Restaurants (Service and Cover Charges) Bill [H.L.]

HL Deb 10 January 1996 vol 568 cc220-52

9.26 p.m.

The Earl of Bradford

My Lords, I beg to move that the Bill be now read a second time.

I should make my personal interests clear, as president of the Master Chefs of Great Britain, chairman of the Westminster Considerate Restaurateurs Association, committee member of the Restaurateurs Association of Great Britain, Chairman of Weston Park Enterprises, and owner of Porters Restaurant. By inclination and by nature I am a committed believer in deregulation and the more directives that appear from Brussels to handicap our restaurant trade unnecessarily, the more I feel that way.

However, the Bill is deregulatory as it will clear away a morass of unworkable codes of practice and government directives to create a positive level playing field on which all restaurateurs can play the game by a clear set of rules. Surely that is better than baffling our customers with rather ambiguous and conflicting practices as we do at present.

The fact is that there is already regulation over misleading prices under the Consumer Protection Act 1987 and the Code of Conduct for Traders on Price Indications which followed a year later. The Department of Trade and Industry appeared to realise that both the Act and the code of practice were not working or being complied with, as it set up a working group in 1992 to study the best way forward. It sat on the recommendations until 1993 and then completely ignored the working group's call for regulation, instead proposing a reformed code of practice. Sadly, it has even failed to deliver that.

All I seek to do with the Bill is to simplify and clarify the mess and confusion that both business and consumers face from the present perplexing mixture of regulation, codes of practice and industry traditions.

Over 16 years ago I tried to introduce a voluntary code to the industry entitled the Newport Code. Its main stated aim was to remove hidden extras from menu pricing and bills. The only achievement was that the Government changed the law regarding not including VAT in menu prices inside the restaurant. One day shortly afterwards I went to my own restaurant to be offered a cocktail entitled, rather grandly, the Newport Codebreaker. This contained a mixture of dark rum, light rum, vodka, advocaat, coconut cream, orange juice, a dash of nutmeg, a pinch of cinnamon and ice. On inquiring as to why on earth it was called the Newport Codebreaker, the manager cheekily told me that it was the cocktail with all the hidden extras in!

Sadly, many serious problems arise when the restaurateur wilfully causes confusion for the customers by using pricing policies that are at best unclear and at worst a deliberate attempt to delude the customer into thinking that a meal will cost him less than it does. This particularly affects tourists as they are totally perplexed by the contrasting policies which are completely the opposite to the situations that they find in their home country. They then leave Britain with a feeling of great dissatisfaction.

In 1992, recognising that the continued muddle over different pricing practices within the trade was persisting, I tried to introduce a restaurant customers charter with the support of the British Hospitality Association, the Restaurateurs Association of Great Britain and the British Tourist Authority. Regrettably, this totally failed to make any significant impact, though it contained sound principles. The same is true of the voluntary code instituted by Her Majesty's Government in 1988, which recommended all-inclusive pricing. Yet again it was almost completely ignored.

In Europe, fortunately, the situation is entirely the opposite. France changed the law a few years ago to make all-inclusive pricing compulsory. This does not mean that you cannot leave a small tip to reward excellent service, but it is not the expected norm. After all, no one can force the public not to tip as it is a voluntary act. Across the rest of Europe, all-inclusive pricing is now standard procedure with the strange exception of Greece, but apparently tipping is not normal there either.

In many ways I agree with those who state that it should not be necessary to legislate over these matters and that the industry should put its own house in order. Unfortunately, time after time it fails to achieve that. There is no way for even the best intentioned industry body to enforce a set of rules or code of practice. Members just ignore that which they disagree with or resign from the organisation.

Is it not time, therefore, that we followed the lead of continental countries and introduced by statute a few standard practices here? The first requirement of the Bill is that prices should be quoted on a fully inclusive basis and that this should be made clear to the customer by means of a simple statement printed at the bottom of the menu and the bill saying that: "Our prices are fully inclusive and our staff do not expect a tip or gratuity". This would ensure that for the first time in this country pricing in all restaurants, instead of just the few, will be fair, honest and open.

I am certainly not expecting—and some have expressed concern about this—that waiting staff will be worse off as a result; rather that they will be properly and more straightforwardly rewarded for the job that they do. At the moment they have to rely on either the strange legalised begging ritual of tipping or on the vagaries of variable seasonal business to produce a reasonable service charge tronc making their wages up to a proper level. The change should increase the public's professional respect for their specialist skills and, in particular, should ensure that they will be decently remunerated with a proper wage commensurate with their ability, in a similar fashion to all other restaurant staff. After all, you do not march into the kitchen when you order a meal and wave a £10 note under the head chef's nose to guarantee that you get good food. Why should you then have to bribe the waiting staff to bring it to the table?

In no other retail business actually selling goods—and obviously I do not include taxis and hairdressers under that heading—does the present situation occur. You do not pay a charge of £1.50 to walk through the doors of an electrical goods shop. You do not then find that the price of a microwave has increased because various parts have been left out, like vegetables in a restaurant all too often. You certainly do not tip the sales assistant when you are paying for the goods.

It follows very simply that if prices charged in restaurants are fully inclusive then there cannot be any reason not to fill in the credit card slip in its entirety. This is a most appalling abuse at present. Only the other day my wife had dinner in a Chinese restaurant in Pimlico Road where they presented her with a bill at the end of the meal that had an unspecified service charge—actually 124 per cent.—added to the total. She presented her credit card. They returned it without the bill and tendered the credit card slip with only the top line filled in. She had to ask for a copy of the bill to check whether or not service had been added before completing the transaction. It was a blatant attempt to try to fool her into leaving a tip on top of the service charge.

Then we come to this strange creature—the cover charge or couvert. Some restaurateurs try to justify that by saying that it pays for the laundry, others that it is for bread, butter, olives. In reality, they could just add it into the charge for every main course and stop trying to mislead the customer into thinking that a meal may cost less than it actually does.

The final requirement is that a restaurant must produce a legible and readily comprehensible bill so that the customer can easily ascertain what he is being charged for. In some restaurants at the moment it would require the use of a calculator along with further careful perusal of both the menu and the wine list to work out some of the indecipherable bills with which you are presented.

This Bill could have gone even further and removed the vegetable charge abuse that so often occurs; namely, when you are persuaded to order three vegetables with your main course and end up with an extra £6 or more, having been charged for a full portion of each. All main courses should be served accompanied, as happens in most other countries. It is yet another way of disguising the final cost of the meal to the customer.

The Bill has the full support of the British Tourist Authority, the Consumers Association, the National Consumer Council, Caterer & Hotelkeeper, The Good Food Guide, Egon Ronay Guides, the Harden Guide to London Restaurants, Sharrow Bay Hotel, the Four Seasons Hotel Group, Albert Roux, Nico Ladenis, and many others in the industry. They regard it as being progressive and in the best interests of business and the customer; they certainly do not consider it as regulatory or even controversial.

Those in the catering trade who argue against it by trying to insist that freedom of choice is important demonstrate how right and important it is, because they all adopt different practices themselves, thus illustrating perfectly the lack of any consensus among them and the confusion that is then caused to the customer.

Other opponents have made conflicting and rather simplistic claims: that it will drive up prices, reduce competition, or make it difficult for a customer to complain by withholding a tip if the service has not been good.

The answer as to whether the Bill will increase prices is yes and no. Yes, in the case of those rare establishments that do not levy service or other charges and where tipping is at the discretion of the diner; but for the vast majority of establishments, no. The price paid by the customer will remain the same; the only difference will be that he or she will know at the outset what the total bill will be and will not be surprised by an additional £1.50 for this or £2.50 for that, plus a hefty service charge.

The second criticism I find particularly strange. Surely fair competition between restaurants will increase if the customer more easily understands what he is to be charged in each individual establishment and is not seduced by strangely ambiguous pricing policies on the menu displayed outside a restaurant into going inside and then being stung by many hidden extras.

Lastly, you can undoubtedly withhold payment for substandard service, exactly as you can for poor food or drink by making a deduction from the bill.

The recent Which? report from the Consumers Association showed that an overwhelming 85 per cent. of the public wanted the price on the menu to be the price seen on the bill; and 73 per cent. wanted cover charges to be scrapped. Obviously, most people are thoroughly fed up with the present situation and we should not disregard their wishes.

Her Majesty's Government should support this Bill, as it is entirely consistent with their declared policy of promoting free choice, fair competition and value for money. I urge them to heed the pleas of many of the most respected in the profession, and particularly the clear call from the public as well as from the many supporters in this House. I should be delighted to discuss the whole Bill with the Minister and make any changes that he sees fit, so long as the substance is not lost.

I realise that there is an absolute necessity for considerable consultation to examine the finer detail and even certain legal problems with the wording. That will inevitably lead to consequent amendments. But let us please attempt to start moving our catering industry practices into the modern age by removing these abuses of the customer and the tax system. In that way we shall make eating out a much happier and more straightforward business, and ensure that the respect and reward earned by being a member of the waiting profession is a vastly better one.

Lastly, I am delighted that two noble Lords will make their maiden speeches tonight on this subject: my noble friend Lord Phillimore and the noble Viscount, Lord Thurso. I am sure that they will add considerable weighty argument and experience to our debate. Altogether, I feel that we have appropriately a fine vintage selection of speakers tonight. I look forward to their contributions with keen anticipation. I beg to move.

Moved, That the Bill be now read a second time.—(The Earl of Bradford.)

9.40 p.m.

Viscount Thurso

My Lords, I believe that I should begin by declaring several interests. I am a director of the Savoy Hotel Plc., the chairman of Lochdhu Hotels Limited in Caithness and managing director of Champneys, the health resort. I am also a former chairman of the Clubs Panel of the British Hospitality Association and currently chairman of the Master Innholders. According to my mother, my father once spoke in your Lordships' House during a blackout. The Chamber was lit by candles and the microphones were not working. He, with his customary skill and ability, surmounted those difficulties. I am only too delighted tonight to have both light and sound. I only hope that when I sit down your Lordships will feel the same way.

I am most grateful to the noble Earl, Lord Bradford, for this opportunity to speak for the first time in your Lordships' House on an issue which has been the subject of hot debate in the industry in which I have spent my whole working life. I am only sorry that on this occasion, while I am in sympathy with the objectives with which this Bill seeks to deal, I cannot support the noble Earl, since I believe that primary legislation is not the appropriate method for dealing with these matters.

My entire working life has been in the hospitality industry, having gone straight to management training with the Savoy Company after leaving school. During those early years, I worked in every department in the hotels and for much of that time was the recipient of service charge and tips. In the light of that experience, I should like to make one general observation. I have often heard the assertion that receiving tips or service is demeaning to the recipient. But I have never in fact heard it from anyone in the industry who benefited from that income. In my case and the case of colleagues with whom I worked at that time, we were only too delighted to be able to increase our remuneration by our own honest endeavour and skill. I do not recall feeling demeaned. I do recall the joy of receiving a tip for a service well performed.

I have been extremely lucky in my life in the hotel industry. By great good fortune I was appointed the general manager of the Savoy's hotel in Paris at an early age. At that time, it was customary for the majority of hotels and restaurants in France to levy a service charge, which was then governed by, I believe, the Loi Goddard. I am aware that the law in France has now changed, but at that time that law set out the rules governing all aspects of service charges. If my memory serves me correctly, it was a requirement that, where a service charge was levied, it had to be paid to the staff. In this country, so far as I am aware, there are circumstances in which a service charge can be levied but not given to the staff. I have heard of establishments which indicate a service charge but do not distribute it, it being kept by the proprietor. I believe that to be wholly misleading, since customers are perfectly entitled to believe that there is no requirement to leave any form of gratuity, whereas in fact the staff will receive nothing. I would certainly support any action to deal with that iniquity.

On my return from France I had the further good fortune to become the founding general manager of Cliveden. I decided at that time and in that particular property that a service charge was inappropriate. I hoped that guests who were happy with the service we provided would chose to leave whatever gratuity they felt appropriate. But at the same time I wanted to make it clear to them that there was no pressure from either the management or the staff. We therefore ended up with a long-winded statement on the bottom of our menus which indicated that service was "neither included nor anticipated", which we later amended when it was pointed out to us by a client that he thought we meant that service charge was neither included nor anticipated. Gratuities thus were left: entirely to the discretion of the guests.

At that time I also came across the practice of leaving credit card slips open, a practice which I personally dislike intensely. I made it a disciplinary offence for any member of staff to leave a credit card slip open. The only complaint I ever received was from a gentleman who complained that he was unable to add a gratuity to his bill, which proves something that all hoteliers know: you cannot look after all of the people all of the time.

Until recently I ran a small company which owned three hotels and a major golf club. One of the hotels was in America where there is no service charge, or there was no service charge in that establishment. But everybody was well aware that one tipped for everything. I was interested to discover that the wages paid to waiting staff in Florida were generally lower than comparable wages paid in this country, even though there was a statutory minimum wage. However, overall it seems that the waiting staff earned more than their counterparts in this country because of the tips that they received.

I have always been struck by the friendly and efficient service which the majority of establishments give in the United States. I believe that there is a direct correlation between the quality of the service and the financial interest which the servers have in rendering good service. However, that system only works if the customers are prepared to partake in tipping, and it seems to me that in this country generally customers are less likely to tip.

Until October of last year I was chairman of the club's panel of the British Hospitality Association. The BHA takes the view, which I endorse, that it is inappropriate to deal with this matter by primary legislation; rather, it would prefer to see an extension to the Price Marking (Food and Drink on Premises) Order 1979. I am also currently chairman of the Master Innholders, an association of some 80 hoteliers who have received the accolade of Master Innholder. At a recent meeting of its executive committee I asked those members present for their views. They were unanimous in opposing legislation as the correct method of dealing with this matter.

I apologise for taking up so much of your Lordships' time in relating my career. However, hope that my experience may be helpful in this debate. While I fully accept that consumers would benefit from an abolition of service charge in the short term, I am equally convinced that employees would lose.

A well-run service charge system permits the restaurateur or hotelier to have a degree of flexibility in his labour cost, which is usually the highest cost element in his operation. At the same time, it allows the employee to share both the gain of the good times and the pain of the bad times. That of course can also be achieved by a bonus or commission system. However, current taxation law is such that if the proprietor indicates that the service charge is voluntary, then the taxation treatment is more beneficial than if it is compulsory or inclusive.

I suggest therefore that an amendment to taxation legislation to allow all service charges, whether voluntary or compulsory, to benefit from the same tax treatment, coupled with compulsion for restaurateurs to pay staff any amount of service which they have indicated is included in the bill, would allow restaurateurs to obtain the benefit of the current service charge system while allowing existing legislation to be used for strengthening the rules governing the display of service charges. Most importantly, it would allow restaurateurs to display prices as inclusive of a specified percentage of service without any negative impact for him or his staff in taxation terms.

I dislike the practice of cover charges intensely and none of the businesses with which I am involved in an executive capacity employs them. However, I believe that cover charges have largely died out and I doubt the necessity of requiring their abolition by legislation.

This is an important issue in our industry. However, at a time when restaurateurs and hoteliers are facing an increasing barrage of regulation, I urge that the Bill is an unnecessary curtailment of their commercial freedom.

9.48 p.m.

Viscount Montgomery of Alamein

My Lords, it is my privilege on behalf of the whole House to congratulate the noble Viscount on his splendid maiden speech, and I do so unreservedly. He comes from a distinguished Scottish Liberal family who have served both his party and the nation over many generations. But today he chose to speak on a subject of which he has great knowledge. He cogently outlined his career in the restaurant industry, and that is precisely what we have found to be of great value. He is uniquely qualified to speak with authority on the subject, and indeed he did so. I hope that we shall hear him frequently in the future.

My noble friend Lord Bradford, who is a successful restaurateur and also speaks with knowledge, has explained the objectives of the Bill very clearly. I believe that it would be widely welcomed by consumers but, sadly, as my noble friend has explained, it has not been accepted universally by the industry. Before we go much further it is important to distinguish, as both previous speakers have done, between cover charges, which include table money, cutlery, table cloths, and so on, which practice of charging has been widely discontinued and of which very little exists, and the service charge—tipping—on which I propose to concentrate now as it is clearly the more controversial element and is causing quite a lot of complication.

In doing so I must declare an interest in that I am a former honorary president of the Restaurateurs Association of Great Britain. My noble friend is a member of its committee. Unfortunately, as he pointed out, the industry is not entirely of one voice; nor is the British Hospitality Association, as was mentioned by the noble Viscount, Lord Thurso. To a certain extent that is understandable, because no restaurant wishes to take a lead and put itself at a disadvantage to its competitors. However, if the matter of no tipping was made mandatory, it would be taken out of restaurants' hands and would be more acceptable since it would be universal. In other words, there would be one rule for all. As my noble friend has pointed out, the code of practice which the industry attempted to recommend and which was endorsed by the Department of Trade and Industry has not been 100 per cent. successful.

The other interest I have to declare in this matter is that I have recently been appointed honorary president of the Academy of Food and Wine Service, a position to which I succeeded when my noble friend Lord Montagu retired. It is an extremely worthy organisation with the most admirable aims—to improve appreciation of food and wine by developing the knowledge, service and social skills of restaurant staff. In other words, it is a training organisation which aims to achieve nationally recognised levels of professional competence in restaurant services. Its objective is to promote the image of restaurant service as a profession equal in all respects to other craft/skill occupations. That is a most excellent and worthwhile objective as it will inculcate the idea of waiting and service as a career. In that sense, it deserves very full support from Her Majesty's Government.

As noble Lords can imagine, the Academy supports the objectives of the Bill since, if restaurant charges are all inclusive, the staff will have a proper salary structure and thus a longer term stability than might otherwise be the case. I should have thought that that would appeal to all parts of the House. Indeed, it is the situation in both France and Italy, where legislation has been applied to this matter. I therefore support the Bill wholeheartedly and hope that it makes further progress.

I shall be interested to hear what my noble and learned friend on the Front Bench has to say, because I am extremely doubtful that the Bill can make its way onto the statute book unless the Government are prepared to support it properly or at least to take it seriously, which I hope they will do, and give the matter further consideration for the future. I support my noble friend and hope that the House will give the Bill a Second Reading.

9.54 p.m.

Lord McConnell

My Lords, I wish to join in the congratulations to the noble Viscount, Lord Thurso, on a very interesting and informative maiden speech. I hope that we shall often hear from him in future. The only interest that I might declare in this subject is as a customer who has nothing whatever to do with the restaurant business. I strongly believe, as has already been said, that staff in restaurants should get proper wages and that they should not have to rely on tips to augment them. They are respectable people and, although the noble Viscount may disagree with me, I personally feel that it is degrading to have to slip money to some other man who is just as good as I am and who is there as a waiter. I believe that he is entitled to a career and to be regarded with respect in that and get his wages in the proper way.

It has been said that in many other retail trades there is not such a thing as tipping. If one goes into an outfitter's shop one may try on various garments. One may be given advice by the assistant, but one is not charged for what might be quite a lengthy service. He gets his wages and he is happy to serve the customer. He may possibly earn some commission, but there is nothing extra charged to the customer. Why should it be any different in a restaurant? I cannot fathom that.

It has been said—and I have heard it many times before—that not all service charges are handed over to the staff. There are cases in which a service charge is levied—very often a large amount, between 10 per cent. and 15 per cent.—and the restaurateur puts it into his own pocket. I believe that to imply that the payment is for the staff and then to pocket it is very near to the criminal offence of obtaining money by false pretences. It should be made a specific offence.

I know that there has been a recent High Court decision that in certain circumstances gratuities which are not in cash become the property of the restaurateur. I am told that that case will be the subject of an appeal. But it should be made clear in law and not left to interpretation of what is rather ambiguous legislation at the moment. It is essential that we have proper legislation. Voluntary codes are of no use at all because decent people in the trade will follow them and the cowboys will take no notice. Therefore the legislation has to be something that applies to everyone and which can be enforced.

I was very glad to see mentioned in the proposed legislation credit card slips and the space which is left at the end. I have come across that as, probably, have most noble Lords. I write in "nil" against the addition and give something in cash to the waiter because I know right well that some are going to put in a figure underneath the sum and then a subsequent total for a higher amount. That is very sharp practice, to put it mildly, and it may be a little more than that.

I agree that we should be brought into line with the rest of Europe, which, with the possible exception of Greece, as has been mentioned, has, I am led to believe, proper legislation. Our near neighbours certainly have legislation which we could well benefit from examining to see to what extent we can copy it.

I notice that the Bill does not apply to Northern Ireland. That is probably inevitable because it seeks to amend Sections 21 and 25 of the 1987 Act, and those two sections are contained in Part III, which does not apply to Northern Ireland although Parts II, IV and V do apply there. It is very much a hotchpotch of legislation. I do not see why one part of the United Kingdom should be treated any differently from the rest. It may be that an Order in Council will be produced if the Bill becomes law, but I deprecate that method of legislation. I deprecate introducing an order which cannot be amended and which has to be accepted in total or rejected altogether. It negatives the function of this House as a revising Chamber if something is presented to us and we are told, "You cannot revise it. You cannot do anything about it. Take it or leave it".

I support the Bill and hope that it will eventually become law. It is a good first step. It may be necessary to have other pieces of legislation along these lines, particularly with regard to the enforcement of wages for catering staff, but I have great pleasure now in supporting the Bill.

10.2 p.m.

Lord Phillimore

My Lords, I welcome this opportunity of making my first speech in the House in support of this Bill. My interest in supporting the proposed legislation lies in being a restaurant customer who detests being "badgered, bothered and bewildered" by the variety of practices adopted by restaurateurs in relation to cover and service charges and the presentation of the costs of a meal.

Every customer is entitled to be made welcome and comfortable in a restaurant. That includes not only the provision of pleasant and attentive service and good food, but also a clear presentation of the likely cost of the meal. No one likes to query the position about cover and service charges at the end of a meal when wishing to leave. I am sure that, like many restaurant customers, I am too interested in the food for the health of my body or wallet, and so I concentrate on the choice of dishes rather than on scouring the menu card for details of cover and service charges, and thus leave myself open to a price shock at the end of a meal. The usual practice, whereby the menu card is efficiently whisked away after the initial choices are made, often never to be seen again since a separate dessert menu is sometimes presented which does not refer again to cover or service charges, serves only to compound the confusion.

Some of the practices that I have experienced, which I understand that the Bill seeks to eradicate, are, I am sure, well known to your Lordships and have been referred to already, but they bear brief repetition. I refer to the lack of clarity as to whether there is a cover charge; to the lack of clarity as to whether there is a separate and additional service charge; to the so-called "optional" service charge which is often filled in before the presentation of the bill to the customer, thus eliminating or at least strongly discouraging any choice by the customer; and to the blank space that is left on the credit card voucher for the insertion of a gratuity which is presented to the customer whose memory has faded about the details of the menu card as to service charges, perhaps from having wined and dined too well.

Those practices cause much confusion and can be misleading not only for those who live in this country but also for those who visit this country for tourism or business. It is vitally important for the reputation and economy of this country to make all visitors feel as welcome and as well treated as possible. This legislation will lead to uniformity of practice to the great advantage of the customer, who will know the likely price of a meal on studying and comparing menus displayed outside a restaurant as well as when he sits down inside a restaurant.

Legislation in this form is necessary because the restaurant profession is not seen to have adopted a uniform code of practice on these matters; and the present legislation is inadequate in that the definition of "misleading price indications" under the Consumer Protection Act 1987 is not wide enough to outlaw these practices. So I commend the legislation to your Lordships.

10.5 p.m.

Lord Rathcavan

My Lords, it is my privilege on behalf of the House to congratulate the noble Lord, Lord Phillimore, on his maiden speech. I share with him the distinction, wisdom and good taste of having chosen a French wife, but I also share with him a keen interest in the restaurant business. I was most interested to hear his comments on the Bill, delivered in a style which was a tribute to his training in the Middle Temple. I am sure we all greatly look forward to hearing his future contributions.

I have to declare an interest as now a director of the Berkeley Hotel, which owns restaurants. I have been involved closely in the restaurant business over the past 15 years as a non-executive director and at one time as a proprietor of a restaurant business. Up to a point, I strongly support the aims of the Bill to remove the great confusion which exists among restaurant customers, particularly foreign visitors, and to prohibit the levying of hidden and unexpected charges.

The cover charge habit, as many noble Lords have pointed out, is indefensible. It is rapidly going out of fashion, and I hope that most noble Lords will support its prohibition. As any good restaurateur knows, the cost of the cover should be absorbed into the normal overheads. Secondly, the habit of adding on what amounts to a compulsory service charge, often as high as 15 per cent., is immoral when it becomes a charge which is not distributed to the staff but is taken by the company or the restaurant owner as a contribution to his own overheads. That is all too frequently the case.

I find equally indefensible a service charge which is said to be distributed to the staff but is in fact taken by the company or restaurant owner and paid to the staff as part of their weekly wages.

That is as far as I would go in supporting the Bill: prohibiting the unfair, the unclear and immoral service charges which go to the proprietor and not to the staff; and banning the cover charge and stopping the confidence trick of not fully completing credit card slips when given to the customer for signature. However, I do not agree that genuine and optional tipping or gratuities for good service should be actively discouraged, as the Bill proposes.

Reward for good service is a part of the restaurant business. When it is properly organised it acts as a great incentive in so many ways to the efficiency of a restaurant. That is recognised by our tax system also. I am grateful to the noble Viscount, Lord Thurso, for having brought such expertise on the subject in his excellent contribution. Where a gratuity is genuinely optional, and where it is distributed directly to the staff, as he said, by an agreed or even elected and truly independent representative of the staff, known as the troncmaster, that charge is not subject to VAT or liable to national insurance contributions. Together those savings amount to over 3 per cent. on the total bill or 25 per cent. of the gratuity given.

I checked this week with the VAT office of Customs and Excise and with the Contributions Agency of the DSS. Both confirmed that there is no reason to change the special treatment in the regulations for tips and gratuities. Restaurants which operate that fiscally efficient system save over 3 per cent. in tax costs. If the Bill goes through in its present form and staff are remunerated only by the employer and not partly through a troncmaster, those costs will be passed on to the consumer.

I assure your Lordships that staff who are partly paid by and through the independent troncmaster greatly prefer that system, as the noble Viscount, Lord Thurso, confirmed was the case when he worked in the industry. They see their weekly wage reflecting the level of business and the reward for good service. It means a fluctuating weekly wage but it is a mighty incentive towards higher standards of service and greater efficiency. Some restaurant owners even ask their troncmasters to bear a percentage of the costs which arise from breakages and pilfering. It is extraordinary what effect that has on the level of breakages and pilfering. I hope that when the Bill is discussed in Committee, your Lordships will take into account that point and will allow the troncmaster system to continue.

Most restaurateurs would like to see a level playing field where bills are legible and readily comprehensible; where prices are as net and as inclusive as possible; where there is no more confusion about spurious service charges which do not get properly distributed to the staff; and where there is a real incentive to compete on the same pitch with good fresh food and good value for money.

I thank the noble Earl, Lord Bradford, for bringing the Bill before the House. It seems to prohibit some of the worst practices now used in the industry. But I do not believe that it should discourage genuine gratuities and tipping. I hope that I have been able to explain to your Lordships the important role played by that most respected man in the restaurant staff—the troncmaster.

10.12 p.m.

The Earl of Lindsey and Abingdon

My Lords, I begin by congratulating both the noble Viscount, Lord Thurso, and my noble friend Lord Phillimore on their excellent Maiden speeches and their contributions to the debate.

Some 40 years or more ago, I was considering making the hotel and catering business my career. I undertook a course in hotel management and bookkeeping which required one also to have some practical experience. I applied for a job and was accepted as a junior or commis waiter at a well-known London hotel. Although I lasted for less than six months in the job, the experience was most interesting and worth while. I believe that it has contributed to my being able to understand more clearly the views of the restaurant owner and the waiter as well as those of the customer.

The hotel for which I worked had an extremely good and well-regulated system governing additional charges. There was no service charge as such. That was left to the discretion of the customer. The restaurant was divided into what were known as stations, which covered about six to eight tables each. Each station had one head waiter, one chef waiter and two commis waiters. Only the head waiter of each station was allowed to accept a tip or gratuity. That was then put into a pot known as a tronc. At the end of each week's takings, the amount was distributed on a percentage basis to the four waiters who worked on the station.

I assure your Lordships that that was an extremely welcome bonus, small as it was in my case, because basic pay was extremely low considering the long and unsociable working hours. There was no such thing as trade union protection or a guaranteed minimum wage.

After I decided to pursue another career, I experienced a very different situation. As an interest, I invested a small amount in a restaurant near to where I then lived in London. The establishment did not impose a service charge and a waiter who received a tip was allowed to keep it. However, the management imposed a cover charge which, if converted into today's money, would amount to about £2 per customer. I wondered what that was for because the place provided no table cloths or napkins; indeed, there was not even a carpet to clean. The floor was of stone and covered in sawdust and the walls were hidden by prints and watercolours.

I find it most annoying—and I am sure that many of your Lordships will agree with me—when eating out at some of these restaurants, when what should have been an enjoyable meal ends up with confusion over the bill. With a menu stating "cover charge and service included" there is a gap for the gratuity when the bill arrives. That amounts to a double service charge. If you pay by cheque or credit card, there is no knowing if the so-called "gratuity" goes to the waiter who has served you or into the coffers of the management. I must say that I am inclined to leave that amount blank and hand a cash donation to the waiter concerned if the service has warranted it. I am also fully aware that there are tax implications to be considered in the Bill.

In conclusion, I welcome the Bill to "prohibit the levying" of service and cover charges other than those stated. I wish my noble friend Lord Bradford every success in getting the Bill through its remaining stages and on to the statute book.

10.17 p.m.

Lord Montagu of Beaulieu

My Lords, I hope that my career in the tourist industry over the past 45 years and its inevitable connections with the catering industry is well enough known for me not to bore your Lordships' House with a long list of my appointments past, present and in the future.

I believe that the noble Earl, Lord Bradford, is to be congratulated on raising this issue, even if the Bill fails to become enacted. I certainly support the Bill, but as Ihe details have been so well rehearsed, there will he no good in repeating them tonight. However, I should like to submit to your Lordships' House my view that, if passed, the Bill would have a very radical and beneficial result, not only on our restaurants, cafeis and hotels but also on Great Britain's ability to continue to compete successfully in the tourist industry. The facts arc simple: tourism is our most important overseas earner and one of our biggest employers, but it was not always so.

Before the war our food was unexceptional; there were very few good hotels and restaurants and there was no expertise or skill to command respect or indeed to attract people to these shores. Over the past 50 years those concerned with the tourist industry have done a magnificent job in making Britain one of the world's great tourist attractions for millions of overseas visitors, as well as our own people who take holidays in this country. Our food is no longer a deterrent, and the same can be said for British wine. The industry has been transformed by better training, dedicated chefs and restaurateurs. It is now not only respected and admired, but also emulated. Indeed, we have seen roast beef featured on French menus, which is a great compliment.

The only regular criticism is the confusion on prices and costs which has been described. The uncertainty about the total bill and how to deal with gratuities deters many people from eating in restaurants, and that applies particularly to the lower income bracket and young people who are not experienced in restaurants. So what do they do? They go instead to fast-food establishments because there is no VAT and no service charge on hamburgers and hot dogs.

France had a similar problem and it successfully solved it by legislation of this sort. Therefore I hope that the Bill will succeed. It is to my mind necessary that any extra charges are not imposed, but what is equally important is that they are seen not to be there. Managers of restaurants can present themselves with transparent honesty as long as they say what is being sold and for how much. That is sadly lacking today. The result of the code of practice is that the good guys obey it but the bad guys do not and therefore the good guys suffer.

Great patronage will result from increased respect and confidence. Of course the staff must be rewarded but I believe that it is for the management to determine how best that should be done. It is not the responsibility of the customer. Some noble Lords tonight have the impression—I hope that the noble Earl, Lord Bradford, will correct this—that the Bill seeks to abolish gratuities. In my opinion, that is certainly not the case. I believe that the noble Earl, Lord Bradford, will confirm that when he replies to the debate. Individuals must of course always retain the right to reward good service. I hope that this Bill will succeed, as I believe that it will make an important contribution to customers' satisfaction and consumers' interests.

10.21 p.m.

Lord Monson

My Lords, as well as congratulating the two maiden speakers on their excellent and interesting maiden speeches I also wish to congratulate the noble Earl, Lord Bradford, on his initiative in devising and bringing forward this Bill. The all too frequent abuse of service charges is something which has concerned me for a long time. Indeed, I first raised this matter in your Lordships' House when the party to which the noble Earl belongs was seated on the opposite side of the Chamber, which takes us back 17 years or more.

However, unlike the noble Earl, my particular concern has been not so much for the customers, most of whom—although I concede not all of them—are astute enough to look after themselves, but rather for the employees. I know from several sources—not least from younger members of my family and their friends who in the past have worked in restaurants during long vacations—that all too often service charges which the customer fondly imagines are destined for the pockets of the waiter or waitress go instead into the coffers of the owners or managers, in whole or in part. Here I entirely endorse what the noble Viscount, Lord Thurso, and the noble Lord, Lord Rathcavan, have said on this matter.

I have often mulled over the idea of introducing a Private Member's Bill myself which would make it obligatory for service charges to go entirely to employees, but I have always been stymied by the all too likely prospect of unscrupulous owners or managers redesignating themselves as employees and thereby creaming off the greater part of the money raised by the service charge. The noble Earl may have come to the same conclusion; at any rate, his solution is the bold, even ruthless, one of outlawing both service charges and cover charges altogether. I use the words "bold" and "ruthless" for two reasons. Even in North America where tipping, and substantial tipping at that—15 per cent. is normally expected—is an absolute social, even if it is not a legal, obligation, service charges are now normally levied if the party is larger than six or eight. This applies not only in areas frequented by British and other European tourists but throughout the greater part of North America.

Moving back to the eastern hemisphere, we find that—unless legislation has changed since I was last in France—the cover charge is still alive and cooking (that is a Freudian slip; I meant to say alive and kicking) on the European continent. If one orders one of the prix fixe menus in France, as one normally does if one has any sense as they are such good value, one will not pay such a charge as such menus are genuinely all inclusive. It is a very different matter if you order à la carte. In that case you are almost invariably charged a couvert, not unreasonably. I am the first person to defend the practice, under certain circumstances.

Restaurateurs are normally terrified of someone monopolising a potentially profitable table on a busy day and ordering perhaps only one course and a glass of tap water. Contrary to popular supposition, it is possible to get a glass of tap water in France despite the restaurateurs' protestations. It would obviously be disastrous for their profits if the practice were to become too widespread. Therefore, I believe that in certain limited circumstances a cover charge on an à la carte menu rather than a table d'hôte one, can be justified.

Provided the customer is kept fully informed, which is not the case at present, and provided there is no ambiguity and no cheating of customers or staff, I believe that restaurants should be allowed a choice. There are many reasons for that. In view of the late hour I shall mention only two.

An isolated restaurant with intermittent trade may only be able to survive if its part-time staff, who may be students, are paid on what is effectively a piecework basis, as happens in Canada and the United States. Secondly, many customers, surprising though it may seem, feel uncomfortable not tipping and would prefer the basic price not to include service so that they can tip either on an ad hoc basis or, having had the calculations made for them, by means of a service charge. Remember that in France, even though prices may be all inclusive, it is usually stated that service of 10 per cent., 12 per cent. or 15 per cent. is compris so that people are aware that there is a charge, which, if the restaurant is properly run, presumably goes to the staff.

To sum up, I agree with the noble Viscount, Lord Thurso, that Clause 1 of the Bill is over-prescriptive, as is the last half of new subsection (1A)(c) in the otherwise excellent Clause 2. However, the latter can be amended in Committee. Should it come to a vote I shall certainly vote for the Second Reading of the Bill as the status quo is most definitely not satisfactory.

Viscount Montgomery of Alamein

My Lords, before the noble Lord sits down, perhaps I may correct him on one matter of fact. Generally speaking, there is no cover charge in France. However, there is frequently a minimum charge. The minimum charge is usually sufficient to cater for the person who comes in and orders one course and a glass of tap water to which the noble Lord referred. Therefore, it is a minimum charge rather than a cover charge. There is no cover charge.

Lord Monson

My Lords, I am grateful to the noble Viscount for pointing that out. It is a long time since I have eaten à la carte in France. I go there as often as possible, but I usually eat the prix fixe menu because it is so much better value. However, that gives me an opportunity to say that, if one sees the words "minimum charge" on a menu, it is extremely off-putting. I would prefer to have a cover charge because there is something very down-market about seeing "Minimum charge £5" on a menu. I would prefer not to see that, but it is entirely a question of personal taste.

10.28 p.m.

Lord Cadman

My Lords, in rising to speak in support of the Bill I hope to be brief in view of the hour. The only interest that I can declare is that of a consumer, albeit one who still pays his dues to the British Hospitality Association. Also, my wife and I were the operators of a restaurant business for some eight years until fairly recently.

During our incumbency of that business we sought selectively and voluntarily to ask our customers for a contribution towards service. Our motivation was to ensure that our staff were adequately rewarded for the extra effort involved in dealing with large groups and at Christmas time, when invariably their expectations in that regard were rarely met. We had few problems with this policy and in general everyone was happy. It has been suggested that the Bill seeks to abolish tipping. I can see no case for this. Tipping is a personal matter and no business should rely on the custom of tipping, in the restaurant or any other trade, to fund their staff's remuneration.

The public seem to have accepted that a service charge is something that they must pay if they want to eat out. Otherwise, what restaurant would be able to get away with imposing it? That is the whole point underlying this practice. It has been suggested that restaurant staff wages will suffer, or that somehow restaurants will pay more in VAT and national insurance contributions as a result of the Bill. That will only occur if the restaurant finds itself able to incorporate any charges it might make into its menu prices thereby increasing them, or by reducing staff wages to compensate for its inability so to do.

It goes without saying that unless the restaurant has a captive audience its prices have to reflect market forces and I can assure noble Lords that there is a great deal of competition out there, notwithstanding the fickle nature of restaurant customers in general.

Making a cover charge is, I feel, less of a problem. At least it is normally nominal and is generally accepted as being for bread and consumables not charged for on the menu. Again, I have to say that these days those who make a cover charge feel that they can get away with it. I should be careful here because cover charges are made in your Lordships' House. Perhaps it is a tradition, but it may be one which has become inappropriate.

Providing uncompleted credit card vouchers for signature is, of course, an open invitation to the customer for a gratuity and no customer ought to feel obliged to accede. I know of one charge card company which actually encourages this practice, although I have to say that I feel it encourages fraud. In our business we had some instances of customers signing the voucher and neglecting to fill in the total. After all, if a customer wishes to add something to the bill in this way he can always ask the waiter to bring another voucher for him to complete and destroy the original.

As things are at present there is total confusion with customers not knowing their rights, or whether any contribution they make goes where they think it ought. Some restaurants make charges of varying amounts; others do not. Some charge groups; some impose a charge above a certain amount spent; some are optional; some are not. It is total confusion, and perhaps some regulation is now necessary. I welcome the Bill and should like to thank and congratulate my noble friend for the way in which he introduced it. I wish the Bill a fair passage.

10.32 p.m.

Viscount Mountgarret

My Lords, I begin by congratulating the noble Viscount, Lord Thurso, on an excellent maiden speech by one who is obviously at the top of the tree in his profession, as is the noble Lord, Lord Rathcavan. The words they have imparted arc worthy of great consideration by my noble friends, most of whom have spoken in favour of the Bill. They are two people who are very knowledgeable in their field. In fact, the noble Viscount is even cleverer than the remainder of us. I think I am right in saying that as regards the two restaurants of the Savoy, in the Grill Room there is a cover charge, service charge, and so on, and in the River Room it is all inclusive. So there is a hedging of bets. If you wish to have the benefits of the one as opposed to the other, "you pays your money and takes your choice".

I must declare an interest in that I am involved with my stepson who has just started a very humble sandwich bar. I hope that one day he might go the route of others to the top of the profession. Like me, he is very opposed to the Bill and I shall tell the House the reasons.

I believe that the sentiments expressed about the unnecessary addition of cover charges, that it is not fair to add in service charges and so on, cloud the issue. The noble Lord, Lord Rathcavan, said that he does not like them. I do not like them. To my mind, a £16 steak is £16 and there should not be any cover charge, nor should there be an automatic service charge. But that does not mean that we need to regulate the matter. Parliament is not there for that; there are trade associations which are more than capable of putting their own house in order. Just because my noble friend Lord Bradford says that it has not been done is no justification for Parliament to legislate. If one takes it to absurdity, are we to have every mortal thing regulated?

I may be treading on tricky ground here because I do not know the facts too well. However, let us take the Jockey Club which runs racing. An enormous amount of freedom is given to the Jockey Club to make the rules and run racing and it is autonomous. If all the rules and the organisation were to be regulated by Parliament, it would completely destroy freedom of life and freedom of choice. It would he most unfortunate.

I must apologise to my noble friend. Having been in the position of proposing a Private Member's Bill which noble Lords kindly allowed me to introduce, like my noble friend Lord Montgomery I know what it is like to have perhaps not the wholehearted support of one's colleagues and friends. At the end of the day, we Back Benchers must stick together because united we stand, divided we fall. However, one cannot support something with which one disagrees fundamentally.

Let us take the wording of the Bill. I am no parliamentary draftsman, but line 10 of Clause 1 states that any restaurant or premises offering similar services "is misleading as to price" if it indicates a separate charge for service of food and drink and a separate cover charge. But that is not misleading, it is very clear. I should like to see on the menu that a cover or service charge is made if the restaurant wishes to make it. It is up to the customers to decide whether they accept it. If they do not like the way the restaurant runs its business they can stay away and go elsewhere. Therefore, to have the clause as drafted is a contradiction in terms. It is not misleading; it is clear and indicative.

Clause 2 is misleading. It is designed to discourage reward and thanks by a customer for service or whatever it is by saying on the menu that staff do not expect a gratuity, end of story. Many customers would feel, "The staff don't expect it, I'd better not give it". Noble Lords know as well as I do that no two people think alike and a customer at the next table may wish to give a tip or gratuity.

I wonder if anyone remembers how the late Nubar Gulbenkian would arrive at the Ritz Hotel in his taxi, turning, as he put it, on a sixpence, would sit down at his table and would produce the equivalent of a £20 note. Putting it on the table, he would say to the waiter: "It's yours if I'm satisfied. It's mine if I'm not".

My noble friend Lord Bradford mentioned going to a restaurant and bribing the chef. It really does not matter a hoot. You either bribe the chef beforehand, or bribe the waiter and the chef afterwards. The fact is that if a customer tips the waiter, or whoever, he will enjoy better service next time than the man who does not. Therefore it is quite wrong to try to encourage customers not to give a tip by having those words in the Bill.

My noble friend Lord Montagu said that it is the responsibility of management to reward, and not the customer. I disagree. It is not the responsibility of management to reward, except in so far as it is entirely right, proper and desirable that the staff are properly rewarded in the level of salaries they receive. But that is not up to the customer; it is up to management. The knowledge that the restaurant trade is badly paid is irrelevant in the context of whether the customer should tip or whether there should be a service charge. Basic pay is basic pay, and it is an area where there could, and should, be improvement, hopefully with the encouragement of the associations.

Last year I was in the United States and Canada, which I am sure many noble Lords know far better than I. I found that the service received in every restaurant, across the whole of the United States, was excellent because the waiters rely on tips. It was known that the prices did not include tips, and therefore the staff gave a better service. On the other hand, if a service charge is added, they can sit back if they feel so inclined and do nothing. That is the advantage of tipping.

My noble friend Lord Bradford, like me, does not like regulation. He stated that. Yet here he is trying to regulate. He said that the association had failed to get its act together and therefore legislation was necessary. That is a non sequitur. He said that his wife had an unfortunate experience in a restaurant. I suggest that perhaps she will not go to the restaurant again. He listed the organisations that support the Bill, such as the Four Seasons. But do they support the principles? I do not believe they do. I know the Four Seasons quite well, and I seem to recall that it certainly had a cover charge and a service charge added.

The Earl of Bradford

No, it does not.

Viscount Mountgarret

I may stand corrected, and if so I apologise.

The sentiments of this Bill are right, but the practicalities contained within it are wrong. I hope that it will not be given a Second Reading. I will take guidance from my noble and learned friend Lord Fraser as to how we proceed from here.

10.44 p.m.

Lord Mountevans

My Lords, as always, I declare an interest. We still have to do these things, until we put them on paper at the end of the month.

We are all grateful to my noble friend Lord Bradford for introducing this Bill seeking to abolish compulsory service and cover charges and thus simplify the consumer's menu-based concept of what he or she is getting. I believe that he seeks to abolish compulsory service charges while seeking to preserve gratuities and tipping which are discretionary.

I am also grateful to the two maiden speakers. The noble Viscount, Lord Thurso, put the supplier case, while my noble friend Lord Phillimore put the case for the consumer. Both want fair play, but their approaches, as a supplier and a consumer, were inevitably different.

The noble Viscount suggested that tipping should be discretionary and I go absolutely and totally along with him. My noble friend stressed the importance of tourism, and indeed uniformity of practice, which I believe is the most important matter. I found myself agreeing with both of them on a number of points. Of course, tipping—gratuity—should be an option. But service charge, cover charge or, as we call it in this House, "table money", should not, I feel, be compulsory.

So where do we go? Do we seek better enforcement or do we seek compulsory regulation? The argument has gone sometimes this way and sometimes the other. There is a whole wad of legislation which could be prayed in aid: the Price Marketing (Food and Drink on Premises) Order; the Price Indications (Method of Payment) Regulations of 1987 in so far as they refer to credit cards; or the Consumer Protection Act 1987 and its references to misleading information on the price to be charged for goods. They should all be taken into consideration and perhaps in an ideal world they would be. Certainly they are all relevant.

I say that in an ideal world they should be taken into consideration, but sadly this is not an ideal world. That, I think, is what provoked my noble friend Lord Bradford to bring forward his Bill. And because it is not an ideal world, one has to go for something stronger. Even if it is only a matter of giving the issue an airing in this House and giving the Bill a Second Reading, putting it on the record, I believe that, deep down, one has to support my noble friend.

Tourism has been mentioned. Again, I declare an interest. Foreign tourists spend some £2.2 billion in this country. Indeed, 22 per cent. of their total spend is spent on eating out. The British Tourist Authority and my old colleagues there make a major point of marketing the variety not only of British food but also of what one might call foreign cooking. London is the food capital of the world. We lack a Lithuanian restaurant, but otherwise there is just about every nationality that one can seriously think of providing food either in the capital or in the provinces. We make a point of encouraging restaurants to provide quality and value for money. But it is difficult to do that if there are different interpretations of what one might call existing subsidiary legislation.

Foreign tourists are, of course, "Johnny foreigner". But we must remember that our restaurants make far more money—I am sure that my noble friend Lord Bradford when he winds up the debate will confirm the fact—from the British tourists. We are all quite often tourists in our own country. So it is quite interesting to see an English Tourist Board survey published only last month which reveals that 55 per cent. of those interviewed were not totally au fait (if I may use a foreign phrase) with the concept of service charge, whether it was compulsory or whether it was discretionary, while 35 per cent. did not understand what services were provided by cover charges or, as the noble Lord who will respond might say, "table money".

Given that ignorance, interpretations or misconceptions, and given European practices, which have been mentioned by several people, we are out of line on this matter. Certainly my experience in France and Sweden has been different. In France, one tosses into the pot the centimes that are left; in Sweden, one tosses in what Swedes call the lösöre—the small sums. I know that the noble Lord, Lord Peston, eats in a rather higher standard of restaurant than I do and he can defend his position when he rises to speak. Certainly in Sweden, if one has a bill for the equivalent of £59.35, one throws the 65p. into the pot. That is all one has to do.

Good service is taken for granted. It is not something that one has to add on—unless of course the service is brilliant. If it is really good, then of course one rewards it. I do not like the hidden extras—the cover charges, the service charges and the others that have cropped up, let alone the incomplete credit slip. I must support my noble friend Lord Bradford. As I said, he has given this matter an airing. I am not sure that his Bill has any great chance of succeeding, but I certainly hope that it will receive a Second Reading tonight. As a consumer, I would certainly support that.

10.50 p.m.

The Viscount of Fallkland

My Lords, I came into this debate with an open mind and I leave it with an open mind, I hope, but much better informed. The contributions of the two maiden speakers were quite remarkable—one from a customer's point of view and the other from a supplier with a great deal of experience. My noble friend Lord Thurso again shows the expertise that comes into your Lordship's House even through the hereditary peerage. I hope that that will be picked up in particular by the popular press. We look forward to hearing both maiden speakers contribute again in this House in the near future.

My feeling as a reluctant diner-out is as a creature of habit. I tend to stick to a restaurant which I like and where everything seems to go according to what I think is right in terms of food and service. One restaurant to which I am extremely loyal is connected with the noble Lord, Lord Rathcavan. I believe he founded it and most noble Lords will be aware of the restaurant to which I refer. One of the rewards for both the providers of good food and those who serve it is that customers return to the restaurant. That is a reward in itself.

Tipping is an extraordinary concept. I do not believe that anybody in your Lordships' House has not said at some time, "How much shall I leave?" We have all developed our own mental arithmetic for working the sums out quickly, especially those who frequent betting shops as well who become extremely quick at mental arithmetic.

I cannot see any great benefit in the complications or the "morass", as the noble Earl, Lord Bradford, described it. He is to be congratulated on explaining his position so well and so clearly. I am three-quarters of the way with him. But it seems to me that restaurants and the serving of. food implies that one will receive one's food served in the best way possible. It is difficult therefore to calculate whether or not a tip has been earned.

For example, there is no difficulty in a restaurant in deciding that one wants to tip the lady who looks after one's coat or hat. If that service is done grumpily and she squashes one's hat or tears one's scarf, one will only leave her a fraction of what is laid out as a heavy hint in the saucer on the shelf. However, if she has done something like look after one's motor cycle helmet, which is often done for me, one may leave a little more. The same is true of the man who parks one's car. One may want to reward the man or woman who goes out in the rain to park one's car. One may even feel that the waiter has done something exceptional if he goes out to one's car to retrieve a wallet left there. But, I have just returned from Italy where, as noble Lords explained, the procedures are governed by law. In that country one receives a bill at the end which one knew perfectly well one was going to receive, and one just leaves small change or perhaps something more substantial if something exceptional happened by way of service. And that is the ideal situation.

Having researched the whole complex problem a little, I find that the situation is not so simple. It washing explained to me by a lady who had been a hairdresser and a waitress—not normally my source of briefing, but on this occasion extremely useful—that in restaurants which generally have a lower turnover and where the price paid per customer is relatively low, the customers and staff are usually young people, who tend to go out on Fridays and Saturdays. At that time, therefore, it is difficult to obtain staff because they also want free weekends. So to those who come in on Fridays and Saturdays tipping is an important part of their agreement to serve the establishment.

Having heard the informed contributions in your Lordships' debate, it seems to me that that could well be corrected by a minimum charge. I see no problem with a minimum charge. I do not agree with the contention of the noble Lord, Lord Monson, that a minimum charge is somewhat infra dig, or whatever phrase he used, rather more than a cover charge. It seems to me that a cover charge is less acceptable.

Fundamentally, the British are rather frightened of waiters. On the rare and distasteful occasions when one sees someone being rude to a waiter that person is invariably drunk, which means that he has whipped up some Dutch courage. About 10 years ago I had the great fortune at a dinner to sit next to the distinguished architect, Sir Basil Spence. It was a very charming evening. He said to me early on, "Please speak up because I am rather deaf. It is one of the afflictions of old age. There is only one compensation for reaching old age. You're no longer afraid of waiters". That has always stuck in my mind. There is a kind of fear of waiters among diners and a great deal of uncertainty, which would in a way be dealt with by the noble Earl's Bill.

After today's debate I tend to lean towards the feeling that legislation is the only answer. Certainly cover charges and the other things, which are on the way out as I understand it, are unsatisfactory. What I really do object to is to see on a bill the note that a 12.5 per cent. or 15 per cent. service charge has been included at the customer's discretion. That is an unfair thing to do because the drunk may well say, "I'm not going to pay your charge", but the sober, well-behaved diner may think, "It's frightfully embarrassing. I don't particularly like this restaurant anyway. I'll pay it and I just will not come again". But that is an unsatisfactory of dealing with a business.

It has been an excellent debate and the evening is drawing to a close. I would just say to the noble Earl that if his Bill gets nowhere this time he should follow the example of other noble Lords on other matters and present it again; and if, again, he is unlucky or meets with no co-operation he should put the Bill to a Select Committee of the House. That is what we did on the Dangerous Dogs (Amendment) Bill and I have great optimism about that piece of legislation. This is an excellent subject to be dealt with by a Select Committee of this House if all else fails. I am quite sure that an enormous amount of helpful information would come out of such a procedure on which even better judgments could be based.

10.58 p.m.

Lord Peston

My Lords, I, too, must start by making a sort of declaration of interest. I am chairman of your Lordships' Refreshment Sub-Committee. The House has the equivalent of a cover charge and service is levied in some parts. I have to tell noble Lords that the staff are happy with that and, indeed, all they ever tell me about is the number of noble Lords who do not feel that they want to tip. I shall not regale the House with some of the delicate problems I have had to deal with in that regard. My daughter is a chef of some distinction and I have many friends in the restaurant industry, from those who own restaurants at one end to those who do the washing up at the other. Rather like the noble Lord, Lord Phillimore, I have probably spent more time and money in restaurants than is good for me. Perhaps I may also say at this point how much I welcomed his maiden speech and that of the noble Viscount, Lord Thurso, who both spoke from experience and knowledge.

Although, as always, we shall grant the noble Earl the courtesy of giving his Bill a Second Reading, because we always do, I am bound to say that, unlike most, but not every, noble Lord, I am totally opposed to it and would not be in favour of it entering the statute book. Therefore, I shall be as blunt as I can. The Bill seems to be based on a misunderstanding of consumer protection on the one hand and on the economics of the restaurant industry on the other. I am aware of the views, inter alia, of the British Tourist Authority, the English Tourist Board, the Consumers' Association and the National Consumer Council. It is my judgment that they are mistaken, too.

I am especially sad about this because my point of departure tonight is what it always is; namely, to follow Adam Smith's dictum that the criterion to be applied in judging any industry's performance is consumer satisfaction. What the Bill seeks to do is to limit what restaurants can do by service charges, cover charges and the like. I shall return to the special question of leaving the credit card slip open and deal with it in a few minutes. It will be illegal to do those various things, as I understand it, that the restaurants currently do.

Why would it be right to bring the law into this? The answer, in so far as any rational argument has been put forward at all, appears to be that that is what consumers want. Before examining that, perhaps I may reflect on what happens in a sample of restaurants that I go to—the matter has already been referred to—and which I particularly like. I shall mention four of them. The restaurant in the Capital Hotel has a very expensive prix fixe and an à la carte menu. It is a superb restaurant and states clearly that there are no cover charges and no service charges of any kind to be added. That is what one pays. At Alistair Little's there is only a prix fixe and again no cover charge, and service is left to the customer. At The Ivy there is à large a la carte, a cover charge, and service is stated not be included. At Shepherd's, to which many of us go across the road, there is a prix fixe with some dishes costing extra, no cover charge and service is added. So we have a full range of what happens.

In the last three cases, since it is clear before the customer enters the restaurant what the position is, I cannot see that those restaurants are doing anything wrong at all. I have to emphasise that the noble Earl is simply in error in what he is attempting to do. Perhaps I may add that, when he reads Hansard tomorrow, I believe he will also note that he has been verging on the defamatory in his remarks on his fellows in the restaurant business, and I was not happy with that.

In particular I must emphasise—and this lies at the heart of where the noble Earl is mistaken, and the point has already been made—the restaurant business is highly competitive. Some people, as a result of both culinary and managerial skills, together with good luck, earn a lot of money: many others do not. The successes of the former attract new entrants, but most do not succeed or survive for very long. It is always a source of great sadness to me that many a good restaurant that I have favoured has gone out of business.

My point is that. in this highly competitive environment it is certainly in the interest of the restaurant to give the customer what he or she wants, especially something so simple and straightforward as a cover charge or a service charge. If consumers want it, one will get customers by printing on the menu in large letters for all to see, "Menu £25, no further charge required or accepted". My view is that if it does not suit The Ivy, for example, to do that, it is up to them to decide and to risk losing their clientele, but that is hardly likely. It is for them to decide that and not for us as legislators.

That takes me to the crux of the matter, which is information. A good example is provided by the best of guides, The Good Food Guide, published by the Consumers' Association. In our present area of discourse it does exactly what is required and what is most helpful. It gives a clear indication of the restaurant's price range, its position as regards service and cover charges. It tells one about the dreadful practice of leaving credit or direct debit slips open when service has already been levied. In other words, it does exactly the job that ought to be done.

That takes me to the Price Marketing (Food and Drink on Premises) Order 1979, which has been referred to. I do not believe that that has been superseded by Part III of the Consumer Protection Act 1987, but I do believe that Sections 20(1) and 26 of that Act are important supplements to the earlier order, together with the Code of Practice for Traders on Price Indications published by the Minister's department in November 1988.

My own view is that it is transparency that is required and that the existing legislation, if enforced, protects the consumer while not interfering unnecessarily in the way in which restaurants conduct their businesses. I believe that the noble Viscount, Lord Mountgarret, made that point earlier.

In that connection, it has been alleged that, although restaurants disclose fully all prices before the customer enters the eating area, which is what they are required to do under the price display order, their actual menus are different. My experience does not bear that out at all. The menus that I am given in the places to which I go are precisely what was in the window before I stepped into the restaurant.

At this point, I must mention another matter which is important but which the noble Earl's Bill ignores. Section 5 of the price marking order requires the display of wine prices. Most restaurants, including the Savoy, do not meet that obligation although it is a legal requirement. The trading standards departments with which I have been in contact—for example, the excellent department in North Yorkshire—do not seem to enforce that requirement rigorously. I believe that not infrequently when the restaurant bill is larger than one expects, the reason is the obvious one: you have ordered more and better wine than you had intended. I believe that consumers must bear the consequences of their own actions in this regard as long as they have not been misled. However, I would welcome the Minister's comments on the enforcement of Section 5, the wine section, of the price marking order.

Perhaps I may now turn to the problem of open credit card slips. I agree with all noblte Lords that that is an outrage. I am told by my legal advisers, however, that restaurants which levy a service charge and then leave open the credit card slip are almost certainly committing criminal deception. The noble Lord, Lord McConnell, who is versed in such matters alluded to that. If restaurants are committing criminal deception, we may not need new legislation; we merely need to enforce the criminal law and someone should bring a test case, perhaps backed by the Consumers' Association or the NCC. However, I may be naive on this matter and perhaps we need a straightforward ban on that unattractive practice. Again, since the Minister has all the legal expertise that I lack, I should welcome his guidance and advice on the point.

I have two points to make about tips and pay. First, as other noble Lords have said, it is the role of management to ensure good quality service first by recruiting good quality staff and then by paying them appropriately. Secondly—this is my only political point—the way to deal with low pay (which arises from excessive bargaining power on the part of the employer relative to the employee) is to introduce a statutory minimum wage. A restaurant which cannot survive except by paying very low wages to its staff deserves to go out of business. Of course, I appreciate that there is occasionally malpractice. The case of Burger King, owned by Grand Metropolitan, appalled all of us. It was an abuse of managerial power, but I have not heard that any managers have been fired. Cases of malpractice are not unique, but abolishing tipping has nothing to do with that kind of malpractice.

As we are on the subject of occasional malpractice, I should add that I was shocked by the television programme late last year which showed clear-cut cases of violence against junior staff being perpetrated by senior staff in some restaurants. Again, does the Minister know of any impending prosecutions by the police in relation to those instances of criminal or common assault? It is a very serious matter.

To conclude, all of this depends on the view that one takes of the consumer on the one hand and competition on the other. The state has a role to ensure transparency—full information—and to prevent the exercise of undue market power, but it is not the role of the state to impose uniformity on this sector or, for that matter, any other. I, for one, believe that the consumer can be trusted. That is not to say that all restaurant experiences are satisfactory. I believe that the noble Earl referred to his wife having such an experience and I could bore your Lordships with many tales of how I have been poorly treated in one restaurant or another.

Even though a restaurateur is subject to great competition, I am always puzzled as to why he sometimes goes out of his way to annoy his customers. When that happens, my answer is simple—again, the noble Viscount, Lord Mountgarret, made the point—I just do not go back. I am under no obligation to go to any particular restaurant, or any restaurants at all. I write off the bad experiences. I go further and tell my friends accordingly. Consumers generally can and should do the same. Therefore, although as a matter of courtesy we give the Bill a Second Reading, I hope that that will be the last we see of it.

11.10 p.m.

The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie)

My Lords, I have listened to the debate with great interest. My noble friend Lord Bradford has been an admirably persistent campaigner for all-inclusive pricing in restaurants over a long period. I begin by congratulating him on his tenacity. It has been all too clear during the debate that some of the points he made struck a chord with many noble Lords, not least my noble friend Lord Montgomery and the noble Lord, Lord McConnell.

First, perhaps I may congratulate the noble Viscount, Lord Thurso, on his excellent maiden speech. He revealed great experience of the industry and made a number of usefully perceptive points. At the same time, while opposing the principle of the Bill, he skilfully eschewed a tone of controversy which might otherwise have been unacceptable in a maiden speech.

Perhaps I might similarly congratulate my noble friend Lord Phillimore. In some respects, while his speech was equally excellent, he had an easier task because he supported the principle of the Bill. He admirably expressed that irritation which we have all experienced of being subjected to an ill-defined pressure to leave a tip when the service has not warranted a penny of appreciation, although we have been uncertain whether a charge appearing ultimately on the bill is one which was declared openly some hours previously when the meal was first ordered. As he put it, for a variety of reasons recollection of what was on that menu might have become somewhat dimmed. It Was a useful pair of maiden contributions, and I congratulate them both.

As your Lordships will be aware, the Government have acknowledged on a number of previous occasions, as I do now, that the variation of practice in how restaurants and similar establishments choose to set their prices can, in the absence of clear indications, at times be confusing. But that is not in itself a reason to put in place further regulation in the form of primary legislation.

To prohibit service and cover charges, as is proposed, would restrict restaurateurs' freedom to run their business in the way they believe will best enable them to maximise their custom and provide their clientele with an effective service. I believe, as the noble Lord, Lord Peston, said, from the consumer's point of view that competitive forces would soon see off those businesses with, if I may put it this way, too greedy an appetite for profit.

I enjoyed the speech of my noble friend Lord Lindsey, but wish that he would reveal to us just how long it was the restaurant in which he invested his hard earned money survived, given the quality that was offered. My main concern is what would be the impact of obligatory all-inclusive pricing on the general level of meal prices.

My noble friend Lord Bradford may have noticed an article in today's Evening Standard which takes up the point of pricing. It has the apposite headline, "Just tip the taxman". That is a point upon which the noble Lord, Lord Cadman, dwelt. I fear that it would necessarily follow that if the Bill were to be implemented, VAT on a service charge included within a single total would, as a matter of law, be required. Inevitably, that would sooner or later be passed on to the consumer.

That is not the only matter. There is also the question of transparency. Whereas now service and cover charges must be clearly stated if they apply, my noble friend's proposals—this may not be what he intends—would have them hidden in one single overall figure. It would thus become more rather than less daunting for consumers to withhold a percentage of the bill if they considered that they had received poor service. Even if in law—and that is an interesting question—they were entitled to withhold a service element having regard to the poor quality of the service received, what would he the percentage to be withheld? Is it to be 8 per cent., 10 per cent., 12.5 per cent., 15 per cent. or in smarter restaurants 25 per cent.? Unless that too were specified, I do not know how the matter would be handled.

What matters, of course, as for any other commodity or service, is that consumers are not misled over what they must pay and can therefore make an informed choice on where to place their custom. General and specific legislation to achieve those objectives is already in place.

An order which requires menu prices to be displayed at restaurant entrances and any compulsory additional charges also to be displayed at least as prominently as the menu prices has been in effect since 1979. Additionally, Part III of the Consumer Protection Act 1987 makes it an offence to give consumers a false or misleading indication as to the price at which virtually any goods or services are available. That Act also empowers the Secretary of State to make regulations on how price indications may be given. The fact is therefore that consumers already have to be made fully aware of what they will have to pay for their meal before they enter the restaurant and place their order.

There is no legislation governing optional charges, but a code of practice approved by the Secretary of State for Trade and Industry under Part III of the 1987 Act recommends that such charges should not be included in bills presented to customers. While a breach of this code is not in itself an offence, a departure from its recommendations may be used to support the prosecution of a false or misleading price indication under the Act.

The Government have twice in recent years reviewed the case for specific regulation on service charges. In February 1993, my noble friend Lady Denton of Wakefield announced that she was not convinced that further legislation would make an effective contribution to solving the problems that can arise over payment for service. She was responding to a report on the issue by a working group of relevant interests from the Monitoring Committee on Misleading Price Indications which the Government had appointed in 1989 to review the operation of Part III of the Consumer Protection Act. My noble friend's view was that it was better to rely on consumer common sense and to encourage best practice within the trade.

My noble friend Lord Strathclyde took the same view when a subsequent proposal to abolish service charges was made in another place in February 1994. I too share those views, while noting again that the power to regulate is already available for use under the 1987 Act should sufficient evidence emerge to justify further controls.

My noble friend Lord Bradford has drawn attention to the survey by the Consumers' Association reported in a recent edition of Which? magazine. This suggested a high level of confusion among people who eat out about what cover charges are for and about their rights to refuse to pay for service. A high proportion of those interviewed were reported to favour abolishing cover charges and either including service charges in meal prices or not allowing an extra charge to be added for service. I do not believe that those findings can be dismissed immediately. But given the confusion that exists as to whether service charges can or cannot be objected to, I wonder whether there is not a greater ambiguity in those findings than is claimed for them. Certainly the fact is that:, despite regular airing over the past three or four years of the issue, the apparent concern revealed in Which? has not been reflected in evidence of consumer dissatisfaction reaching the DTI and particularly pointing to the solution offered by my noble friend. Therefore, while I do not set aside what has been indicated as a matter of concern, I remain to be persuaded that the proposal advanced does indeed meet the not very well expressed concerns that the general public may have.

I should tell the noble Lord, Lord Peston, that, as he implied, the 1979 order does require. wine prices to be indicated. I do not have the knowledge of the same fine restaurants that the noble Lord frequents to know how well that is followed through, but the law is certainly sufficiently clearly stated.

Perhaps I may also deal with the matter of the open credit card. It is really quite difficult to give a simple answer in that respect. If the matter is simply left open—that is, effectively, leaving the customer in exactly the same position—where a service charge has been imposed and he wishes to give a further charge, that is entirely a matter for him. However, if the waiter, when asked whether a service charge has been included, denies it, or if he should actually add in a figure after the credit slip has been signed, it would seem to me that it is not difficult to envisage a number of offences at common law arising.

I shall now turn to the proposals put forward by my noble friend for amending Part III of the Consumer Protection Act 1987. By defining as misleading for the purposes of the Act price indications which indicate a separate service or cover charge, Clause 1 of the Bill would, in effect, prohibit such indications. The Long Title of the Bill confirms that that is the intention.

The purpose of Part III of the Act is to achieve transparency in price indications across all goods and services. It would surely be contrary to That aim—which would seem to be desirable—to prohibit a type of price indication which explicitly advises a consumer whether or not, as the case may be, a service or cover charge is included. That would seem to me to be perfectly clear and not at all misleading. So I would be concerned that the effect of Clause 1 would be to reduce transparency and clarity. I believe that that was exactly the point that my noble friend Lord Mountgarret made in his speech.

A second point of importance is that the clause would change the scope of Part III of the Act to introduce provisions which relate to a specific sector. That would be undesirable, in that it might cast doubt on the continued general application of Part III of the Act to all price indications.

I referred earlier to the power which Parliament gave to the Secretary of State under the 1987 Act to make regulations relating to the circumstances and manner in which price indications are given. If my noble friend's Bill were to proceed, it would override that discretion. Although the Secretary of State has not seen it as necessary to use that power in respect of service charges, were he to do so, he would be under a statutory obligation first to consult the Director-General of Fair Trading and other parties. The proposal would circumvent that requirement.

These are fundamental objections and not simple technical details that could readily be resolved. However, other aspects of the Bill also give rise to concern about how much attention has been given to its drafting and the consequences that it would have. For example, in Clause 1, it is not clear whether, a separate charge for the service of food or drink", would include the entire provision of the food or drink or simply the service actually at the table. In the latter case, the way would still be clear to make a separate charge for the preparation. Similarly it is not clear whether it would be possible to charge for entertainment.

If your Lordships have an objection to sloppy waiters, I am sure I shall unite noble Lords when I say how much I detest singing waiters. If one were entitled to impose a charge for a singing waiter, a dancing waiter or, as I have once been exposed to—horror of horrors—a roller skating waiter, it would seem to me that the valid concern that my noble friend has would in large measure be sidestepped.

Clause 2 of the Bill also contains what I consider to be a number of other defects, but given the time of night it might be acceptable if I were not to spell those out, but I consider they are real ones. The principal objection that I have is the way it is drafted. If there were to be a breach of the code of practice referred to under this provision, the clause of itself would not provide for an offence and accordingly the legal certainty which one would presume was intended would not be achieved.

This has been a useful debate. It has spelled out a number of concerns that are undoubtedly felt across the community and a wide range of views have been clearly and usefully expressed. However, for the reasons that I have spelled out, not least the problems that I see about transparency and the deprivation of choice that would be imposed—while I would hope, as the noble Lord, Lord Peston, said, that the normal courtesy of your Lordships' House would be extended to this Bill in relation to a Second Reading—I have to say that it is not a Bill that I can wholly recommend to your Lordships.

11.26 p.m.

The Earl of Bradford

My Lords, I realise that we have arrived at a rather late hour so I shall try to keep my comments reasonably brief. The purpose of this Bill is essentially to simplify the situation and to avoid confusion. I shall explain a little about tipping. Originally this was a reward for excellence. It has now become the norm. I think it should return to being a reward for excellence. The service charge should be done away with; it is an anomaly.

Various noble Lords have mentioned the situation in America—the land of great and free tipping. Now the service charge is creeping in there. Surely that is the thin end of the wedge. Does that not indicate the right way forward for us to take here? As regards cover charges going out of existence, that is not happening. At lunchtime only today my wife went to a restaurant where a £2.50 per head cover charge was imposed. If a service charge is added to that, too, it can represent a considerable extra charge. I personally cannot see why that should not be absorbed into the cost of other dishes on the menu. It seems a ridiculous anomaly in this day and age.

Also we should recognise that in the main we tend to be rather more sophisticated as regards the matter we are discussing. I would love to be the guest of the noble Lord, Lord Peston, at any of the restaurants he mentioned tonight. However, that is very much the top end of the market where the clientele tend to be rather more sophisticated and understand in advance what they are going to be charged. We must remember the visitor to London, both foreign and British, as was mentioned by my noble friend Lord Mountevans. Those visitors look to advertisements, which seldom give any good guide as to prices in the restaurant, and then they look at the menu outside the restaurant. I certainly experienced quite recently what my noble friend Lord Mountgarret referred to as the cowboy phenomenon. Appropriately, that was in a steakhouse. There the restaurant had managed to cover up the indication of the cover charge and the service charge with the menu of the day. That was not only on one menu board outside the restaurant but on all three. One did not realise until one was inside the restaurant.

Lord Peston

My Lords, is the noble Earl aware that that is illegal? It may be done, but it is illegal.

The Earl of Bradford

My Lords, I fully accept that it is illegal, but unfortunately all too often it happens. Tourists are not as sophisticated as we are and they are totally confused by different practices in different restaurants, as has been demonstrated in our discussion tonight.

Extremes exist all round the world. In Japan there is no tipping at all. Australia does not have a tradition of tipping, while in America the position is the complete opposite. In Europe we have moved to a position where service charges are no longer normal, and tipping—not normally only a few centimes left on the table but one hopes a few francs (and I am not sure what the currency is in Sweden)—is used to express appreciation of a wonderful meal brilliantly executed and very good service. I should like to see us return to a position where tipping is not the expected norm for the ordinary but appreciation of the exceptional.

There seems to have been some slight confusion with regard to credit card slips. I referred particularly to the fact that if charges were all-inclusive there would be no necessity to leave a credit card slip open. I abhor the practice whereby a service charge is made by a restaurant and the credit card slip is left open. Equally, where no gratuity has been charged to the customer and it is left to the customer's discretion as to whether he wishes to leave a tip at the end of the meal, I believe that it is acceptable to leave the credit card slip open, as long as the customer fully understands where he stands.

I find it very sad that a committee of the catering industry on which I sit which for some years has declared itself to be in favour of an all-inclusive pricing policy should recently have changed that policy and now considers that restaurants should be free to do whatever they want so long as that is made clear to the customer. How long does the customer have fully to understand what he will be charged? How many people study the fine print? Across Europe the catering industry has simplified its practices. The customers have shown themselves to be in favour of that.

I should like to end by congratulating the two maiden speakers. They expressed rather different views. The noble Viscount, Lord Thurso, gave us the benefit of his experience working at the upper end of the trade. My noble friend Lord Phillimore gave us the customer's view and referred to what was reflected in the recent Which? survey, to which we should all pay attention.

I conclude by asking the House to give the Bill a Second Reading and to allow a Committee of the Whole House to consider the positive points which it contains. I realise that changes will have to be made. While I accept some of the criticisms of the drafting, perhaps I may say that the Clerk of Public Bills was extremely helpful in putting my points into draft form. Equally, I accept criticism for anything that I may have got wrong. I realise that drafting requires expertise that I do not have. Perhaps we can put some of those points into better order on a future occasion. I ask the House to give the Bill a Second Reading.

On Question, Bill read a second time, and committed to a Committee of the Whole House.

House adjourned at twenty-six minutes before midnight.