agreement. While this secret agreement exists, people are applying for planning permissions within the town.

The Queensgate centre, which is favoured by the local authority, is in the town centre. The extension to the Kingsgate centre, which is not favoured by the local authority, is also in the centre of town. At the same time as decisions are being democratically made on those issues, the local authority is already in bed with, or closely associated with, a supermarket that is going to make an application for a different site outside the town centre. One might say, “What a wonderful deal for Huddersfield because they are going to build a supermarket on the site of a couple of 1970s blocks of flats and the Huddersfield leisure centre.” We are told that we will get a new leisure centre. Perhaps we will, but the deal is highly suspect.

An organisation comes along and asks for planning permission—under section 106 or whatever—and they get it. Not only is there a secret agreement between the local authority and the supermarket, but there is also an inducement, in the form of a leisure centre, to get that planning permission. I am very dubious about that sort of agreement, especially as there is a perfectly good store in the town centre and Tesco will get planning permission for a whole area of the town that will include a new hotel and residential properties. There will be a bit of social housing in that, but overall the deal looks extremely favourable to Tesco.

Over the past 11 years, the Government have failed to recognise the real power of monopoly in retailing. I have seen the power of monopoly in many areas of retailing; it is not just about supermarkets. Supermarkets are a particularly sensitive issue because of their impact on the versatility, sustainability and diversity of our towns and cities. We can see that shrinking all the time with international global brands replacing local businesses. It happened in Cambridge. I believe that the local authority has given planning permission to Tesco in a beautiful part of Cambridge. I know that many people campaigned against it. This monopoly of supermarkets has grown in a stealthy way. The Government have been remiss in the way that they have reacted. When the Office of Fair Trading referred the grocery market to the Competition Commission, the commission said:

“The retail sector will be less innovative due to lack of independent businesses that evolve through natural competitive pressure. Needs of people in local areas will not be met due to a loss in locally immersed businesses. Access to affordable healthy food will deteriorate. Regular social contact will be lost for certain members of the community, thereby entrenching social exclusion. Citizens will become less devolved from the decision making process surrounding planning policy in the areas in which they live, due to the growing dominance of large retailers over local Governments and councils.”

I raised this debate today for the best of reasons. First, my constituency, my town and my community is under threat from an unwelcome expansion of one major retailer that already has a dominant position in the town. Secondly, unless the Labour Government wake up to the fact that such a monopoly dominates the lives of the individuals in this country, we will be seen as not having stood up for their rights. The amount of power that such companies have is no longer acceptable. We know what has happened in the past in the United States: monopolies have been taken on and broken up. We have a positive power to do something in this country, but we have not used it. Most of the mechanisms that we used have been limp-wristed.

I call on the Government to wake up to the fact that one of the big issues in the next two elections will be the power of individuals in communities to stand up to the power of those remote people. They are global companies. Money from our towns not only flows into the salaries of the boards of directors, but to institutions well beyond our communities and this country. There is something fundamentally wrong with British society when the Government do nothing to temper or curb the power of monopoly. Monopolies need to be taken on—even the former Conservative Government saw the power of the brewing chains’ monopoly in public houses, and powerful action was taken by Lord Young. The United States took on the big energy companies and forced them to break up. At the moment, we cannot even take on one of the most pernicious monopolies—BAA—which provides the rotten service in so many airports that we must all put up with. It is time the Government realised the power of monopolies and how vulnerable communities and individuals are, and did something about the problem.

I congratulate my hon. Friend the Member for Huddersfield (Mr. Sheerman) on securing this debate. The Under-Secretary of State for Business, Enterprise and Regulatory Reform, my hon. Friend the Member for Harrow, West (Mr. Thomas), who has responsibility for consumer affairs, is out of the country on Government business today, but I shall do my best to respond to the important points raised by my hon. Friend the Member for Huddersfield.

Supermarkets are an important part of life in our country. We all have them in or near our constituencies—I have a Morrisons, an Aldi, a Lidl, a small Tesco and a large Waitrose in mine. My hon. Friend talked about supermarkets’ work in communities and I believe that they do good work. In my constituency, Tesco has given money to a pensioners link line and Waitrose does good work with the Graiseley primary school. It is important, as my hon. Friend stressed, that such businesses are good citizens.

My hon. Friend raised many issues about his own constituency, Tesco and the plans that are under discussion. I am sure he will understand if I do not comment on the detail, given that the proposals are likely to be subject to the planning process; indeed, he would not want me to do so. If an application is made along the lines that he described, the local authority might have to refer it to my right hon. Friend the Secretary of State for Communities and Local Government, so it would be wise not to get drawn too much into the pros and cons of the issue now, lest it prejudice any future decision.

My hon. Friend’s description of monopoly power reminded me a little of a film we all watch at Christmas—“It’s a Wonderful Life”, starring James Stewart. I cannot remember the name of the character who, in effect, owns the town—perhaps other hon. Members know—but I was reminded of him when my hon. Friend described the effect that a monopoly or near-monopoly influence can have on an area.

As a society, we probably have dual views on supermarkets’ power and small shops. Supermarkets have brought us huge advances in convenience, price, even if there are some issues with that, and choice, because we can choose from thousands of retail lines within one store. However, we also like small shops. We might like to do our major fortnightly or monthly shop in a big supermarket, but in between we like to buy bread at the local bakery or go to the butcher and the small grocer. I am not sure that we should always see the issue in terms of conflict, although I suspect that I might if I were a small retailer. As a society, however, we want both the choice that the big supermarkets represent and probably also the choice represented by small shops in specific cases.

Is there not much more that we can do with the supermarkets collectively on issues such as the code of practice on a self-regulating basis? There is a real need, as has been mentioned. Are the Government thinking in those terms?

As my hon. Friend the Member for Huddersfield said, a structure involving the Competition Commission, the Office of Fair Trading and so on ensures that markets operate properly.

My hon. Friend was right to say that the four or five biggest supermarkets wield considerable power. The eight largest retailers account for about 85 per cent. of total grocery sales, with the four largest accounting for about two thirds. Collectively, that is big power.

There have been some inquiries into supermarkets, and the Competition Commission report, to which my hon. Friend referred, explored some of the issues just a few months ago. It found that the grocery market in general was delivering a good deal for consumers, but it identified two areas of concern. The first is that several grocery retailers have such a strong position in local markets that it could lead to a poorer retail offer to the consumer, and my hon. Friend touched on that point eloquently. The second area of concern related to the transfer of excessive risk and unexpected costs to suppliers—the relationship between supermarkets and suppliers is, of course, critical—through practices that the commission believes adversely impact on investment and innovation.

What are the remedies for the concerns that have been highlighted? The commission has proposed several, including restrictive covenants and exclusivity arrangements on land sites, which it has the power to implement. Large grocery retailers will be required to notify the Office of Fair Trading of all acquisitions of large grocery stores. In addition, the commission has recommended to the Government that a competition test be adopted and that the OFT act as a statutory consultee in the process. On the supply chain, the commission will establish the grocery supply chain code of practice.

I know what the Competition Commission said, but what I want to know is what the Government will do about the monopoly—the Minister admitted that large retailers account for more than 80 per cent. of the market, which is a monopoly. What are the Government going to do to break up that monopoly? Why can we not start taxing supermarkets so that the tax can flow back into communities to regenerate them? He has not answered that question. All that wealth is going out of communities. What are we going to do to put it back in?

I am not sure that I accept some of what my hon. Friend has just said. Supermarkets, of course, pay tax—they are major businesses and they pay tax. Whether we are talking about a monopoly is also something to be debated. I said that we were talking about big power, and it is big power when four or five chains are in the position that they are. Whether that is a monopoly, however, is subject to debate. Nor do I accept that all the wealth goes out of the community. We are talking about major employers, which employ hundreds of thousands of people. My hon. Friend says that the wages are low—

Actually, those jobs often offer paid leave, contributory occupational pensions and benefits that are quite attractive to employees, as well as flexible hours. I do not think that the picture on employment is entirely bleak.

There will always be contested views on this issue. As a society, we want the small shops with their character and we want the convenience of the large supermarkets—we want both. Whatever the regime, I suspect that that will remain the case.

11.30 am

Sitting suspended.