§ Order for Second Reading read.
§ 11.5 a.m.
§ Mr. John H. Osborn (Sheffield, Hallam)
I beg to move, That the Bill be now read a Second time.I have always been told, I believe rightly, that a Member of Parliament should never turn up on a Friday, and that, if he turns up, he should always vote against every Measure that is brought forward."—[OFFICIAL REPORT, 10th March, 1933; Vol. 275, c. 1564.]These are not my words. They are the words of the former Member for Wallasey, Lieutenant-Colonel Moore-Brabazon, now a Member of another House, who, on 10th March, 1933, introduced the Gift Coupons Bill. History repeats itself. This year, the same ground which was covered 30 years ago in this Chamber is being trod again. In 1933, the monoplane was a novelty. Now we talk in terms of the supersonic jet. The monoplane required very little control and regulation for its flight. The modern jet has to be operated as a precise instrument.
The former Member for Wallasey introduced his Bill with a speech which lasted less than 20 minutes. I think that, if I were to pursue the analogy of a monoplane and supersonic jet, I would shortly be sitting down. However, I propose to take some time in introducing this Bill, because the subject is one which raises passions. There has been an intensive publicity campaign for and against trading stamps. In introducing the Bill, I wish to explain the history of stamp trading, how it works, the scale of operations, not only in this country but in America, over the last 10 years, some of the pitfalls and the thinking which the sponsors have had to do in bringing the Bill before the House today.
676 State legislators and legislators in many countries have been trying to cope with this form of sales promotion for over 50 years. As the former Member for Wallasey said:I became involved in this particular form of Measure, and have stuck to it ever since."—[OFFICIAL REPORT, 10th March, 1933; Vol. 275, c. 1564.]That happened to him, and it applies to me today. The hon. Member said that he had behind him the support of all the national chambers of trade. I think that that is the case today. But there the analogy ends because the 1933 Bill dealt with gift coupons as against trading stamps. That Bill was quite simple. Clause 2 of it stated:After the expiration of three calendar months from the passing of this Act it shall not be lawful to issue any gift coupon.Hon. Members will see that today's Bill attempts to do something entirely different.
I think that I should explain how I became interested in this trading stamp problem. As we know, in the late summer and early autumn it was quite obvious that the use of trading stamps in the country was growing. It similarly received considerable publicity. Last November I happened to be in the United States of America and on more than one occasion I discussed trading stamps and retail selling methods with responsible citizens and leaders whom I knew in that country. Time and again the advice from these responsible people was to the effect that Britain could manage to do without these things; society here would be the better for it. That was from a people who have become used to trading stamp operations.
Whilst I was in America I read that my hon. Friend the Member for Cleveland (Mr. Proudfoot) had stated that he was contemplating introducing a stamp Bill. Immediately I returned I offered to support him if I was lucky in the Ballot. As hon. Members know, that was the case. That is why I am speaking now.
There are difficulties facing the private Member. This autumn there was some considerable discussion of trading stamp practice on both sides of the House and a desire by members of all parties to appreciate this new form of promotion and, if thought necessary, do something 677 about it. The trouble I have found with my co-sponsors is to decide what a private Member should attempt to do at this time in 1964 about it, bearing in mind that in the previous three months attitude and views have been changing. There has been, obviously, a slight difference of opinion amongst the sponsors of the Bill.
I will be perfectly frank with hon. Members: at one time I was of the view that this task was too difficult for a private Member to tackle. It was only the support I had from my co-sponsors and their encouragement and, I might add, in some cases their persuasiveness, that made me continue to present the dummy Bill early in December. I thank them and the many others for the support, help and encouragement that have been given to me as an introducer of the Bill.
It is only right, at this early stage of the debate, to make it perfectly clear that from the very beginning it has been the aim of the sponsors to control and regulate the activities of trading stamp practice, taking advantage of precedents in many other countries, particularly in the countries which have developed this form of sales promotion, mainly the United States and Canada. It has never been our intention to abolish stamps outright, either by direct or indirect methods. This is, therefore, the main difference between the Bill which was debated on 10th March, 1933, and this Bill, apart from the fact that the 1933 Bill confined itself to gift coupons as such. The 1933 Bill was to abolish. This Bill is to control and regulate.
There has been in the last few months some misunderstanding as to the aims of the sponsors. This could well be as a result of the announcement the Secretary of State for Industry and Trade made to my hon. and gallant Friend the Member for the Hartlepools (Commander Kerans) on 21st November last, when he stated that he saw no needfor the Government to intervene in what seems to be essentially a controversy between retailers."—[OFFICIAL REPORT, 21st November, 1963; Vol. 684, c. 126.]My right hon. Friend justified this conclusion at the time by referring to the Molony Report and the fact that at that time the Consumer Council saw no reason to take up a position on the issue. There was, of course, the promise, 678 with the help of the Consumer Council, to keep a close watch on developments.
More recently there was a constructive debate on trading stamps on 16th December in another place where the Minister of State, Board of Trade, Lord Drumalbyn, justified the Government's refusal to act on trading stamps by referring to a Board of Trade Committee which reported in 1933 that stamp trading was not detrimental to the public interest. He also referred to the Report of the Molony Committee on Consumer Protection of 1962, which stated that there were no relevant changes since 1933.
What were the conclusions of this Board of Trade White Paper which was published only five months after the debate instigated by the former Member for Wallasey? Some of the principal objections which were referred to in that White Paper are very relevant today. Paragraph 38 of the Report states the conclusionThat the customer of a stamp-trading shop is misled by the inducement held out into believing that he is getting something for nothing, whereas he might be paying very heavily for his purchase.It was stated in the White Paper thatmany trading stamp companies offer poor value in the gifts that they themselves provide.It was true then. In some cases it is true now.
It is suggested in this White Paper that a trading stamp scheme conducted by a retailer or a group of retailers is more likely to give gifts of fair value than when the scheme is organised by a trading stamp company.
Paragraph 40 says:That the retailer is frequently unable to escape from the trading stamp system even though he may wish to do so.Paragraph 41 says:That trading stamp companies are essentially parasitic, providing no useful service to the community for the profit which they make.This appeared in a White Paper—Cmd. 4385, July, 1933. This was a Report to the Government.
Arguments were recorded in favour of trading stamps. It is only fair to put these on the record as well. The other arguments were against trading stamps. Paragraph 44 states:That they represent a form of sales promotion under which the retailer is enabled to secure a large share of the local trade …679 Paragraph 45 says:That they enable retailers to compete more successfully with co-operative societies …Paragraph 46 says:That they enable the retailer to adjust his prices by a very fine scale of discounts.Paragraph 47 says:That the cost incurred in distributing 'gift' goods is materially less than the cost entailed by distributing the goods in the ordinary way, and that the difference accrues to the advantage of the public.However, the conclusions are interesting. The White Paper contains this statement:our conclusions are that trading stamp organisations are not detrimental to the public interest"—this statement was quoted recently in another place—so long as they are conducted with integrity.The second conclusion is of equal interest:We have had some evidence that in a fairly numerous and possibly increasing class of cases individual traders have been constrained to accept the services of trading stamp organisations against their will by the fear that if they did not do so their customers would transfer their custom to other retailers who were prepared to do so. This we regard as an undesirable feature of stamp trading, but in our view the proper remedy is for the individuals through their trading associations to combine and either to abjure"—that is an interesting word—the use of trading stamps altogether or to perform for themselves the functions which are now being performed by the trading stamp organisations.How similar the situation 30 years ago was to the situation as it is today. But how different is the case as well. For example, in 1956 there was the Restrictive Trade Practices Act. It is suggested in this White Paper thattrading associations"—should—combine and either … abjure the use of trading stamps altogether or … perform for themselves the functions. …Has recent legislation altered that position now?
In the 1933 Report there was one reservation by Mr. Macgregor:I do not accept the General Conclusion in respect of Trading Stamp Companies, unless these are constituted by retailers. I am apprehensive of the growth of independent companies strong enough to impose on retailers the cost of a stamp system, of which the profits go elsewhere.680 I submit that the situation has completely changed since 1933 and justifies this Bill.
Before going on, I emphasise that there is no question of the sponsors taking sides in a battle between retailers. We have consulted retail associations, local chambers of trade, the National Chamber of Trade, and the Distributive Trade Alliance, and we have had considerable advice and help from stamp companies. We have consulted those concerned with consumer interests and we welcome the help and encouragement which we have received.
I should like to refer hon. Members to this statement in Which?:The Council has taken the view that in its present form this method of promoting sales has some undesirable features. Shoppers could not compare values between retailers giving stamps and those that do not. …I could go on quoting from the statement, but I think that hon. Members will have read it for themselves.
Only this morning I received a release from the Consumer Council, which has consulted with the sponsors of the Bill, particularly since it has been published, and it says:The Consumer Council in general supports the terms of Mr. John Osborn's Private Member's Bill on Trading Stamps, first, because its provisions seem rightly aimed, and, secondly, because it is urgent to secure the interests of the consumer by compelling stamp trading companies to give financial guarantees sufficient to cover their commitments.As hon. Members will also know, the Consumer Council has reservations, to which I shall refer in due course.
I think that it is of value to study the history of trading stamp companies. They are not new. The first one, I am advised, which appeared in Britain was the Blue Trading Stamp Co., dated 1880. Trading stamps existed in this country between the wars enjoying a flurry of limited success and much controversy. They were confined mainly to back-street shops. Some operators obtained a bad reputation through selling stamps, and then, according to plan, going into liquidation.
There were such companies in my own city of Sheffield, and those much older than me remember the sort of practice that existed then.
At that time, gift catalogues were not often issued and the quality of the 681 gifts was generally poor. Shopkeepers were invariably blamed by the public for these shortcomings. On the other hand, the Sperry and Hutchinson Co. was formed in New York at the end of the last century and this is still the largest stamp company in the United States.
My attention is drawn to the fact that the first appearance of stamps in America, in a Milwaukee department store, was in 1891. So trading stamps are nothing new, and I think that all of us are aware of that. Returning to my visit across the Atlantic, I remember in 1951 seeing self-service stores, out-of-town shopping centres and supermarkets. I remember coming back to this country and pointing out to many retailers that I saw this developing on this side of the Atlantic, Of course, this form of retailing is sweeping Europe and this country at the present time. It is not unreasonable, therefore, to refer to experience in America of trading stamp practice To my way of thinking, trading stamps are one of the most sophisticated techniques available for selling American products, mainly through retailers, admittedly. There is an Institute of Trading Stamp Companies which has over 220 affiliated members out of a total of about 400 in this field. I have had brought to my attention in the last few weeks a symposia of trading stamp operations and have read impressive literature and promotional books from the United States of America which definitely confirm that the operation of a trading stamp company is in itself a highly developed sociological—I would almost say scientific—economic promotional activity, ranging from accounting and commercial practice to a detailed knowledge of consumer psychology.
A study of this literature makes fascinating reading. To quote an example. There is the differing behaviour of saver types. There is the aggressive saver—in England we call him a keen stamp collector. Then there is the passive saver, who will have nothing to do with stamps in any circumstances whatsoever. There are studies of the changing composition of interest units, studies of the characteristics of the savers as against the non-savers, and details of race, family size, income, marital status—all being important 682 factors. As leading stamp companies have mastered what I can only describe as penetrating techniques in this field with a thoroughness characteristic of the American people in so many fields, it is not unreasonable to assume that the same techniques, thoroughly Anglicised, of course, will eventually be adopted here with the growth of this form of practice.
I think that we should refer to the operation of trading stamps and remind ourselves that the retailer buys stamps from a trading stamp company. The retailer then issues to his customer one stamp for, say, every 6d. spent in his shop. The customer sticks the stamps into a sayings book provided free by the stamp company through the retailer. One or more filled savings books may be redeemed for gifts listed and illustrated in a catalogue, either at one of the company's redemption centres or by post. In one catalogue which I saw a silver-plated teapot from a Sheffield firm could be had for 14 books.
Gift values are quoted in terms of books—three, three-and-a-half, and so on. The companies also encourage stamp saving clubs for charitable purposes, but I will refer to that later. One case of the operation of a British company provides an example. The retailer may buy 6d. stamps in pads of 5,000, having a face value of £125. These will be sold to the retailer at varying prices. For instance, one pad of 5,000 stamps would work out at £3 15s. per pad, and 50 such pads at £2 19s. 5d. per pad.
The retailer, therefore, purchasing one pad at a time, would buy these stamps at a rate of 3 per cent. on retail sales. If he buys them at higher rates this may drop to 2 per cent. on turnover in the case of multiple stores. The number of books in each savings group depends on the company. Each customer's savings book takes 1,260 stamps. This represents £31 10s. worth of purchases at least, and, depending on the rate at which the retailer buys the stamps, a book of stamps may cost the retailer something over 15s.
In other words, the trading stamp company is in itself a form of department store buying in bulk and selling at more or less retail value. The modern stamp company carefully surveys an area to decide which retailers 683 should be given the franchise to distribute the stamps. If, in a small town, one shop retailer signs an agreement with the trading stamp company, this trader, because he is in the first in the field, invariably enjoys a rapid increase in turnover.
This increase in turnover, in practice, has varied, but a 50 per cent. or even 100 per cent. increase in turnover is not unheard of. Depending on the trade, it would seem that turnover has to increase from between 10 and 18 per cent. to justify a retailer having the franchise of a stamp company. The franchise itself usually takes the form of an agreement signed by both the trading stamp company and the retailer.
I think that we should look at the economic side of the trading stamp operation in the United States and this country.
§ Sir Ian Orr-Ewing (Hendon, North)
I am not quite clear where my hon. Friend gets the figures of 10 to 18 per cent. Is he suggesting that the trading stamp company withdraws the franchise if that turnover is not achieved, or does my hon. Friend feel that that is the necessary turnover increase by retailers in order to cover their costs? The second is a very high figure.
§ Mr. Osborn
It depends on what is the justification. Each trading stamp company has its own yardstick as to what increase in volume of trade justifies taking on stamps. That is the only way of dealing with this matter. Obviously, there must be such an increase in turnover as to justify the use of stamps both from the retailers point of view and the stamp company's point of view.
The economic side, I think, is interesting. It is also interesting to note that at the present time in Albany, in New York, a Bill is going through. If I may quote the Attorney-General of Albany, Mr. Lewis J. Lefkowitz, who is introducing legislation into the State at the present time, he says:Recent statistics compiled by the Trading Stamp Institute of America offered dramatic evidence of the growth of the trading stamp business, which literally reaches into every household in the country. During 1963 the Report indicates that sales of stamps totalled 870 million dollars and that this figure is expected to reach 950 million dollars during 1964.684 There seems to be conflict about the rates of growth in America. Some spokesmen say that this is dying down. On the other hand, there seems to be a 5 per cent. to 10 per cent. increase per annum. Four or five years ago in America the percentage was 30 to 40 per cent. per annum. What is true is that this high rate of growth existed four or five years ago across the Atlantic. There are many companies. The biggest take 37 per cent., 14 per cent. and 10 per cent. of the trade in America. There are roughly 250,000 retail outlets distributing stamps. From my information, which I have had difficulty in collating, there are about 2,000 redemption centres in America.
One particular feature is the growth of clubs, which donate stamp books to a pool for the purposes of acquiring some expensive item for a convent, or a school, or for acquiring furniture, hospital equipment, a church organ, and so on.
It is only in the last 12 years that trading stamps as a sales promotion, which has gone hand in hand with the larger retail stores, have come from over the Atlantic. In 1957, the Gift Coupon Co. was formed in this country; in 1958 there was the Green Shield Trading Stamp Co., and more recently Sperry and Hutchinson. The turnover has varied, but a fair figure at the moment is £6 million to £8 million. In another place a figure of £13 million was given. The rate of increase is estimated at 30 to 40 per cent. per annum. One figure which I have seen is that by 1970 this may reach £30 million.
I will not dwell too long on the economics of stamp trading, but I accept from the consumer's point of view that if one is driving along a road in a car and there are two petrol stations, one which gives stamps and one which does not, and both charge the same price, then it seems well worth while to go where the stamps are given away. This is the point of view of the consumer, whether he is a motorist or a shopper. I will leave other hon. Members to state what they think goes on. On the other hand, there may be a small locality, in a village or a town, at which saturation is reached.
In America, in one State, the point was reached at which 92 per cent. of 685 all groceries were subject to stamp trading. When the point is reached that all retailers of this particular line of product, be it groceries or petrol, provide stamps, then the activities of stamp traders can be described in the words of the White Paper of 1933 as no more than "a parasite" on top of the normal processes of retailing.
Surveys, including those in the Financial Times, carried out recently have been inconclusive from my point of view. I must say that to be honest to hon. Members. There is no proof that a supermarket giving away stamps does so at a marginally higher cost than those which do not sell stamps, although I have read many reports which either prove or disprove this point. It is perhaps worth recalling the concluding paragraphs of a report by Mr. H. D. Dickinson, M.A., Professor of Economics at Bristol University. He says that the general conclusions which emerge from this survey are three.
The first is that stamp trading is undesirable because it confuses the consumer's judgment, limiting his freedom of choice and making it difficult for him to make accurate estimates of relative prices. The second is that it is difficult to see what gain can accrue to the consumer seeing that in the long run he must pay for the whole cost of the goods.
§ Sir Harry Legge-Bourke (Isle of Ely)
Does my hon. Friend not realise that the consumer does not pay? It is the shops that pay. What the consumer then does is to get the benefit of buying at a retail shop what has been bought in bulk.
§ Mr. Osborn
This is one of the economic arguments which I could or could not tackle. Economic arguments are confusing. This is an economic point rather than a political point which must be made clear and it depends on the state of growth.
The third point which was raised was that if any gain can accrue to the consumer it is through the elimination of high cost distributors, but freer competition would bring about this end.
§ Mr. John Hall (Wycombe)
I am sorry to come back to the point about the additional cost which must fall on 686 the consumer in the long run if he deals with the trading stamp retailer. Can my hon. Friend give evidence from America or any other country showing that prices to the consumer have increased as a direct result of stamp trading?
§ Mr. Osborn
I have said that this section of the argument is inconclusive. I thought it fair to record the conclusions of one economist. I hope that I shall deal with my hon. Friend's point later.
We must accept that there is a glamour in stamp-collecting. There is a desire by women who, in some respects, with to be independent of their husbands. Just as a farmer's wife makes some money out of chickens "on the side", so toe city wife wants to make something out of her shopping in the supermarket. In my view, the gift has a memory value which perhaps has a psychological advantage.
From the trading stamp point of view, it is important that once the retailer has signed an agreement he should actively sell stamps, and this has been pointed out to me by those operating trading stamp companies. There have been many abuses of trading stamp practice. They are to the detriment of stamp promotion and present various factors with which we in this country have to contend.
I should like to review some of the legislation in other countries. In Canada, just before Christmas, there was a charge under a section of the criminal code which makes illegal the sale of goods by stamps redeemable in places other than where the goods were purchased. There is an interesting case going on at present.
In Kansas, stamps have been prohibited outright. There are eight States which have laws which require trading stamp companies to register with a State agency, post a bond for the redemption of trading stamps, print a cash value on the stamps, and redeem the stamps in cash at the stated value at the option of the holder of the stamps. Redemption has been in various figures—one dollar, 50 cents, to 25 cents. A further five States demand a cash value on the stamps and redemption of the stamps in cash at the option of the holder, and in two States, Wisconsin aid Wyoming, stamps may be redeemed for cash only.
687 To my knowledge there have been four recent bankruptcies. In two cases the bonds which had been deposited by the stamp companies made a contribution towards the liabilities and in the other two cases the retailers themselves met the liabilities in order to maintain goodwill.
Legislation in Europe has been interesting. In France, it is expressly forbidden to redeem stamps for merchandise at a time later than that of the purchase which provided the customer with the stamps, and, therefore, the only permissible schemes are those which provide redemption for cash, for articles of nominal value or for the same article as the original purchase. In Germany, the law provides that trading stamp redemption can only be for cash or for the same article as the original article purchased, or for articles of little intrinsic value. Stamp trading is forbidden in Iceland, Jersey and Norway.
What are the political considerations that should concern the House? If stamp trading is a form of sales promotion, retailers must be permitted to retaliate against stamps if they do not like them, or do not wish to use them, by offering alternative incentives—discount credit, delivery, or special service. A second consideration, especially in the South of England, is that a large number of women, of all political parties—and a "round robin" has proved this point—would resent any endeavour by a political party to abolish stamp trading outright. I therefore welcome the fact that I have been able to raise this matter by way of a Private Members' Bill.
However strong may be the views about the ethical and moral considerations, the Members who have sponsored the Bill are determined, for the reasons that I have outlined, to control and regulate this form of activity, and especially to look after the consumers' interests.
I now turn to the Bill. It is necessary to explain some aspects of it. Its first object is to put a cash value on trading stamps. Its second is to make stamps redeemable for cash. Its third is to ensure that the catalogue published by the promoters of trading stamps shall state the cash value of a filled stamp book so that the consumer can readily 688 compare the cash alternative with the gift value in the catalogue—in other words, compare gifts with cash and the expenditure incurred, and draw his own conclusions.
Its fourth object is to take adequate steps to control and regulate the activities of trading stamp companies in order to ensure that they are operated competently, and are not set up with the deliberate view of going bankrupt after a limited time. Hon. Members can probably remember one such case. How have we tried to do this? Under Clause 1, the printing of the cash value on the stamp, together with the name of the company issuing the stamp, should present no problems.
§ Mr. Reader Harris (Heston and Isleworth)
The cash value of what? Is it the cash to be received in exchange for a stamp when it is handed in?
§ Mr. Osborn
Yes—if it is handed in for cash redemption. This does not mean that trading stamps can be treated as a form of currency. Clause 3(2) deprives stamps of one of the essential characteristics of currency, namely, full negotiability regardless of title.
Clause 2 provides the safeguard of redemption for cash. It is unsatisfactory if the consumer is tied to one retailer simply because he happens to be collecting stamps of a certain stamp company. In this country, in the case of one stamp company, it is necessary to purchase over £30 worth of goods to obtain a gift of the approximate value of 15s. Considerable purchases must be made before a book is completed. Therefore, 5s. would appear to be a reasonable figure, and it compares favourably with the figures for the United States of America to which I have already referred.
The other advantage of this Clause is that the retailer who gives stamps will find that he is no longer tied to one stamp trading company, as is the case now. The retailer in an urban area who accepts the franchise of a stamp company and then, for whatever reason, gives it up, is likely to lose more than he gained by originally taking up the franchise. This is because his customers go to the retailer across the road, who has taken over the franchise that he has given up. The effect of this tie 689 to the consumer will not now be so great.
Subsection (4) establishes a legal relationship between the stamp company and the consumer. At the moment, the only relationship is between the stamp company and the retailer.
§ Mr. John Hall
Can my hon. Friend clear up one small point? Clause 2 refers to redemptionin current coin of the realm.Does that include banknotes?
§ Mr. Osborn
It does not. We have had counsel's advice on this point. It is not the intention that this should refer to banknotes. Hon. Members will realise that I am not a lawyer, so I will leave it to my hon. Friend the Member for Colchester (Mr. Buck) specifically to deal with this point when he winds up the debate—[Laughter.]—I am sorry. I meant to say "if he is fortunate enough to catch the eye of the Chair".
Clause 3 has been one of the most difficult Clauses for the sponsors. There has been far more unanimous agreement between us, and I would merely describe it as an adequate compromise. I am aware that others would not describe it in that way. It has been heavily criticised. I have received criticisms privately from several hon. Members, and from the Consumer Council—a criticism which I respect—and I understand that it has also been criticised in other quarters.
Cash redemption in itself is ridiculous if the stamp company puts on such a low cash redemption value that it is not worth redeeming the stamps at all. On the other hand, it would prohibit stamp trading activity altogether if the redemption value of the stamps were made equivalent to merchandise value or to a high value. If there were collusion between stamp companies it would be possible for the redemption value to be made so low that the impact of competition would be negligible. The Board of Trade, or the Executive, is given powers of judgment under the Clause which I admit might be hard to exercise. A second difficulty is to provide a definition of a proper relationship between redemption value and either merchandise value or the value which the retailer has paid for the stamps.
690 It might help the House to point out that the sponsors have had a chance of discussing the question with a company that has had considerable experience in America. It has asked me not to quote detailed figures, but I will try to put the case in average sterling equivalents. The number of stamps sold in any one year, and the cost of wholesale purchases by a stamp company, can be discovered at the end of the year by a normal costing exercise.
Assuming that a book of stamps is equivalent to 1,200 stamps, the information from this company shows that the average cost to the retailer, allowing for discount values, can be 19s. per book, and the average retail value of redemption merchandise may be as high as 22s. per book. It may even be greater in some cases. The average value of wholesale purchases is, therefore, about 11s. Per book. Where casa redemption has been an alternative to merchandise redemption, this figure has been put at between 8s. and 9s., or perhaps 10 per cent. of the wholesale price, but in the few States where redemption is by cash alone it has amounted to about 14s. per book.
This is a guide provided by another country, and this is why I have quoted the figures. There would be difficulty in establishing whether this is a proper relationship. The alternative suggestion put forward by the Consumer Council, that cash redemption should be closely related to the wholesale purchase price of merchandise, is one to which I would feel favourably disposed, and which, I think, could be considered in Committee. There are safeguards in respect of the rather powerful regulations under Clause 3. They would be subject, under Clause 10, to a Resolution of either House of Parliament.
Clause 4 is self-explanatory. It deals with the catalogue so that the consumer may know the cash repayment values as well as checking his own goods. Clause 6 has been criticised. The sponsors of the Bill have had a difficult time. We had a very detailed schedule of what could or could not be done, but I am aware that a Private Member's Bill can be made so lengthy that it defeats its own object. We deliberately gave indefinite powers of regulations 691 because some of the conditions of trading stamp operations are not yet known in this country. It is essential that the Board of Trade or some responsible body should be able to decide the information which it is necessary to have before a trading stamp company can be registered.
This Clause is designed to protect the retailers and consumers against mushroom stamp companies which require only to print stamps as a first operation. Then the stamps are sold for cash to retailers. In the early stages there is a rapid cash flow into the company. If operating expenses are too high the company can get into financial difficulties and this could lead to bankruptcy. The case of one company was mentioned in the Press only a few weeks ago.
Paragraphs (g) and (h) of the Clause are all-important although both could well be more precise. Bonding is not a common practice in this country, but some equivalent means could be devised. The difficulty for a private Member is to draw a parallel basis to bonding which exists in other countries. In America, for a turnover of perhaps 250,000 dollars a bond of 25,000 dollars is required and for between 250,000 and 500,000 the bond may be 50,000 dollars. Maximum bonds on that basis are 100,000 dollars in some States and 150,000 dollars in others. That could be a guide, but when we were preparing the Bill we did not consider it wise specifically to put bonding instructions into a Private Member's Bill of this sort.
One of the most interesting things is the definition of a trading stamp.
§ Mr. J. Grimond (Orkney and Shetland)
If the hon. Member is dealing with Clause 6, I wish to ask him a question for information. This refers to Clauses 6 and 3. I appreciate that the Minister will be telling us the Board of Trade point of view later, but has the hon. Member any idea of how much extra work this would place on the Board of Trade; whether it would mean an immense expansion in activities and staff?
§ Mr. Osborn
Obviously, it would involve some work. The difficulty is that 692 the trading stamp operation has had to be regulated in other countries. I think that the principle of registration is good. There must be some criterion of whether it is a bona fide company or not.
§ Mr. Osborn
The hon. Member has said that we should abolish them altogether. I accept his point, but he will agree that the Bill has been designed to regulate and control these operations and that there must be some machinery. It might help if I say that, in Committee, the sponsors of the Bill would, of course, consider a sensible, modified scheme to provide the safeguards we have set out and to bring this about.
§ Mr. R. T. Paget (Northampton)
Would the hon. Member consider an Amendment, which I should think extremely sensible, to omit everything after the words:No person shall issue any trading stamp"?
§ Mr. Osborn
I have set out the object of the sponsors, although I respect the view of the hon. and learned Member for Northampton (Mr. Paget).
The final matter I deal with is the definition of a trading stamp. If the manufacturer decides to insert coupons with his goods, where these are later redeemed in the form of merchandise as in the case of cigarette coupons, this is a matter for the manufacturer and it is specifically excluded. There is a specific exclusion to cover the case of the sale of newspapers containing as an advertisement coupons issued by the manufacturers of a similar type.
There is the third case where the retailer issues his own stamps and where the same retailer who sells the goods undertakes to redeem them. There is a reservation here. This is to safeguard such activities as Christmas clubs. Dividends of co-operative societies are excluded from this provision, but where a large chain store has many shops over the country and sets up its own stamp company I think it reasonable to include the operation of that type of stamp company in these provisions.
I have covered the problem of trading stamp operations and dealt with the Bill. I have spoken for far too long and I 693 should like to conclude so as to give other hon. Members an opportunity of commenting on the Bill. I emphasise that those retailers who do not like this form of promotion should, in their own interests, devise schemes to retaliate. The abolition of resale price maintenance has given them one such opportunity. On the other hand, the abolition of resale price maintenance has added to the confusion for the consumer and this confusion will no doubt become greater as the months and years go by. It is true to say that the opportunities for sales promotion activities, including trading stamp activities, are greater than they were a few months ago.
I am aware, particularly after the interruptions during my speech, that the Bill is not perfect. I have noted the criticisms and I hope that hon. Members will accept that I found this an extremely difficult task to undertake. I know that many criticisms will be put forward today. I have been grateful for comment from my co-sponsors and the Consumer Council. My co-sponsors, I am certain, would consider reasonable Amendments, but I remind the House that the Bill has been drafted as a result of discussions with many interested groups. This must be appreciated because of the complexity of the subject with which we are dealing.
I acknowledge that until the Consumer Council has completed its initial survey, and has published it next month, and until the Institute of Economic Affairs has published its conclusions, much of the information about stamp trading in this country is essentially vague and there is no sound basis on which to base economic arguments on this matter in this country. I think it wise to bring in some form of legislation now and then to develop it. That is why regulations would be brought in as experience grows.
I have been impressed by the fact that many legislators in other countries are looking to this House—I did not know this until a short time ago—to see how we in the Mother of Parliaments tackle this very technical economic situation which has grown up with modern selling methods. The best way of tackling it seems, first, to come to this House with an all-party Private Member's Bill, I thank hon. Members on both sides of the House for the help they have given to me. Just over 30 years ago the then 694 hon. Member for Wallasey did not ask for a Second Reading for his Bill, but asked for an inquiry. In 1964, I put forward a proposal which I think is a better alternative, that this Bill should have a Second Reading, and on that basis I commend it to the House.
§ 11.59 a.m
§ Mr. W. E. Padley (Ogmore)
I congratulate the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) on introducing the. Bill. I congratulate him also on the clear and exhaustive way in which he presented the case for it. I am a total abolitionist. I agree with my hon. and learned Friend the Member for Northampton (Mr. Paget). Therefore, my arguments will not be so moderate as those of the hon. Member for Hallam. Nevertheless, I regard his Bill as the absolute minimum required to protect the interests the consumer.
I declare my interest as President of the Union of Shop Distributive and Allied Workers, most of whose 350,000 members are shop managers and staffs. We have had long experience of "gimmick" trading in all its forms. Throughout the years, shop managers and staffs organised in the U.S.D.A.W. have been opposed to coupon trading, trading stamps and the rest. Although it may come as a surprise to some hon. Members opposite, to any shop manager it is a simple self-evident truth that trading stamps are paid for by the consumer, in conditions of full employment and inflationary pressure. In conditions of unemployment and deflationary pressure, some part of the cost might be met by the shopkeeper and the staffs working in the shops.
Not very long ago, there was a cut-price war in Harlow. Traders were selling sugar at less than cost. In the end, Sainsburys stuck a notice in the shop window offering to buy the sugar back at a price bigger than people had been buying it at other shops. The following weekend, I was presiding over a conference of multiple grocery shop managers. An experienced shop manager said at that conference, "Mr. President, it is said that the founder of Barnum and Bailey's 'Greatest Show on Earth' once said that there was one born every minute. If he lived in the modern world of retail trading, in America even more than in Britain, he would have concluded that there was one born every second."
695 Stamp trading as an idea depends upon the gullibility of the public, on the belief that there is something to be had for nothing. As the hon. Member said, stamp trading is not new. As long ago as 20th September, 1903, the Financial Times reported that France wasat present suffering from an acute attack of discount stamp mania".It went on to describe the activities of 28 companies. The hon. Member told us that Jersey has a law prohibiting stamp trading. It goes back to the French mania in the early years of the century. I believe that the law is dated 1906. What is new, of course, is the financial power of the stamp trading companies and the scale of operation. As the hon. Gentleman said, in days gone by stamp companies confined their activities in the main to relatively small traders. This was true in the United States and other countries, too. But we cannot ignore what is happening now.
Stamp trading will become more, not less, important with the disappearance of resale price maintenance. Resale price maintenance, particularly in its old collective form, certainly had some abuses but it also prevented a number of abuses and, if R.P.M. goes, we shall certainly have to tighten the general law relating to commercial conduct for the protection of the consumer. For example, we might have to consider the French law which says that traders must not stick up a lying price, cross it out, and substitute another. With Gallic logic, the French say that this is fraud and prohibit it.
In the United States, in 1951, about 1 per cent. of retail sales were covered by trading stamps. The proportion is now 14 or 15 per cent. certainly, and very much more than that in some American States. I will not elaborate on the figures because the promoter of the Bill gave them.
In Britain, the turning point was 1957–58, when Green Shield and others began to emulate the American methods. By the middle of last year, about 40,000 traders had adopted stamp trading, and between 3 and 4 per cent. of the nation's trade, probably, was carrying stamps. On American experience, there could be a very rapid growth of this practice. Therefore, this Bill is none too early.
696 It is important to realise that the stamp trading company is more than a stamp trading company. It is in fact, an alternative form of wholesaler and retailer. The stamp company has some marked advantages over orthodox traders—I was going to say scrupulous traders—whether they be co-operatives, multiples, chain stores, departmental stores or small shops. One must look at the stamp trading company as wholesaler and retailer.
First, it gets the money long before the customer gets the goods. It gets the money for the stamps from the retailer, but it does not have to issue any goods until the customer has accumulated the appropriate number of stamps. Second, the stamp company buys wholesale and sells retail, yet seldom, if ever, has it to mark down or reduce the prices of its goods in the way that most other traders find necessary from time to time. Third, a stamp company increases its net profits when people do not redeem stamps.
The figures in this field are all wild guesses, but most people who have been engaged in making guesses say that at least 10 per cent. of stamps are never redeemed.
§ Mr. Padley
My hon. Friend says that it is 10 to 15 per cent. As I say, it is all guesswork, but, even if it be 10 per cent. or less, this is a very substantial proportion when one considers the margin which normal traders get. In other words, a stamp trading company is not simply a stamp trading company. It is a new form of wholesaling and retailing which is shackling a substantial part of normal retail trade, and, as American experience has shown, there is here a quite frightening anti-social economic power.
I have not been to the United States of America myself. Perhaps I should interpolate here that I recognise that Britain and Europe have gained some valuable distributive techniques from United States. The studies and report of the Anglo-American productivity team in which my union participated were valuable to British retailers, and many of the private expeditions which have gone over, from the Co-operative 697 movement and large groups of private and multiple traders, have brought back good ideas. But let us face the facts. The American system is also the most wasteful and expensive distributive system in the world, and stamp trading, of course, is one of the reasons for it being so.
Just before he died, Algot Jöhnson, the President of the Swedish Distributive Workers' Union, investigated stamp trading in America. In a discussion we had after he came back, he told me that it was his conclusion that of every dollar collected one-third went in commission to the man selling the stamps to the shopkeeper, one-third went to the redemption of stamps, and the other third went in the profits of the company, sales promotion schemes, advertising and the rest.
I was interested, therefore, when, on 23rd November, the Economist, in its American survey, gave some figures. Although the stamp companies are very secretive about their business, the Economist said that, as a sample, it could be assumed that of every 15 dollars collected from a merchant for a pad of stamps the salesman returns 5 dollars 31 cents commission, places 4 dollars 12 cents against potential redemptions, and forwards 5 dollars 57 cents to the main office. This means that my experienced colleague, the late Algot Jöhnson, underestimated the extent of the racket.
Way back in the 1880s, this House began to take a hand in the industrial insurance business because of the high expenses ratio and the large number of lapses in policies. Since that time, there has been some measure of State supervision and control, with annual reports of the Commissioner. There is thus good precedent for State intervention.
On 12th November last, the Financial Times estimated that trading stamps account for roughly 14 per cent. of a supermarket's expenses in the United States, compared with 44 per cent. for staff, 10 per cent. for rent, 5 per cent. for advertising, 5 per cent. for wrapping and supplies, 5 per cent. for depreciation and 17 per cent. for other overheads. Let no hon. Member of this House underestimate this new financial power which is arising, this new form of wholesaling and retailing which 698 shackles a substantial part of our traditional trade. Let no one underestimate the extent to which the consumer is fleeced.
Roughly, it may be said that the consumer gets one-third of what is paid. That marks off the trading stamp from the genuine Co-operative dividend and the genuine deferred discount which William Bros. paid over the years. Those are genuine schemes. Stamp trading is parasitical and I believe it to be a subtle and sophisticated combination of two of the oldest frauds and rackets known to the human race.
The first is the chain letter. Hon. Members will know about the chain letter by which everyone makes something for nothing so long as five other people forward their half-crowns. Everyone does well until the chain is broken. Similarly with trading stamps. As Professor Dickinson points out, trading stamps cannot increase the total volume of trade. The first trader in a locality to use trading stamps, and his customers, may gain something. He will increase his trade at the expense of others and his customers will benefit until saturation is reached—I do not like the word "saturation" but it was used by the: hon. Member for Sheffield, Hallam—not on a national scale but in a catchment area of retail trade.
It is not necessary to have trading stamps to cover the whole of the trade of a nation or even the whole trade in a catchment area, in order that consumers begin to lose. It is only necessary for trading stamps to cover about half of the total trade. At that point it becomes logically impossible for the consumer to gain at all. Two-thirds of the proceeds from the sale of stamps must come either from the consumer or the shopkeepers and their staffs, and under conditions of inflationary pressure it is more likely to come from the consumer. Second, stamp trading resembles the protection racket, since the threat is always there that another trader will use stamps. I hope, therefore, that this Bill will receive a Second Reading today and that it will have a successful passage to the Statute Book. I hope that, at a not-too-distant date, after experience of the operation of this Bill, we shall have new legislation providing for total abolition.
§ 12.14 p.m.
§ Mr. Wilfred Proudfoot (Cleveland)
When this Session of Parliament started I was one of the first people to talk about trading stamps and I must admit that at that time my reaction was a little over-emotional. Like everyone else, as soon as I opened my mouth I started to learn a lot more. I discovered that there are no substantial economic arguments either for or against trading stamps and that both the stamp companies and the D.T.A. have been guilty of overstating their arguments.
This House always gets these things into perspective ultimately. The biggest worry today is not that we have stamps—we had stamps before the war—but that they will develop at a much faster rate. Before the war trading involving trading stamps was, as it were, "vertical". The stamps were used in the grocery business. Today the use is "horizontal". They are used at filling stations, grocery stores, shoe repairers— and in my town I see that a taxi-driver is giving Green Shield stamps. I do not know whether he expects a tip as well. But it is a change for a taxi-driver to be giving, as it were, a tip to his customer. It is this spread, I think, which makes the thing more insidious.
A few weeks ago I thought that I would start a one-man campaign against the stamp companies by going to filling stations where stamps were given and asking for a discount instead of stamps. But this was refused and so I asked for a stamp catalogue and a stamp book in which to put the stamps. I thought that I could fill my car with catalogues and books and so operate a campaign in that way. But I came to the conclusion that I could not get enough people to do the same, and so I dropped the idea.
The D.T.A. states that the trade in stamps in America is dying, but the evidence which I obtained does not support that argument. The rate of growth of stamp companies is slowing down in just the same way, I suppose, as hoola-hoops were sold originally at a colossal rate but the sales tapered off before eventually the hoops vanished. I am of opinion that stamps will come and go. The life cycle of the fad for stamps will be between six and ten years and without doubt it will come to an end. I do not believe that any trader worth his salt 700 should be frightened to compete against stamps. Friends of mine in America have been able to meet this competition by sitting down and thinking out new and better and more vigorous methods of merchandising.
I visited America in order to inspect supermarkets and I never noticed trading stamps at all. That may sound startling after what we have been told about them. I was studying the supermarket industry and my only recollection of stamps is seeing a drawer underneath one cash register in a store and this contained stamps. I saw some tea services standing in the open at a filling station and these could eventually be obtained by customers of the filling station in exchange for stamps which were given for so many gallons of petrol. But it is the "horizontal" aspect of the sale of stamps—when the husband can collect some stamps when he takes the car for petrol and the wife gets them in the grocery shop where she trades—which will make more rapid the advance of stamp companies in Britain.
I have come to the conclusion that this is only another method of selling. I believe that it is the lazy man's way of merchandising. This stamp war which has suddenly blossomed—although stamp companies have been with us for a long time—started because one chain of stores, owned by a former Member of this House, got into difficulties. It ran out of managers and an attempt was made to import them from Canada. The store had to think of a new promotional "gimmick" and it was the first big chain store to go in for stamps. That is what created the furore just before Christmas.
The experience of traders who give stamps varies enormously. A friend of mine who began to give them away increased his sales from nil to 25 per cent., the figure varying from one location of his store to another. It is easy to discover why, if one examines the type of community for which the store may cater. Stamp companies are wrong when they claim that this is the touchstone by which traders may immediately increase their turnover, and this represents overselling on the part of stamp companies. A butcher in my home town agreed to give away stamps. But he gave up the scheme after five weeks because his 701 sales had gone down. The same thing has occurred in other areas.
I with to refer to some of the bad tactics which are used by stamp companies to get their stamps used in stores. I had a pitiful anonymous letter from an elderly couple somewhere in Britain who had been terrorised, as they put it, by salesmen from a stamp company, who said "If you do not take our stamps, the chap next door is on the verge of taking them." I have listened to stamp salesmen. When they offer one a franchise, one says to them, "Right. If we get the franchise, this will be fine, but who will sell to the chain stores—to Lipton's or to Meadow Dairies—or any of the national chains?" The salesman replies, "That is not my responsibility. Somebody does this in London with the headquarters of the chain." Then one asks, "Does my franchise stand against the national salesman who goes into the headquarters of the national multiples?" The salesman is beaten and has no answer. If one of the national multiples takes up the stamps, the little man's franchise counts for nothing.
I set out with the feeling that it would be a good thing to ban stamps altogether, but I came to the conclusion that there were no intellectual grounds for banning them. In the end, one had to admit that the only possible type of legislation should be to protect the customer or to allow consumers to judge for themselves what they were getting. Many hon. Members who might be against the Bill because they feel that it interferes with the liberty of the subject should think again.
I am not a fad for consumer protection in many ways. People should live dangerously and buy a 6d. bar of soap. If they have a bad buy, it is hard luck on them. But I cannot honestly decide which is the best electric razor for me. I do not have the technical knowledge to judge one razor against another.
I remember that the wife of a constituent of mine wanted a spin-drier. He wrote and asked what the drum of the drier was made of, its number of revolutions per minute and how long it took to dry so many pounds of clothes. To this day, he has not had a satisfactory answer from any of the spin-drier manufacturers.
702 These things are difficult for consumers to judge. If hon. Members feel that they should be against the Bill on the ground that it infringes the liberty of the subject, I ask them to recognise that in our society consumer products, particularly durables, are getting so complex that it requires a technician to tell them which is the best. With the ordinary run of 6d. or 7d. goods, however, let people live dangerously and competition will look after that and be their protection.
I therefore approach the Bill from the viewpoint purely of consumer protection. The consumer should know the value of what he or she gets when accepting trading stamps. I accept that the housewife can in many cases enjoy stamps. Private traders have used them for years, although they do not at the same time cut the price of the same goods. Nevertheless, they have been using this method of drumming up their trade, much to the pleasure of a lot of housewives, who feel that they have collected something "on the side" and almost got something for nothing. I concentrate, therefore, on the narrow point that we must let the housewife know.
When it comes to the business of how much the book of stamps should be redeemed for, I am a great believer in competition and I am willing to let King Korn, Green Shield and S. and H. try to outbid each other for the greatest cash-value redemption of their books. This is the greatest consumer safeguard. There has been some criticism of this aspect of the Bill. As long as we ensure open competition between the stamp companies, we will have done our job.
I also believe that the ventilation of the subject so far in this House has done a great deal of good. Even if the Bill does not get through, the House has done a job of work already. It has made the stamp companies, and equally the retailing industry, come out into the open. There have been huge advertisements in the Press and the customer can now start to judge between the arguments on one side and the other. We are still left, however, with the central problem of how the customer can judge what he or she is getting. I believe that the Bill will do exactly this.
§ 12.25 p.m.
§ Mr. John Stonehouse (Wednesbury)
The whole House will congratulate the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) upon his initiative in bringing in the Bill and drawing attention to what is becoming a serious problem both to the customer and to the trader who are becoming subject to controls by stamp trading companies who are accepting no conditions or safeguards on the way in which they run their operations.
As far as the Bill can introduce such safeguards and conditions, it is to be supported. The one weakness of the Bill is that it puts so much responsiblity on the Board of Trade. So far, the Board of Trade has not shown any real interest in protecting either the customer or the retailer.
I had occasion to raise the matter with the former President of the Board of Trade, who is now Minister of Power, last September. On 7th October, he wrote to me and said that the inquiry of 30 years ago had reached the conclusion that trading stamp practice was not detrimental, thereby showing that the Board of Trade did not regard the matter seriously. The right hon. Gentleman ended by saying that the Government did not feel that there should be any further inquiries into the subject but that the President of the Board of Trade would keep the matter under review. That attitude to the problem is quite inadequate. If it is the attitude that continues to reside in the Board of Trade, the Bill will fail, because its teeth can only be put in by the Board of Trade making the necessary regulations to control stamp trading firms.
Therefore, I look forward with great interest to what the Parliamentary Secretary to the Board of Trade has to say today, when, as on other occasions, the Board of Trade has had to be "taken by the nose" by private Members. I hope that the hon. Gentleman will take up the points that are being made from the benches behind him as well as from this side of the House and do something to control the activities of the stamp trading firms.
As my hon. Friend the Member for Ogmore (Mr. Padley) said, there is more in this matter than mere stamp trading. These companies are now issuing what 704 is virtually a second currency, but they are not accepting any controls over their activities and they are not giving any real guarantee, either to the retailer or to the customer, that they will fulfil the commitments which they apparently advertise in their brochures.
I should like to quote from the stamp book of the Sperry and Hutchinson Co. which is typical of the sort of let-out which these companies put in their conditions:As changes may occur in relation to the merchandise available or in relation to the cost of such merchandise the company reserves the right without notice to vary the items quoted in its catalogues and also without notice to increase or decrease the number of S. & H. collectors' books required for individual items of merchandise.The company may without notice impose such requirements and terms in connection with the redemption of stamps as it may find requisite or necessary to impose from time to time.That means that these brochures which all the stamp companies issue are fraudulent. They make a promise that they will exchange certain attractive merchandise for a certain number of books, but the customer does not read the conditions in the front of the collector's book. At any time, the customer may find that these goods are not available.
§ Mr. Proudfoot
Surely the hon. Member would admit that any mail order house selling by mail order would have this proviso in its catalogue, because of the fluctuation in prices—even a co-operative society that issues a Christmas catalogue?
§ Mr. Stonehouse
The hon. Member must bear in mind that the customer is paying in advance. The customer is paying for stamps sometimes years before she goes to redeem the stamps.
I have examples here. This is taken from Green Shield's brochure. The hon. Member will, no doubt, be interested because a lot of the goods are produced in his division and they are advertised in these brochures. There is listed here a Mayfair, guarantee 20 years, silver plate set, Sheffield made. This set needs 25 books. The value of the merchandise to be bought, food or other commodities, in order to fill this number of books is £775. A typical household would have to spend all its weekly 705 expenditure on food at one shop for Green Shield stamps for a period of possibly two years before it could redeem its 25 books for this particular so-called gift.
This would mean, of course, that it would be relying on the honesty of the stamp trading firm to provide that gift at the end of the day, but if the price which the stamp trading firm has to pay to obtain this commodity goes up in the intervening years, the customer saving up may find that not 25 books but 35 books are required. There is no guarantee for the customer, although he is paying in advance and collecting over a period of up to two years for this so-called gift—sometimes longer if he wants something far more extravagant, like—
§ Sir H. Legge-Bourke
I have a Green Shield catalogue here, too, and it says that the qualification for the right to take out of a shop a certain commodity illustrated in the catalogue is governed by these words:If for reasons beyond our control. …There are many reasons which may be beyond the firm's control, as the hon. Member well knows, and I would ask him, now I am on my feet, what sort of conditions are made by King Ko-op in the north, and Redco, at Reading?
The hon. Member is coming on to a very important point indeed and one I want to follow, but if he goes on to read the conditions which he is quoting from the back of the Green Shield brochure he will see words such as, "We reserve the right at any time without notice to withdraw such articles or to replace them with substitutes of equal or better value and to decrease or to increase the number of Green Shield stamps required." It is in very small print; one can hardly read it. It really means that the stamp trading company is going to make the conditions. The consumer cannot make the decision. It is the stamp trading firm which will have the whip hand at the end of the day.
Let us consider some of the other gifts which are advertised. We see it will take years to collect for them. A Kodak Brownie with a movie projector requires 28½ books and £900 will have to be spent before the customer can collect 706 that number of books. Then there is a colour snap camera; £450 will have to be spent before that sort of gift can be obtained. Even a comparatively small gift like a children's nylon inflatable boat in coloured plastic and complete with a special Li-Lo pump requires 1¼ books and the customer will have to spend £40 before getting that. A small household will take some time to collect stamps to that value.
However, the point which I hope the hon. Member will allow me to make before I give way to him is that during that time, which may be weeks or months or years, the stamp trading company has the money well in advance, because even before the trader gives the stamps to the customer the trader has to pay cash for the stamps.
§ Sir Ian Orr-Ewing
But there are other retail outlets as well as food shops—garages, for instance; and at the end of that time, if the customer has such other retail outless, he will have something at the end which he would not otherwise have had.
§ Mr. Stonehouse
We dispute that, because there is ample evidence to show, so far as food is concerned, that where stamp trading has been growing considerably it the last few years the cost of commodities has to go up.
I am sorry that the hon. Member for Wycombe (Mr. John Hall) is not here, because he raised this point before, and asked what was the experience of the United States. I should have liked to have referred him to a journal called The Progressive Grocer, which has conducted a number of surveys into the problem, and has come out with evidence to show that the price of the groceries in shops giving stamps is between 2 per cent. and 3 per cent. higher than in stores which do not give stamps. It is already the case in this, country that most of the retailers who are giving stamps now have had to put up their prices slightly in order to corer the cost.
Admittedly at the beginning of the promotion of these schemes they were prepared to accept lower gross profit to give the new schemes a bigger impact on the consumers, but even the Fine Fare chain, when it started to give Hutchinson stamps—and we got this information from sample purchases taken in the 707 chain's shops—had to put up its prices to offset the cost of the stamps which it gives from between 2 per cent. to 2½ per cent. of its turnover.
§ Mr. J. H. Osborn
It might appear, from what I said, that I disagree with the hon. Member, but I think I shall be meeting his point of view in saying that if what he has just said is the case it is probably a justification of my argument that the economic situation is one about which we want to find out more, and I hope that in the next few months we shall have this information and that it will appear whether this statement is proved or not.
§ Mr. Stonehouse
I appreciate the moderation with which the hon. Member put his case forward today, but it proves that it is all the more necessary for the Board of Trade to conduct these inquiries. I very much regret that the former President of the Board of Trade, now the Minister of Power, replied to me on 7th October last saying that the Board of Trade was not prepared to carry out these independent inquiries. I hope that it has had a change of attitude to this, and will be prepared, as in the case of R.P.M., to conduct the fullest inquiries to get at all the facts, as I have no doubt what these inquiries will reveal, because the information I have obtained in the last few months certainly proves that the costs of commodities must go up where these organisations and firms are handing out stamps.
The experience of small retailers is that the stamp trading company puts tremendous pressure on them—threatens them almost that unless they are issuing its particular stamps they will lose trade to competitors up the road. When a small retailer or a garage enters into this agreement with a stamp trading firm it is tantamount to accepting protection. The protection racket of the stamp trading firms is one of the sinister aspects of this stamp trading development.
Even when the small trader thinks that he may not get that 15 per cent. increase in trade—and very often does not—which the stamp trading firm promises him, he finds out that once he has accepted the promise of the stamp 708 trading firm it is impossible to withdraw. He is frightened that if he does withdraw from the scheme he will lose the customers who have developed the habit of collecting stamps. A customer may have half a book full and wants to go on to fill it, and the shopkeeper is fearful that he will lose the loyalty of his customer, who has dealt with him over the years, fears that the customer will be lost if he, the trader, withdraws from the scheme.
I have had a number of constituents write to me about their experiences of stamp trading. I should like to quote the experience of one garage proprietor who bought a book of stamps from one of the smaller stamp firms, and paid £9 for it. On reflection, he decided he would not go ahead with it, so he asked for a refund from the stamp firm concerned. It was not prepared to give him a cash refund, but it said that it would give him the goods. When he went to collect the goods, he found that the maximum amount he could get back in goods was £5, and that was a concession. The same firm was good enough to write to me, and I quote from their communication:You will no doubt appreciate that this Clause"—giving the retailer exclusive rights in a particular locality—has to be inserted to cover additional costs, i.e., commission expenses, and an apportioned part of the representatives salary, ledger work and other administration which has been costed by our accountants at approximately £5 per retail trader.This is evidence, directly from a stamp trading firm, showing that the costs of administering these schemes more than confirm the figures which were given by my hon. Friend the Member for Ogmore as a result of investigations in the United States.
It is quite obvious to the objective inquirer that the administration of stamp trading firms must cost money. Representatives have to be paid. Then there is the advertising, the promotion, the printing of stamps, as well as all the other costs. The overhead expenses have to be borne in some way, and it must, of course, be the customer who pays in the long run. As my hon. Friend the Member for Ogmore said, in the initial stages the first retailers to adopt these schemes may get some marginal benefit from them, 709 but as they develop apace there is no benefit either to traders or to customers.
During this period of development of stamp trading, it is almost impossible to get at the redemption figure. Some stamp trading firms claim that it is 90 per cent. I think this is a dishonest claim because they cannot tell during the period that the use of stamps is expanding by 20 or 25 per cent. or more per year, what the actual redemption is. Most customers have to save up for months or even years before they redeem, so it is impossible to say what proportion of the stamps given out in a particular year is eventually coming back.
I quote from an advertisement issued in the Financial Times of Thursday, 30th January, by the Green Shield Trading Stamp Co., which says that 90 per cent. of the stamps issued by Green Shield are redeemed. This is a claim which they cannot in all honesty yet make because, as their business is expanding so rapidly, they cannot estimate what is the degree of redemption. I believe that the redemption figure is much less than this. There are many customers who are given stamps who do not want to use them, or who lose them, and the figure of redemption will probably be only 80 per cent. or 85 per cent. This means that 10 or 15 per cent. or even more of the turnover of the stamp trading firms is for the stamp firms themselves for which they have given no benefits to the community.
The estimate of the turnover of stamp trading is something like £7 million, probably increasing in the next six or seven years to £70 million. It is becoming a major part of retailing and if it is not controlled it will be increasingly important. The 10 or 15 per cent. of the turnover on stamp trading which the stamp trading firms are getting as a result of stamps not being redeemed is a mediaeval tribute which the trading world is having to pay to these trading stamp firms. I believe that it is necessary for the Board of Trade to initiate inquiries to get at the facts and then impose controls to ensure that this sort of benefit or tribute from retailing is not enjoyed by the trading stamp firms, which, in return, do not give any real guarantees, as the quotations from the collectors' books which I have already given demonstrate.
710 The hon. Member referred to a stamp trading firm which went bankrupt or is about to go bankrupt.
§ Mr. Stonehouse
There are, I believe, two stamp trading firms in Britain which are in a very shaky condition. This is a danger. If we have small concerns developing stamp trading and over-expanding themselves—spending a lot of money on promotion and advertising—it works all right in the first few years because the amount of money coming in from the expansion of their business can cover the commitments which they have already got; but after a few years if their business does not expand to anything like the same extent and there is an increasing demand from the stamps which they have already issued and which have been collected over the months and years, then those firms are in a perilous position and already several, two in particular, are feeling this pressure.
I do not think that this will apply to the bigger concerns. The bigger firms have probably sufficient resources to carry them over a period of promotion and development, but when stamp trading firms are going in for halt-page advertisements in the Financial Times and other newspapers and spending a tremendous amount on public relations the money has to come from somewhere and it is probably coming from their expectation of future business. If this future business does not come their way, they will find that their expenses have been developed to too great an extent and they will not have sufficient turnover to justify them.
§ Sir H. Legge-Bourke
I do not want there to be any misunderstanding about the two stamp promoters that I mentioned when I interrupted the hon. Gentleman. The two I mentioned were King Ko-op, in the North, and Redco, in Reading. I thought that both were Co-operative organisations.
§ Mr. Stonehouse
Redco is run by a very well-established retail Co-operative society which is not in any way near bankruptcy and which is doing an extremely good job. The King Ko-op company is not a Co-operative organisation, and has no connection with the 711 Co-operative movement, except that the stamps are used by a number of retail co-operative societies. The King Ko-op trading stamp organisation is one of the organisations which are in a shaky condition. Thousands of customers who have collected stamps may not be able to get the goods they expected when they began.
It is important that there should be regulation of the stamp trading companies soon. They should have to make a deposit to justify the issue of stamps. I believe that many of them have sufficient reserves at the moment to meet their commitments but if they continue to expand at the rate they have expanded in the last year, they may become over-extended and not have sufficient reserves. There are controls over the operations of building societies, insurance companies and the like which provide a service for the general public, and there is every reason why the Government should have similar controls over the operations of stamp trading companies, which are trading in future promises to customers.
I hope that the Government will not only give their blessing to the Bill and allow it to have a Second Reading, but take action and issue the regulations which Clause 6 gives them power to do. Without the co-operation of the Board of Trade, the intentions of the Bill will not be achieved. The Board of Trade must take the problem seriously, and for the benefit of both customers and traders, it must take action to control stamp trading development.
§ 12.50 p.m.
§ Sir Ian Orr-Ewing (Hendon, North)
I shall take up one or two of the points touched on by the hon. Member for Wednesbury (Mr. Stonehouse), but I want, first, to congratulate my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) on the very moderate way in which he introduced the Bill and on the great pains that he has obviously taken to examine data and assemble the facts and present them to the House.
I was particularly pleased, as a fellow scientist, that my hon. Friend should not have accepted the figures which had been put before him concerning the way in which prices had gone either up or down. This was exactly the conclusion I came 712 to. It is typical of a scientific training that one examines these matters most exactly. I wish that the hon. Member for Wednesbury had had the same scientific training. He would not accept the 90 per cent. redemption figure put forward by the Green Shield Company.
I know for a fact, because I have questioned it, that it went to very considerable pains to take into account the turnover of the stamps, the time taken to collect books of stamps and the age of stamps before being redeemed before it arrived at the 90 per cent. figure. But without any of these facilities at his command, the hon. Member produced another figure, of 80 or 85 per cent. I do not think that that is as accurate an estimate as the one at which the Green Shield Company arrived.
§ Mr. Stonehouse
I also have had discussions with some of the executives of stamp trading firms, and they gave me an estimate of 15 per cent. of stamps not redeemed. I think that I have carried out just as many investigations as the hon. Gentleman has done. Will he say on what evidence the 90 per cent. turnover redemption is based and whether he believes it is justified that a stamp trading firm should enjoy the value of the 10 per cent. which is not redeemed?
§ Sir Ian Orr-Ewing
The hon. Gentleman's source and mine do not seem to be very different. The result is not very different. The hon. Gentleman has modified his 80 per cent. figure to 85 per cent., as against the Green Shield Company's estimate of 90 per cent. That represents only 5 per cent. margin of error in a very difficult assessment.
I take part in the debate because the headquarters of the Green Shield organisation, which is an entirely British firm and has been trading for six years, is in Edgware, in my constituency. It employs about 500 people, mostly my constituents. That company and the Sperry and Hutchinson Company between them share about 80 per cent. of the stamp market. I apologise to my hon. Friend the Member for Hallam and to others because I have to catch a train and may not be able to stay for the whole debate.
My attitude to stamp trading is influenced by my general philosophy, which is that the Government ought not 713 to interfere with genuine and legitimate trading and something which is popular among housewives and customers. I am also influenced by the fact that it has been stated several times in the debate that it is abundantly popular among our housewives. About 7 million of them are now collecting stamps; it is clearly something which appeals to them. I would support the Bill more whole-heatedly if it were concerned only with protecting housewives from mushroom companies which might not be able to honour their commitments at a later date.
It is important that we should get the whole question of stamp trading in perspective. Stamp trading is surely just a form of sales promotion. Every year in this country about £500 million is spent on promotion in the form of television, newspaper and poster advertising and all other forms of sales promotion. We are concerned today with a sum of £10 million only, with only 2 per cent. of all the promotional activities which are undertaken.
Another fact is that stamp trading covers only 6 per cent. of our total retail trade. It may grow, as my hon. Friend said, but at the moment that is the proportion. According to a circular issued by the D.T.A., it covers 35,000 shops. But that circular did not state that the last census of retail distribution in 1961 showed that there are 581,000 shops in all. So the situation is that stamps are currently covering 35 shops in every 581.
I am sure that, in introducing the Bill, my hon. Friend had the aim of protecting consumers. This is in accord with Conservative philosophy and action. I am sure that most Conservatives, and perhaps many on these benches, do not want to see the State interfere too much in this direction. After all, we have in this Parliament taken measures to protect the consumer. We have set up the Consumer Council; we have introduced a Weights and Measures Bill, so that the housewife will know more about what she is getting for her money; we have introduced anti-monopoly legislation and tried to introduce competition into the retail trade; we have strengthened the restrictive practices legislation; currently we are dealing with a Hire-Purchase Bill: 714 and we have now decided to abolish resale price maintenance.
In all these fields we have the philosophy that it is right for the Government of the day to take some action to introduce competition and try to protect the consumer.
§ Mr. George Darling (Sheffield, Hillsborough)
Can the hon. Gentleman tell me when the measures with regard to monopolies and strengthening the restrictive practices legislation were introduced? We have not seen them yet.
§ Sir Ian Orr-Ewing
We have set up the Monopolies Commission and the Restrictive Trade Practices Court. The hon. Member must surely know that under the present Government and previous Conservative Governments there has been steady progress and action. We are now to strengthen our legislation further. It has been announced by the Secretary of State for Industry and Trade that we shall take further action against monopolies, mergers and resale price maintenance. It is all part of a package deal in accordance with our philosophy.
I wonder why this small section of the retail trade, this 2 per cent. of promotional activity, causes so much furore and why it has been singled out. We have not sought to single out for legislative action the dividend paid by the Co-operative movement. When I go into a Co-operative shop—naturally, I do not go out of my way to shop there, because I might be financing a prospective Labour candidate to some extent—I am given a little check which enables me to get a dividend later.
In the form of trading about which we are talking, people are given a stamp. I can see some difference but I cannot see a basic difference between these two forms of promotional activity. Why are we not considering the 3d. bit, which is sometimes taped to a carton of toothpaste? Is that undesirable? Is it a promotional activity which is distorting the market? What about loss leaders? I would be happier if we were discussing them and their methods of weaving a web around the housewife in the parlour once they have got her there.
I wonder why this tremendous campaign against these trading stamps has 715 broken out. The campaign is very well illustrated in the Daily Mail today by a whole page advertisement inserted by the Distributive Trades Alliance. I suppose that one of the initiators was Lord Sainsbury, co-chairman of the Alliance, which, I gather, came into existence mainly for the purpose of fighting stamp trading.
We all know of the success of the Sainsbury shops and I suppose that the three of the great, among the multiple distributive and provision chains, are Sainsbury's, Tesco and Fine Fare. But it is surely significant that Tesco distributes Green Shield stamps, Fine Fair distributes Sperry and Hutchinson stamps and that prices have been reduced in the Sainsbury shops. This is as it should be, so that the housewife can choose between stamps and cut prices, or both. I understand that Lord Sainsbury intended to introduce a Bill in the House of Lords, and perhaps it would have been even more restrictive than this Bill. I believe, however, that he has decided not to go ahead with it.
Talking on behalf of the Green Shield Company, whose headquarters are in my constituency and which employs 500 of my constituents, I think that it sees the wisdom—which I endorse—of having some regulations concerning stamp trading. I think that the firm even accepts the right of cash redemption, provided that it is properly and sensibly administered. Certainly, some legislation, particularly to ensure that stamp companies meet their obligations, would be welcome.
I have, however, basic objections to this Bill, some so fundamental that I doubt whether they could be allayed even in Committee. For instance, all the responsibility seems to be placed on the stamp promoter and none on the retailer. But surely, whether the retailer is buying wholesale goods or stamps, he has some obligation and responsibility for seeing that he is dealing with a good organisation which can meet its commitments, supply a proper standard of goods and possibly guarantee satisfaction to his customers. The Bill, however, puts no responsibility on the retailer in that connection.
Clause 2 is far too widely drawn. The redemption shop would have to hold 716 unlimited cash, according to its provisions, because anyone would be able to present a demand at any time and ask for cash. Let us remember that someone might produce 50,000 stamps or more. Apparently, the companies would have to pay cash on sight. They would have no chance of checking whether the stamps were genuine or stolen, even if a man were, say, to bring in 100,000.
Again, the Clause says nothing about hours of business, but merely refers to "whenever presented". In addition, if unlimited cash is to be held in the places where stamps can be cashed this will offer considerable security risks at a time when we are anxious to reduce such risks.
If cash is not paid forthwith, the penalties under Clause 7 impose a criminal responsibility and not a civil debt. It provides for three months' imprisonment and a fine of up to £500. The Clause goes much too far and if the House gives the Bill a Second Reading I hope that the sponsors will see that it is radically amended in Committee.
Clause 3 delegates tremendous power to the Board of Trade and I agree with the hon. Member for Wednesbury on this issue. I look forward to hearing whether the Board of Trade welcomes this sort of responsibility. When and how is it to make the "necessary or desirable" regulations? The Bill does not say. The Clause also introduces another novel principle, for the Board would have to fix the difference between the value printed on the stamp and the cash redemption, and that would be very difficult. We are told that in the U.S.A. the cash redemption value is about 50 per cent. of value if taken in redemption goods. Large stamp companies could, perhaps, accept 66 per cent. but small companies starting with high overheads initially might go bankrupt even at 50 per cent.
These are things that the Board of Trade would have to fix as between a large, well-established stamp company, for instance, and a small company operating in a small provincial town. It would be a form of differential taxation as between one company and another. We heard all about that from the right hon. Gentleman the Leader of the Opposition on television last night and 717 I can understand its being received favourably by hon. Members opposite. But it is not a principle that many of us on this side of the House accept readily. I would be happier to see Clause 3 either radically amended or removed from the Bill altogether.
I am reminded of a previous Minister of Transport, Lord Brabazon, who, as Lieutenant-Colonel Moore-Brabazon sat for Wallasey—which seems to be a favourite constituency for Ministers of Transport. In racing parlance "horses for courses" seem to make Minister of Transport winners at Wallasey. In 1933, speaking about gift tokens, he suggested that his Measure might be withdrawn whilst an inquiry was set up. That is very much my view of this Bill. I know that it is a compromise, but it is ill-thought out and in many ways puts responsibility on the Board of Trade which it would he invidious for it to carry out.
In Clause 6 there would be no minimum period for a licence, yet any person engaged in any business wants to know how long he will be able to carry on that business. The Board of Trade would also have to decide the constitution of an appeal tribunal. Clause 7 is based on a precedent which is not altogether appropriate. It appears to be based on the Prevention of Fraud Act, 1958, and the Mock Auctions Act, 1961.
Under the Prevention of Fraud Act, the penalty is £500. One of my hon. Friends, however, mentioned £30,000 not as a penalty under this Bill, but as a bond. Fixing a sum of money like that needs to be considered very carefully indeed. There has been insufficient time to think out this Measure.
I would be much happier to follow what Lord Brabazon, who is my godfather, proposed all those years ago. There should be a further inquiry into this matter until it has been well thought out and a Bill properly drafted, so that we know exactly what we are to get.
§ Sir Cyril Osborne (Louth)
But it is 30 years since Lord Brabazon proposed an inquiry. How many more years does my hon. Friend want?
§ Sir Ian Orr-Ewing
But 30 years ago Lord Brabazon was dealing with gift tokens. We are dealing with stamp trading. We are not seeking to kill stamp 718 trading, but only, as I understand the sponsors of the Bill, to regulate it. My godfather was trying to do away with gift tokens altogether.
In this country this practice is relatively new in size and attraction and rate of growth. I know that there were stamp traders in the past—we have heard the facts and figures—but I think that hon. Members will agree that, possibly as a result of the opposition of the D.T.A., more publicity has been given to stamps in recent months than we ever dreamed of. I think that the oppositior has generated an enthusiasm and knowledge of stamps among many consumers who had never heard of them until it started.
Many of us accept the need in principle for some regulations, but we will find it hard to support a Bill, unless it is radically amended, which seeks to smother legitimate trading and legitimate methods of sales promotion. At this moment it is popular among 7 million housewives, and I hope that the House will think very carefully before agreeing that in its present form the Bill should be allowed even a Second Reading.
§ 1.10 p.m.
§ Mr. J. Grimond (Orkney and Shetland)
The speech of the hon. Member for Hendon, North (Sir Ian Orr-Ewing) will have helped the House. I share some of his criticisms of the Bill, but I believe that it should have a Second Reading. From everything that he has said I do not see why he could not support the Second Reading. I am unconvinced that we need a further inquiry. It is important that we get on with this and, I agree with him, other abuses in trading as quickly as possible. In view of the long and honourable tradition of his family, of which we have heard this morning, of examining this matter, perhaps it should take a lead in coming to a conclusion.
I welcome the Bill and I congratulate the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) on introducing it. I am not personally in favour of trading stamps. I would rather have the cash, or a reduction in price, or a Co-operative dividend. But while I say that, I do not think that it is part of my business as a Member of Parliament to force my opinions on the 719 public at large unless some public interest is involved.
Obviously, the popularity of trading stamps is not entirely due to their profitability. This is not an economic matter. Everybody has played at collecting stamps at some time. There is a fascination about collecting stamps, and added to that there is the fascination of thinking that one is getting something for nothing, even though one knows that one is not.
There is a branch of my family whose very austere and upright members are wholly opposed to trading stamps. I say with some shame that it has been discovered that one of its members has obtained an electric toaster by a privy accumulation of these stamps, by borrowing them or getting them in some other way from several people, and that she is rather pleased with herself. She does not think that it is good value, but she is rather pleased with the whole operation.
Many women regard trading stamps as a way of getting something out of their husbands. It adds to the gaiety of life. No one has ever pretended that betting is to be discussed in purely economic terms—nor bingo—for it is known that the bookmaker always wins. Trading stamps are in that class. I do not regard them as being a very disreputable form of fun, but there are certain abuses in connection with them in which the House has a great interest and to which I shall draw attention.
I could not support a Bill which made trading stamps illegal. I always admire the downright and vigorous opinions of the hon. and learned Member for Northampton (Mr. Paget), but it seems to be an over-use of the bludgeon to make their use illegal. However, there is clearly an acute danger of fraud, and that is a matter in which the House has always interested itself. I listened to the well-informed speech of the hon. Member for Wednesbury (Mr. Stone-house). There may well be a danger that this might become, as he described it, a type of minor protection racket. I did not think of that before, but I can see that it is a danger and that is very much a matter with which the House must be concerned. The House is also concerned because the Government 720 have created part of that climate of opinion in which trading stamps become popular and necessary. To some extent, at any rate, they are an alternative to price cutting which, with the official view on resale price maintenance, is also connected with the growth of trading stamps.
Personally, I believe that this whole matter should be considered as one and to that extent I have some reservation as to whether a Private Member's Bill is the right way to tackle it. I think that we have to look at this in connection with resale price maintenance, monopolies legislation, restrictive practices legislation and the protection of the consumer, all of them put together. This is a matter in which, for better or worse, we are very much in the hands of the Government. That is my first reservation.
Secondly, we should not encourage the practice, which has grown up, of finding that, because we have done certain things, abuses have crept in and then, instead of trying to get rid of the origin of the abuses, try to legislate for the abuses and so create a mountain of legislation when we might cut it all away by removing the origin.
§ Mr. Grimond
I am very glad to have the agreement of the hon. Member for Louth (Sir C. Osborne), who seems to be running into rather a good line of political good sense, both yesterday and today. As this is Friday, I do not see why someone should not pay him a compliment—he does not get many from Monday to Thursday.
I am willing to support the Bill in general and I should like it to go to Committee. The hon. Member for Hendon, North has already touched on one of my main criticisms. I am not happy about the powers which it is proposed to give to the Board of Trade, and this is particularly relevant to Clauses 3 and 6. I would very much oppose Clause 3 if it were not permissive. As drawn, it is, and the hon. Member for Hendon, North asked the relevant question of when and in what circumstances the Board of Trade might use it, should it need to do so. Presumably, the promoters of the Bill intend that these powers should be used 721 only as a last resort, but I should like some clarification of that.
If the Board of Trade is to take upon itself the decision of what is a fair cash value for trading stamps, there are a thousand and one other things connected with the retail trade which we might ask it to decide—what is a fair mark-up and what is a fair profit, and so on? I do not believe that it has the machinery for that and I would loathe to see the Board of Trade creating it. I also agree with some of the detailed criticisms of Clause 6.
At present, I would have thought that it was enough to write into the Bill the provision that companies must produce an independent audit to state the value of their stamps as compared with the value of the merchandise. I would have thought that the stamp companies would have been willing to do that and I do not see why such an arrangement would not meet the objections to Clause 3. I can conceive circumstances in which it might be necessary to give the Board of Trade very wide authority of this sort, but I am not impressed with what has been said so far.
I should like also to refer to Lord Sainsbury and the D.T.A. I agree with the hon. Member for Hendon, North that it is not a bad thing that trading stamps should have had the effect of reducing prices in other people's shops. However, when he asks why this practice should be singled out as against loss leaders, for example. I think that the answer is twofold. First, it is high time that we had a close all-round look at the great range of trading practices, including resale price maintenance, and thereby tried to decide what was legitimate and what was not.
Secondly, if the growth of trading stamps were to lead to a situation in which the retail trade became not so much a branch of, but very much under the influence of, the trading stamp companies, this would be a very undesirable situation. As the retail trade is still largely carried out not by supermarkets, but by many individual traders, this is a development against which they are not in a very good position to fight.
I welcome the fact that Lord Sainsbury has taken up this matter. His opponents are well able to look after 722 themselves. We should give the Bill a Second Reading, but I have grave doubts whether we should give the Board of Trade the powers it suggests. I hope that the Bill will be another step forward in a general review of the whole policy of prices and trading.
§ 1.19 p.m.
§ Sir Cyril Osborne (Louth)
I am very grateful to the right hon. Member for Orkney and Shetland (Mr. Grimond) for the very kind things which he said about me. If at present he feels that he can say them only on Fridays, perhaps later he will be able to say them on other days of the week as well.
I agree with the right hon. Member that lower prices in the shops are much more desirable from a national point of view than stamps of any kind. The great problem facing our country is how we are to control the annual demand for more paper money in wages and salaries. Until the Government produce a method of controlling increases in shops prices there will be pressure from the trade unions, their members and their members' wives for higher wages.
Therefore, from that point of view alone, it would help to reduce the cost of living and, therefore, help the Chancellor of the Exchequer when he meets the leaders of the trades unions to get acceptance of a sensible incomes policy. I should have thought that this small modest Bill would have commended itself to everyone in the House.
My hon. Friends below the Gangway are obviously uneasy about the Bill. I hope that this is not so, but it seems as if they propose to vote against it. I hope that they will not do this. I agree that the Bill, is not perfect—no Private Member's Bill can be expected to be perfect—but I hope that they will agree that it can he amended in Committee.
The Times this morning, in its City column, said this about the Bill, and it rather underlines what my hon. Friends have been saying:Mr. John Osborn's Bill on trading stamps which is to be debated today, is regarded by the Trading stamp companies as a serious threat"—to them, of course,The companies also maintain that the ability of the Board of Trade to supervise both the redemption value of the stamps and 723 the price which the retailer pays for the stamps"—those are the two things which matter in this Bill—would give the Board control of the stamp companies' gross margins, which is commercially undesirable and a dangerous precedent".As a good Conservative, may I say this to my hon. Friends. I am not here to defend capitalism at all costs. I think that in everything the public interest should be the overriding consideration, with there being legitimate consideration for private interests. The public interest should finally decide whatever decision we make.
Therefore, I do not share the underlying fears expressed in The Times this morning which my hon. Friends have taken up. I am not here to defend every aspect of capitalism and to say that it is always right.
§ Sir Ian Orr-Ewing
I know that my hon. Friend would not wish to misinterpret my anxieties and that he is trying to be fair. My anxiety was not merely that the Board of Trade would get involved in this investigation, but that it might have to form a different yardstick as to what was reasonable between a large stamp company in one part of the country and a small stamp company in another. This seems to me a very dangerous precedent which is totally novel to the Board of Trade.
§ Sir C. Osborne
I would not wish to be unfair to my hon. Friend. I see the difficulty of the problem. That is why I say that we should give the Bill a Second Reading and should consider it in Committee. That is surely the proper way to go about the matter. But I say again that for some of my hon. Friends to take a stand, and say that this is against private enterprise and capitalism of all sorts, is wrong. I am not prepared to do that.
§ Sir C. Osborne
If my hon. Friend reads what is said in The Times he will see that that is what is inferred.
Trading stamps form what I would describe as an unholy alliance which ties the customer to the retailer and 724 then ties the retailer to the finance corporation, which is in restraint of trade. Neither the customer nor the retailer can easily shake off the shackles of the finance corporation. This is the antisocial aspect of the matter which I deplore.
I support this modest Bill for three simple reasons. First, I believe that it would help the small shopkeeper, the self-employed family man, in his struggle against the savage competition which he is having to meet from the huge modern supermarket. Whatever the House can do to help the small retailer it should do, and that is the most compelling reason why I support the Bill.
Secondly, if it became law, I think that the Bill would help to reduce the self-deception which the stamp companies exercise or encourage among the customers when they think that they will get something free. There is nothing free in the world. Somebody must pay for it, and ultimately, in this case, it is the customer. One of my hon. Friends said that the customer would not pay for it. In that case, the retailer would pay. If the retailer can afford to have someone take 2½ per cent. from him, prices should be reduced by 2½ per cent.
My experience is that the small retailer is having a hard struggle to keep going. To allow a finance company to put its hands in his till and to take out 2½ per cent. before he has done a farthing's worth of business is socially wrong and contrary to the interests of the small man.
Thirdly, I support the Bill because it would help to stop possible fraud by the stamp companies. I regard stamp trading as economically wasteful and socially undesirable. Questions have been asked about what the experience has been in America. It has been asked whether the practice has increased prices. Perhaps the House will allow me to make one or two quotations from an excellent article in the Statist of 13th December, 1963. We all regard the Statist as a very responsible journal. This is what its correspondent in New York wrote:If the American history of trading stamps is anything to go by, there is a good chance that within a few years the British companies 725 who are fighting out their own stamp war will live to regret that it ever started".That is a warning from America.
I want to emphasise the following quotation to my hon. Friends who are concerned about whether this practice will cost much:Trading stamps have become the second most costly item for America's supermarkets … stamps now account for 14 per cent. of the American supermarket's expense dollar, ranking second only to the 44 per cent. covering personnel costs".That is a staggering figure.
If trading stamps are costing supermarkets in America 14 per cent. of their total operational costs we do not want them here. Neither the small retailer nor the customer wants them in this country. If they are costing 14 per cent. of operational costs, one of two things must happen. Either they prevent prices from coming down, or they must cause prices to go up. We must face this issue; this is the bare economic fact.
What is the experience of the great American companies? One of the biggest is the Great Atlantic and Pacific Tea Company, known in America as A. & P. It is about America's largest supermarket chain, with about 4,500 stores in America and Canada. This company has told its customers that trading stampscost money, and these costs must be passed on to the customers in the form of higher prices".This is what one of the biggest chain companies in America says, and it has been in and out of the racket for many years.
Hon. Members have asked for evidence in this matter, and I hope to give them evidence from, as I say, a very responsible journal. In the autumn, the National Association of Food Chains Convention was held in America. About 1,800 top executives representing about 300 chain companies and 15,000 stores met. It is obvious that these men have a wide and comprehensive experience in this matter. They openly blamed the trading stamp war as the cause of a steady profit decline, despite the fact that their sales were increasing. This means that their profit margins were being reduced.
Many of my good friends in this country are little shopkeepers, who are 726 struggling hard to make a living now. I do not want to see them squeezed out as a result of a stamp trade war in this country. They are having a hard enough time as it is. To introduce this and make it harder for the little men to earn a living is contrary to my ideas of Conservative philosophy.
The article continues in this way:The problem for most chains today, therefore, seems to be one of getting out of the stamp trade business gracefully".When I read that, I thought of the advice I was given a long time ago that men who take either to drugs or to keeping a mistress find it very hard to give them up when they want to. I should think that about the same thing would apply here with the smaller man who takes to issuing trading stamps.
The article in the Statist concludes in this way:It is, therefore, a safe assumption—one that is based on dozens of interviews with chain store executives—that stamps are on their way out as a major promotional tool in America's supermarkets.They have failed there. I do not want them to come here.
I take the argument one stage further. At the moment, stamp trading is in its infancy here. If it is good for one form of retail trade, why should it not be applied to the whole retail trade in this country? I will give hon. Members an idea of what that would mean. The last returns of the Board of Trade I could get were those for 1962, which showed that the total retail trade was £9,088 million—let us say £9,000 million. As I understand it, the trading stamp companies levy 2½ per cent. Two and a half per cent. on £9,000 million, if it were spread right throughout the country, would mean that the finance corporations would in this way be taking £225 million out of the tills of the shops and, in my opinion, rendering no service for it.
§ Sir C. Osborne
The trouble is that hon. Members opposite do not know how to run nationalisation. When they nationalise anything, they put up prices. When they nationalise it, they mess it up. I could use an even stronger word. [Interruption.] The hon. Gentleman should not talk when he is seated.
§ Sir C. Osborne
Wait a minute. One of the main reasons why I of am on this side of the House rather than on the other side is that I am convinced, and have always been convinced, that nationalisation was an utter and complete failure as an economic way of life.
§ Mr. J. Hynd
Why have the Conservatives retained nationalisation all this time? What is the hon. Gentleman talking about if not the rackets and failures of private enterprise and their method of putting prices up?
§ Sir C. Osborne
I am not so bigoted as the hon. Gentleman. I do not think that all good is on my side and all bad on his. I think that there are good and bad on both sides. The hon. Gentleman still has to learn that. One day he will grow up, and he may learn that. That is why I am here. I think. The hon. Gentleman is on that side of the House because he does not think.
I return to my theme. The Board of Trade figures show that total sales in retail shops were £9,000 million in 1962. If stamp trading covered the whole lot, it would give to the stamp companies an annual income of £225 million. I know that this is reductio ad absurdum, but I am showing what could happen. I am advised—I do not know how true this is—that the stamp companies want 25 per cent. of the income for their expenses—printing, travellers, and all the expenses necessary to run the business. They would, therefore, want £56 million for this purpose, which would leave 75 per cent. for gifts. Seventy-five per cent. equals £168 million. This is the possible field in which stamp companies have to operate.
Gifts are bought, say, at half price. They go to the stamp company at the wholesale price. Therefore, a profit will be left on the gift business of about £84 million. This is the size of the problem. But that would be if all the stamps were redeemed. There has been argument across the Floor of the House as to how many are not redeemed. Nobody knows. I was told by somebody who is supposed to know that in America about 20 per cent. are not redeemed.
My right hon. and learned Friend the Member for Chertsey (Sir L. Heald) seems 728 to dissent from this. I will call it 10 per cent., which is a very modest figure. Ten per cent. not redeemed would give the finance corporations another profit of nearly £10 million net. If the trade were spread throughout the whole country over the whole retail business, there would thus be a net income of about £100 million a year to the finance corporations, which in my opinion render no social service at all. This ought to be controlled.
It is no good hon. Members opposite talking about nationalising anything else. If they could show me how they could bring down the cost of coal, gas and electricity under nationalisation, I would listen to them. They have a monopoly in everything they have nationalised. Wherever they have nationalised, they have put up prices. Wherever they have nationalised, they have had labour troubles.
§ Mr. Walter Monslow (Barrow-in-Furness)
The hon. Gentleman is moralising. He is denouncing the high finance corporations, which I rejoice in. I do not know whether he ought to be on the Tory side of the House or on the Labour side. He talks about nationalisation and costs. Is it not true that costs in nationalised industries are less than they have been in the private sector?
§ Sir C. Osborne
That is an impossible question to answer and a rather stupid one to ask. How can the hon. Gentleman ask me to tell him what the comparable costs are as between the coal industry, the electricity industry and the gas industry, and the private sector? These things cannot be compared.
§ Mr. Monslow
I am not unintelligent. I asked the hon. Gentleman a question. I said that the costs in nationalised industries, high as they are, are less than those which have been operating in private industry.
§ Sir C. Osborne
This is by the way. The answer is "No". Nationalisation has been proved to be a complete failure.
§ Mr. Deputy-Speaker (Sir Robert Grimston)
We are not at the Committee stage. All this is very interesting, but perhaps we can get back a little closer to the Bill.
§ Sir C. Osborne
No—back to the Bill!
What is the legal position of trading stamps? This is perhaps more crucial than anyone realises. No one has yet touched on this aspect. I understand that there is a loose undefined contract between the stamp companies and the retailer. Once the coupons have gone from the retailer to the general public, there is no contract whatsoever between the member of the general public and the stamp company. Stamp companies can, if they wish, repudiate the whole lot.
If that is so, it is a terrible scandal. I have been given some advice by a lawyer of some repute. I think that the House should hear this. I am told that the only contract is between the stamp company and the retailer to whom the stamps are supplied. Moreover, under this contract the stamp company invariably retains the ownership of the stamps. I will pass this on to my right hon. and learned. Friend the Member for Chertsey, who is an authority on legal matters. The books in which the stamps are collected specifically reserve the stamp company's rights in every conceivable respect, and not only is the company free to change the range of goods offered on redemption or the number of stamps required for any specific piece of merchandise, but it appears fairly certain that the stamp companies are under no legal obligation to honour the stamps at all.
If that is so, then it is a terrible scandal. It means that it is nothing but a racket. I ask my hon. Friend the Parliamentary Secretary to the Board of Trade whether this is true. I do not know, but I am told on high legal authority that it is. If it is, then as I say, it is a scandal. There is nothing to prevent a shell company like Arco House selling to retailers very large numbers of stamps and then refusing to spend any part of the proceeds on merchandise for the consumer. Is that true? If it is, then stamp trading ought to be abolished altogether.
730 I will now give the House my other reason for supporting the Bill and not asking for an inquiry. I think that it is necessary to have, as under Clause 6 of the Bill, control of the stamp companies for the reason that the people who go to the shops and buy goods in order to get stamps ought to have some reasonable expectation that those stamps will be honoured. Therefore, we are entitled to say that there should be some financial stability behind the people who issue the stamps. I will, if I may, give an example which has just happened. This is not supposition. The Arco House Stamp Trading Company was incorporated on 11th April, 1963. It went into liquidation on 3rd January, 1964. Therefore, it ran for nine months. It was registered with a nominal capital of £100, only £2 of which was subscribed. It had the right to issue stamps for an unlimited amount. It has, as I say, gone bankrupt and the creditors' deficiency is £1,044.
Does any hon. Member who is opposed to this Bill want that kind of thing to happen again? I put it to my hon. Friend that in cases where small mushroom companies emerge, is it not true that the retailer who still has some of the stamps issued has been swindled of the money he has paid for them, and is it not true that the customer, who through the retailer has had the stamps issued to him, has been swindled of the value of those stamps, and ought not this sort of thing to be stopped? The Bill, in its way, will do that.
§ Mr. Paget
I am in very great agreement with he hon. Gentleman, but this is a parasitic incubus of the distributional traders, and but for the dozey incompetence of the Board of Trade would never have been allowed to be established. But having been established, has the hon. Gentleman any solution for dealing with the situation now that all these stamps are out and waiting to be honoured?
§ Sir C. Osborne
Had I known that I was giving way for the hon. and learned Gentleman to throw the comments and abuses which he usually throws across the Floor of the House, I would not have done so. He speaks about the dozey incompetence of the Board of Trade, but will he look at—[Interruption.] For an old Etonian, the hon. and 731 learned Gentleman's manners lack a good deal. He should look at the White Paper, issued by the Labour Government in 1951, which they had not the guts or the confidence to follow up.
Back to the Bill again. I am asking the House to support the Bill because I think that if stamp trading is allowed to grow in this country as it has in America a lot of social evils will result. It will harm the little shopkeeper for whom I am pleading. It will deceive the men and women who buy goods from retailers who give stamps in the hope of getting something for nothing as a result of their purchases. It leaves the field wide open to unscrupulous men to take enormous sums of money out of the retail trade.
I hope that my hon. Friend the Parliamentary Secretary will support the Bill. If there is anything in the retail trade which is going free, then let us have it in lower prices.
§ 1.45 p.m.
§ Mr. Peter Doig (Dundee, West)
Apart from the highly irrelevant remarks made by the hon. Member for Louth (Sir C. Osborne) about nationalised industries, he might, in the rest of his speech, have been quoting from Labour Party documents. I welcome the Bill on the basis that half a loaf is better than no bread at all. I would favour the abolition of trading stamps altogether, but if we cannot have that then at least even a roundabout step towards their abolition is a good one.
In my opinion, there is no doubt at all that when the public realise the real value of trading stamps it will lead to their abolition. Apart from anything else, the fact remains that this roundabout method will take up a considerable amount of the time of and cause expense to the Board of Trade, and in the same way, will take up a considerable amount of time of the police force and involve it in expense. Earlier on mention was made of court staffs. But apart from this, I still welcome the Bill as being at least a step in the right direction.
An hon. Member opposite said that £500 million a year was spent on sales promotion. I feel that this also is something that might well be looked into because I think that the figure is grossly 732 excessive. When Chancellors of the Exchequer are looking round for means of raising revenue or saving money they might profitably have a look in this direction. Another hon. Member said that we did not want the State to interfere too much. What is too much? Will the Bill be too much? I do not think so.
I am particularly concerned with Clause 14 which defines stamps. It states that'stamp' means any stamp, coupon, voucher, token or similar device, whether adhesive or not, other than normal money of the realm".I think, therefore, that the definition will include free gifts from cigarette firms. What I do not believe is covered by the Clause, and what certainly should be covered by it—to quote an example of which I have had a complaint from a constituent recently and which I passed to the Board of Trade—is the sort of inducement practised by the well-known chocolate firm of Cadbury's which advertised everlasting Christmas trees for 5s. to those purchasing its goods to a certain value. It stated in the advertisement that supplies were limited, and this was in fairly small print. It also stated that the offer was open up to a certain date only.
One of my constituents bought these goods and sent for the everlasting Christmas tree at a time before the closing date which had been announced. But he did not get one, and his attention was drawn to the notice in small print which said that supplies were limited. In order to get the tree my constituent bought goods which he might not otherwise have bought; paid the postage, supplied the envelope and paper and paid poundage on a postal order. What is worse, the reply which he received from the firm, expressing regret at the fact that there were no Christmas trees, was printed, which shows that, not one or two, but thousands of other people must have found themselves in the same position as my constituent. In my opinion that is getting near to sharp practice, and I should like the provisions of this Bill extended to cover such things.
We have heard in recent debates on resale price maintenance how poor traders are being threatened, and we are invited to feel sorry for them. Hon. 733 Members opposite were in a terrible state when we discussed the fate of small traders in the event of the abolition of resale price maintenance. At the same time, some hon. Members opposite tried to tell us that these small traders will carry the cost of trading stamps. This is nonsense. If they are as hard up as they are supposed to be, how can they afford to carry any additional cost?
Fewer than 10 per cent. of traders give stamps. Thirty-one per cent. are against using them; 36 per cent. have admitted to a slowing down in their service; 34 per cent. consider that the introduction of stamps will increase prices; 23 per cent. have already decided to stop using them after having given stamps for a short time. What is much more interesting is that 64 per cent. would prefer that no one used trading stamps at all. We may take it that only 10 per cent. of the traders use stamps and of that number, 64 per cent. do not want the stamps at all. The number of traders desiring stamps is very small, something like 4 per cent. There can be no doubt that these stamps represent a useless addition to distributive costs.
I worked for many years in the distributive trade and I know that when a shop assistant has to deal with money and, in addition, distribute stamps and at the end of the day check the number of stamps he has issued, it adds to the cost of the service to the customer. In a big store it might result in more people being employed. In a small shop it means that the assistant must spend an extra half-hour checking up. There is no doubt that the provision of stamps adds something to the cost and slows down the speed at which customers can be served during a busy period. Van drivers who can make a certain number of calls per day are slowed down, if they have to deal with trading stamps, and cannot make so many calls. Alternatively, they must work longer hours.
There is no doubt that trading stamps have to be paid for by the trader or by the consumer, and the money goes to people who perform no useful service of any kind. Today we are discussing means of controlling this practice. We should be talking about abolishing it. But as the intention is only to control, 734 I maintain that it is absolutely essential that there should be proper control. With a cash discount the customer knows that he is getting a fair deal. But when a catalogue is dangled before his eyes and he is told that if he saves 10,000 stamps he will get this, that and the next thing, the person running the trading stamps scheme can increase the number of stamps required for any article, and the customer may never get the article, because there is no guarantee that he will.
This and other things which have been referred to today reveal that there are serious loopholes in the present method of conducting this type of business and I am convinced of the necessity for drawing up much tighter regulations to control this form of trading.
§ 1.56 p.m.
§ Sir Lionel Heald (Chertsey)
I think that it would be generally agreed that a case has been made out for this Bill to receive a Second Reading. Here we are concerned with the principle of the Bill and, from the Long Title, from what we have heard today and what some of us have learned during our study of this difficult and complicated subject, it is clear that there are difficulties and possible dangers, and that the consumer and the trader require certain protection. The actual terms of the Bill may be said to be purely Committee points. But there is more in it than that.
Having made perfectly clear that I am in favour of the Bill receiving a Second Reading and being considered in Committee, and without having any financial, professional or any other interest in the matter, I must say at once that Clause 3 should never receive the support of this House. I think that it should at once be appreciated that the provisions of that Clause would involve giving the Board of Trade absolute discretion to control the day-to-day running of a business.
Such a Provision is something which we have not seen since the Defence of the Realm Act and the emergency regulations which were in force during the war. We had to have such things in those days. But I think it fair to say—one wares to be fair to the Opposition whenever one can—that even during the period from 1949 to 1950 735 there was no provision of this kind, In adopting that view I do not think that I should find myself far from the hon. Member for Sheffield, Hillsborough (Mr. Darling) who, I believe, will speak for the Opposition on this matter.
Clause 3 represents delegated legislation of the very worst kind, giving the Board of Trade power not only to interfere in the day-to-day business of companies but to direct it. Hon. Members should think of the way in which such power could be abused. We have always to consider that, and to do so is not to make any suggestion against anyone. We have heard experts in methods of government suggest recently that there is no need to nationalise industries. If the right power is obtained by Government Departments and exercised, that is sufficient. This would be a model Clause for that purpose. We ought to have an asurance from the promoters of the Bill that they will consider very seriously—I would not ask them to do more than that today—the removal of the Clause from the Bill.
It may be that they can substitute provisions of a positive and definite nature, which the Committee would accept, to carry out some of the purposes of the Clause. I hope that the Parliamentary Secretary will tell the House whether the Board of Trade either wants to have any of these duties or powers or is willing to accept them. If it is not, my hon. Friend should say so. The position should be made quite clear.
Clause 6, when read with Clause 3, is just as bad. Having read Clause 3 and seen what powers the Board of Trade will have, we see that Clause 6 provides that the Board of Trade shall be compelled to regard its powers under that Clause as very wide. In his opening speech—which was a remarkable presentation of the whole case, and showed that he had devoted a tremendous amount of time, care and energy to the matter—my hon. Friend the Member for Sheffield, Hallam (Mr. J. Osborn) admitted that its terms were rather broad. I should think that they were!
For example, it provides that the Board of Trade can prescribe a fee or a deposit bond which would be absolutely prohibitive for anyone. It could make regulations which, in a short time, 736 could render the whole business completely inoperative. That would be a shocking thing, if we start with the proposition that under certain circumstances it is proper to conduct a trading stamps business. If we agree about that, to give the Board of Trade power which could mean the ruin or destruction of that business would be wrong.
I do not mean to make too carping a criticism—
§ Mr. J. H. Osborn
In view of my right hon. and learned Friend's experience, I think that he will agree that a private Member is in a very difficult position in this matter. I have been criticised both because the Bill is too long and because it is not long enough. My legal advisers had a very difficult time in trying to keep the Bill short, and it may be that we could provide for regulations to deal with the matter when we have more information about it. But does not my right hon. and learned Friend agree that a private Member is faced with a difficult problem in respect of these two Clauses? I hope that he will appreciate that we will accept constructive Amendments, and that we greatly value his contribution.
§ Sir L. Heald
I hope that my hon. Friend does not think that I was reflecting upon him in any way. I will not occupy the time of the House by discussing the stable from which this horse originated, although I could offer a guess. We know that people helped my hon. Friend, and that he is not responsible for the provenance of some of the ideas that he has expressed. The assurance that he has just given will certainly enable me to shorten my speech, and will thereby enable others who want to discuss this matter to raise their points.
I proceed on the assumption that we shall be able to rely upon a very different attitude being taken in Committee from that which has been urged in several speeches from hon. Members opposite. Those speeches have indicated a desire that it should be possible so to circumscribe this business by regulations and complications as to make it impossible to carry on. That is something which should never be done. If we think that, we should have a Bill to abolish trading stamps altogether. We do not want to 737 adopt some roundabout way of rendering it impractical.
My hon. Friend the Member for Louth (Sir C. Osborne) has, unfortunately, departed, no doubt to make an admirable oration somewhere else. He raised a legal paint with which I will not deal, except to say that he may have alarmed a number of people. I merely ask him to refer to the famous case—the carbolic smokeball case, where he might find the answer to his problem.
§ Mr. Paget
Surely the carbolic smoke-ball case concerned an offer by some manufacturers of £10 to anybody who bought their product and caught a cold. This was held to be a general offer. But stamps are offered as a free gift. There is no consideration passing between the customer and the stamp company.
§ Sir L. Heald
I cannot argue with the hon. and learned Member. I merely suggest that my hon. Friend the Member for Louth would be admirably employed in reading the law on this subject before he pronounces upon it. Anyway, I do not wish to pursue the matter further.
In view of what my hon. Friend has said, it is clear that he already has sufficient worries and troubles over this matter, and I do not want to add to them. It is clear that he is prepared to look carefully at the mouth of the horse that he received from a certain quarter, and that the results may be very good.
§ 2.11 p.m.
§ Mr. George Darling (Sheffield, Hillsborough)
As the right hon. and learned Member for Chertsey (Sir L. Heald) has correctly anticipated, I agree entirely with his strictures on Clauses 3 and 6. I would also include Clause 7—the penalty Clause. I am glad that the right hon. and learned Gentleman has put forward his criticisms, because I can now shorten my speech. I can leave out some of the detail that I was going to refer to. I am also glad that the hon. Member for Sheffield, Hallam (Mr. J. H. Osborn) pointed out the difficulties in which hon. Members finds themselves when preparing a Private Member's Bill. This situation must be put right, so that private Members have the facilities that they should have from the House in framing this kind of legislation.
738 I do not want to make a long intervention; in fact, as the debate has gone on, my notes have become fuller and fuller, and if I had waited any longer I would have been in danger of inflicting a long speech on the House. Hon. Members are agreed that in one way or another there is a need to lay down rules for stamp trading. I therefore think that the Bill should be given a Second Reading, and I hope that the Government will approve its intentions. I a so hope that in Committee they will assist the sponsors in dealing with the Clauses that have been criticised by the hon. and learned Member for Chertsey.
I join in the congratulations offered to the hon. Member for Hallam, not only for having the luck in winning a place near the top of the Ballot—although I imagine that in the last few weeks, during the preparation of the Bill, he has probably felt that it was unwise to have entered the Ballot at all; I know from my close association with him, he being a neighbour of mine, that the preparation of the Bill has not been easy, to put it mildly—but also that he now has the satisfaction of doing something about a situation in respect of which a large body of opinion feels some action is necessary.
The House should remember that my hon. Friend the Member for Dundee, West (Mr. Doig) is perhaps the only hon. Member who has made trading stamps an election issue. At the recent Dundee by-election he said that he was in favour of their complete abolition, and he got a thumping big majority. I do not say that this was as a result of that declaration, but during the election campaign he made out a fairly good case for banning trading stamps, and he has made out a good case today.
My hon. Friend the Member for Sheffield, Attercliffe (Mr. J. Hynd) also wants the total abolition of trading stamps, and despite the difficulties involved I would support him, if the rumour that I heard this morning has any truth in it—that certain people are considering a proposition that hon. Members should get trading stamps as a sort of bonus for attendance here. I do not think that would work. In any case in law and in equity, I cannot see how it is possible to ban trading stamps as they have grown in this country.
739 As the hon. Member for Cleveland (Mr. Proudfoot) said, there are many customers, housewives, and so on, who like to collect stamps. I think that they are misguided. That is a personal view. I do not think they get the value for money which they think they are getting, but it would be extraordinarily difficult to prove that the practice is so socially harmful that it ought to be banned by law. More important, as I think the hon. Member for Hallam would agree, it would be virtually impossible to define a trading stamp in such a way that we did not also bring into the definition other forms of trading discounts which this House would certainly not disapprove of, including some of the cut price offers which appear in certain trade union journals.
I agree with the hon. Member for Cleveland that what is needed is to give the public all the relevant facts about stamp trading. As he and other hon. Members know, we on this side of the House have always pressed the view that one of the essential and effective requirements of consumer protection policy is the publicising of trade information so that the customer may know exactly what he is getting and whether he is getting value for money. I agree with my hon. Friend the Member for Ogmore (Mr. Padley) that trading stamps are a promotion "gimmick" on a par with the practice of giving 4d. off a detergent packet and of giving customers plastic flowers and other things they do not want, with the goods they buy.
But it is also a self-defeating "gimmick", because the purpose of the stamp-trading retailers is to attract customers from their competitors, and if all of them go into stamp selling in the end they are back where they started, with the difference that they have added the cost of the stamps used in their trading operations, which must be passed on to the customer.
The hon. Member for Hendon, North (Sir Ian Orr-Ewing) wondered why this anti-stamp trading had broken out. The answer is that it broke out when Mr. Garfield Weston, of the Fine Fare Supermarket chain, broke the gentlemen's agreement of the big grocers not to introduce trading stamps into their 740 business. He had had a rough trading period and had not been doing so well as he and his shareholders expected. Then he brought Sperry and Hutchinson in to help him and that is how it all started, but trading stamps have been going on for a very long time. As long as the practice was on a relatively small scale until the recent outburst no one seemed worried about it. It was the sudden intrusion of the big American companies which caused the campaign to break out.
I do not want to go over the criticisms of stamp trading which many of my hon. Friends have put forward. Some of them have far more expert knowledge than I have of this business. I endorse wholeheartedly the views of my hon. Friend the Member for Ogmore, including his opinion that the Bill is the minimum measure which, for practical reasons, can be put forward and, therefore, it should be given a Second Reading. In view of the interest taken in the Bill and outside in the trading stamp campaign, I think that in all fairness we should explain to traders and trading associations concerned, and to the big body of public opinion which is interested, what is likely to happen to the Bill.
Even if it gets a Second Reading today, nothing can happen for a very long time. The Bill has to get through the congestion upstairs. We now have 10 Standing Committees at work. The public should be aware of this. There is a backlog of Bills waiting to come forward to some of those Committees. I hope that the Bill gets a Second Reading and that the Whips can get a Committee to consider it. I hope that the desperately overworked Committee Clerks will not stage a strike before the Committee proceedings begin. I do not think that there is much danger of that, but if they did they would have my sympathy. The Government are putting an intolerable burden on to them and on to hon. Members who are prepared to serve on Standing Committees because of the Government's last-minute death-bed spate of legislation. I shall not pursue that further now, as there will be other opportunities of doing so. We should warn the public that nothing will happen for some time.
I hope the Government will give help in regard to Clauses 3 and 6 which, 741 in their pesent form, give the Board of Trader power to do certain things. I hope that the Government will help in the rewriting of those Clauses to reduce their area of application, to put it in a non-legal way. I hope that when the area of application has been reduced, those Clauses will not reappear as regulations or, rather, in a form giving the Board of Trade power to introduce regulations. These conditions or rules which the Bill lays down for stamp trading ought to be in the Statute itself, not in regulations. I do not think that I need pursue that further, as I am sure the Parliamentary Secretary will give us an answer on it.
We are getting into an intolerable state of confusion—I hope the right hon. and learned Member for Chelsea will not think try lay language incomplete or misleading when I say that we are getting into a state of confusion—over what I call the law of contract for buyers and sellers, the law of contract for shopkeeping. We started 70 years ago with the Sale of Goods Act. That is still a very useful Measure, beautifully worded and beautifully drafted. It has served us very well indeed, but it is out of date and does not cover many of the trading practices which have grown up over the last 20 or 30 years, including stamp trading and hire-purchase. From time to time we have had to add to this basic legislation piecemeal legislation to deal with trading practices for which rules needed to be laid down.
As a result, we now have scores of statutes, and regulations made under statutes, which make a complete confusion of the law of contract which should be made very clear to buyers and sellers of goods.
Take the case of a man who runs an ironmongery and general store, and in addition to his other activities goes in for stamp trading. I refer to this type of trader because I shall have to make the same sort of speech as I am making now when I attend a sitting of the Standing Committee dealing with the Plant Varieties and Seeds Bill. The Government are doing the same kind of thing in that connection. They are laying down conditions under which plants and seeds can be sold in shops and stores. The poor chap who runs a general store with ironmongery and usually sells seeds and plants now has all his operations 742 covered, not only by the sale of Goods Act, the Merchandise Marks Acts, Hire Purchase Acts, Food and Drugs Acts, but several more Acts as well.
There are as I have said, also a score or more of different and complex regulations governing what he does, and we now propose to add some more. So he must look, in future and in addition, at everything very carefully before he sells a packet of seeds, and then, if he goes in for stamp trading, he will have this little lot on his shoulders as well.
Quite frankly, I do not think that these traders fully understand their legal obligations. One cannot expect them to do so. What may be worse, from the point of view of the interest which I claim to represent, is that the customer has not got the faintest idea what his rights are. The time has come when we should get rid of the confusion and do something about having a comprehensive law of contract, to put it in that way again, governing transactions of this kind. We must call a halt at some time, not to the laying down of rules as they become necessary from time to time until we have set about the major operation of consolidation, but we must not make confusion worse confounded by providing for regulations in Bills of this kind. The rules should be in the statute itself so that they may be seen clearly.
I had it [...]n mind to make some suggestions about how Clauses 3 and 6 could he dealt with so that the rules would appear in the Measure itself, limited in the way suggested by the right hon. and learned Member for Chertsey. But I think that these are Committee points and, if the Parliamentary Secretary agrees that they can be dealt with in and he is prepared to say that the Government support the Bill, wish it to have a Second Reading and are prepared to help us in the Committee to get things put straight, I think that we can call it a day, congratulate the hon. Member for Hallam again, and get on with a useful piece of work, though treating it as being in anticipation of the comprehensive law of contract which the country now seriously needs.
§ 2.22 p.m.
§ The Parliamentary Secretary to the Board of Trade (Mr. David Price)
I think that it may be convenient to the 743 House if I follow the hon. Member for Sheffield, Hillsborough (Mr. Darling). Like other hon. Members, I congratulate my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) on having drawn so high a place in the Ballot for Private Members' Bills, on having chosen so topical a subject on which to legislate, and on the persuasive way in which he invited the House to give his Bill a Second Reading.
All hon. Members who have spoken so far have been in favour of the idea of the Bill, although several have qualified their support, notably, my hon. Friend the Member for Hendon, North (Sir Ian Orr-Ewing), my right hon. and learned Friend the Member for Chertsey (Sir L. Heald) and the hon. Member for Hillsborough. From the speeches, it is quite clear that hon. Members wish to have some form of control over the activities of stamp trading companies. Opinion has differed as to precisely how this can best be done, but the general tenor of the debate has been in favour of at least some of the methods which my hon. Friend the Member for Hallam proposes in his Bill.
Of course, as one would expect, some hon. Members, such as the hon. Member for Ogmore (Mr. Padley), the hon. and learned Member for Northampton (Mr. Paget)—who, although he has not made a speech, has made his position very clear to the House in a manner which is so characteristic of him—and my hon. Friend the Member for Louth (Sir C. Osborne), would like to go a good deal further than my hon. Friend proposes in his Bill and frankly ban trading stamps altogether. But this is not the proposition which is before us today.
Before I comment on the details of the Bill, it might be helpful if I were to make a few general observations on the practice of stamp trading, as I see it. As my hon. Friend the Member for Hallam reminded us, the practice of stamp trading is not new. It has existed both here and in America since at least the last decade or so of the nineteenth century. In this country, as in America, we saw trading stamps booming during the First World War. The practice then died down until, in this country, there was a resurgence in the early 744 'thirties, which probably accounted for the efforts of an earlier hon. Member, in 1933, to whom my hon. Friend the Member for Hallam referred.
It has been in the last six years that stamp trading on what one might call the post-war American model has started to appear on any scale in the high streets of this country. At present, it is estimated that trading stamps are given at about 35,000 retail outlets and that stamps are issued at present in respect of about 7 per cent. of all retail trade. I thought that the House would like some figures. Hon. Members have been very modest in not claiming definite knowledge of the figures, and that is our best estimate at the moment—about 7 per cent.
How do retailers view trading stamps? As the House knows, there is no general agreement among retailers that trading stamps are either desirable or undesirable, nor is there general agreement as to their efficiency as a selling device in terms of a particular retailer's own business. My hon. Friend the Member for Cleveland (Mr. Proudfoot) who, I remind the House, is a very successful independent retailer on his own account, regards trading stamps as the lazy man's way out, and, doubtless, there are other retailers who take the same view.
There are many retailers, on the other hand, who have adopted the practice of trading stamps, who are satisfied that it has helped to increase their trade and who are consequently in favour of trading stamps. Others admit the efficiency of stamp trading but doubt its desirability. Others still—I guess that they are probably the more vocal—are quite convinced that trading stamps are an undesirable practice. Many of the arguments in support of this latter view have been deployed in our debate. Then there are those retailers who resolutely refuse to consider using trading stamps and are content to rely upon other methods of maintaining their business.
From one point of view, the trading stamp can be regarded as just another device in competition among distributors. If this is so, the competition generated by trading stamps ought to benefit the consumer. But it has been argued in the debate by quite a number of hon. Members that there are other considerations which may limit the 745 extent to which trading stamps do, in the long run, benefit the consumer. I have in mind particularly the remarks of my hon. Friend the Member for Louth and of the hon. Members for Ogmore and Dundee, West (Mr. Doig). I think that the House will agree that, whatever may happen in the long run, in the short run the use of trading stamps does not appear to put up prices. In fact, it may reduce them, since the most obvious counter-move for a non-stamp trader to take against a competitor who has "philatelised" his business is to reduce prices.
It is argued, of course, that the real danger of trading stamps is long term. Put briefly, I think that the argument is that, when nearly all retailers in a particular area have gone over to trading stamps, particularly stamps issued by one stamp company, then prices will inevitably rise. I recognise that, in theory, this could happen, but, as my hon. Friend the Member for Hallam very fairly pointed out, American evidence is inconclusive and certainly is not sufficient to support this view. In any case, how likely is this to happen in practice? Is this saturation point in trading stamps ever likely to be reached in this country or even in a part of the country?
Is it not more probable that, as the use of stamps becomes more widespread, so its advantages as a means of attracting new custom will diminish and that stamp trading companies will find the law of diminishing returns operating against them? I believe that the hon. Member for Hillsborough will agree with that; he certainly hinted at it in his speech. Retailers will no longer consider it a worthwhile investment to "philatelise".
In addition, there is a very large section of the retail trade which is positively committed not to adopt stamps. I have no reason to suppose that these traders will not stick to their guns. They have made their position so public that it would be a big volte-face for them to change their minds. Even in the United States, where stamp trading has developed a great deal further than it has here, the percentage of total retail trade handled by philatelised outlets—[HON. MEMBERS: "Ghastly word."]—has never exceeded 18 per cent. I gather 746 that some of my hon. Friends do not like that word, but I think that these new practices require a technical expression, and I hope to have introduced such a new expression into the language.
Another point sometimes made is that retailers are blackmailed into using trading stamps by threats that if they do not do so their competitors certainly will. We should recognise that this argument had some force in the early days, but surely not now when so many trade associations and other bodies representative of retailers have come out formally against the practice.
The individual trader must now have a very good idea whether his local competitors are likely to swing over to stamps and is hardly likely to be panicked into deciding to do so himself if it is against his better judgment. Further, the Government's proposals to get rid of resale price maintenance should assist: retailers who wish to resist the blandishments of stamp trading companies. I do not wish to exaggerate this argument because there is a lot of stamp trading in the grocery trade, where resale price maintenance has virtually broken down. But when there is complete freedom to compete on price, retailers and consumers will surely find scamps less attractive.
§ Mr. Padley
The United States is a field in which there has been experience in this matter. Can the Minister give any evidence from the entire history of this matter in the United States that what he said is true? Is it true that those States with no fair trade laws benefit as a result? Is it not true that 90 per cent. of the grocery trade is covered by stamp trading?
§ Mr. Price
I do not think that there is very much in the hon. Member's point. The evidence in the United States about the effect on prices is inconclusive; that seems to be fairly generally agreed by hon. Members who have endeavoured to deploy the argument.
I was about to ask the House to come with me to look at the consumers' view on trading stamps. There is no doubt that many consumers like trading stamps. Some, no doubt, would prefer straight price cuts—and I am certainly among them—but accept trading stamps 747 as the next best thing. Others positively like trading stamps. For them it introduces, so I am assured, an element of fun into the inevitable tedium of repetitious shopping. It also enables them to save for something extra which they would not otherwise buy, and without, I am told, having to bother the old man for more house-keeping money. I am also told that some housewives combine their stamps to provide equipment, or in some cases cash, for a charitable cause.
The Consumer Council on the other hand is less enthusiastic. After its meeting of 28th November it issued a statement. I should like to remind the House of the relevant passages:The Council agreed that any practice is undesirable which makes it more difficult for consumers to compare values or which makes it more difficult for them to transfer their custom, without loss, so as to take advantage of changes in the service and value offered to them by competing retailers.The Council regards stamp trading in its present form as such a practice.At the same time the Council believes that consumers should have the right to exercise their own informed choice as between retailers competing by one method (e.g. stamp trading) or another.The Council went on to propose how this might be done. Its proposals appear to be substantially covered by Clauses 1, 2 and 4 of my hon. Friend's Bill. Therefore I was not surprised to learn last night that the Consumer Council had issued a statement in general support of my hon. Friend's Bill.
We in the Board of Trade have had very few complaints indeed from consumers about stamp trading. On the other hand, only a day or two ago a group of ladies was received in the Department for the purpose of delivering a petition to my right hon. Friend signed by some quarter-of-a-million housewives from all parts of the country asking that stamp trading should be allowed to continue as it is at present. The petition was, of course, organised by one of the stamp trading companies, but nevertheless, a quarter-of-a-million housewives would be a mighty number of women to persuade to sign a petition with which they disagreed.
§ Mr. Price
That information has not yet reached me. No doubt if my hon. Friend would like me to make inquiries, I should be happy to report.
Against this background, I turn to the contents of the Bill. The Bill has three main provisions: first, to give the shopper the right to cash redemption; secondly, to ensure that stamp companies offer a "reasonable" sum as the cash option; and, thirdly, to protect the stamp saver against default by stamp companies.
The argument for a cash alterative to gifts falls into two parts. First, it is said that without this alternative the consumer's freedom of choice is impaired since it is difficult to judge whether there is any advantage to be gained from shopping with the retailer who gives stamps as compared with other retailers. This is the argument which clearly appealed to the Consumer Council.
On the other hand, let us remember that the British housewife is pretty shrewd. She is in general well able to assess the worth to herself of what is obtainable from a given quantity of stamps, and incidentally to calculate how much money she must spend to collect these stamps. None the less, I can see merit in my hon. Friend's proposal.
The second part of the argument seems to me to be stronger. Without a cash option, shoppers may feel tied to one retailer who gives the stamps they are saving, and may be reluctant to change shops before they have collected enough stamps for a worthwhile piece of merchandise. Equally, small shopkeepers who have gone over to stamps and then find that they want to discontinue the scheme may find this a difficult procedure if they are not to drive away many of their customers who have half-filled books of stamps. Clearly, a cash option would help to remedy difficulties of this kind.
I move to Clause 3, which is the second leg of the Bill. I am afraid that I have to tell the House that I do not like this Clause very much. As I understand it, Clause 3 would empower the Board of Trade, if it thought it necessary or desirable, to secure that the cash value of the stamps bears a proper relationship to the value of the gifts for which the stamps may be exchanged or the price charged by stamp companies for stamps supplied to retailers or both.
749 As drafted, this Clause seems to me virtually inoperable. I can well understand why the promoters have left the details to the Board of Trade.
Incidentally, as my right hon. and learned Friend the Member for Chertsey and the hon. Member for Hillsborough said, the phrase "proper relationship" is so vague that the Board of Trade could make or break stamp trading companies by the interpretation which it placed upon it. This is a big power for Parliament to give to the Executive. I have been fortified in my mind on this by the speeches of hon. Members. If Parliament wants to kill stamp trading, let it do it openly and not disguise it in giving delegated powers to the Board of Trade.
Is it possible to fix for all stamp companies a relationship between cash and merchandise values for each and every product, or between these and the price paid for stamps by retailers, or indeed between a cash value and the price paid for gifts by the stamp companies? There are a multiplicity of variable factors involved.
Moreover, I ask the House, what is the proper relationship? I have listened carefully to the arguments and no hon. Member has so far satisfied me as to what hon. Members mean by a "proper relationship". I might mention last night's alternative proposal of the Consumer Council that the cash redemption value should correspond with the average price paid by the companies to manufacturers for the goods offered as gifts. I confess that I do not wholly understand this suggestion, but we will of course examine it. At first sight it seems to me that the "average price" would be extremely difficult to define, and we should need an army of inspectors to police it. In reply to my right hon. and learned Friend the Member for Chertsey, the Board of Trade dislikes this Clause in spirit and detail.
Then there is the wider question that even if some practical form of control could he devised—and I cannot see how at the moment—such a control would be quite inconsistent with our general policy of not controlling the pricing and profit policies of individual traders. In other fields, we leave it to the forces of competition to ensure that traders generally follow policies which are desirable from 750 the community's point of view. If a company's profits are too fat, or its prices too high, it loses business to its competitors. Is there not at present sufficient competition amongst stamp companies to ensure that the deal they give to the consumer generally is a fair one?
Of course, if there were ever to be any undesirable collusion between stamp companies, my right hon. Friend's proposals on monopolies and restrictive practices would provide means to restrain them. So far as we can ascertain, no American state legislation provides for controlling the cash redemption value of trading stamps.
In an intervention, the right hon. Member for Orkney and Shetland (Mr. Grimond) asked how much work would be involved in this for the Board of Trade. I can only say that it would be fairly considerable. We could not estimate how much until we saw the precise Clause that went on to the Statute Book.
I turn now to the third leg of my hon. Friend's Bill—his licensing proposals in Clause 6. As the matter has been raised, it might help the House if I said a word about the current legal liability of stamp trading companies. I did not intend to go into this, but a number of hon. Members have been interested and I have taken legal opinion.
I am advised that there is no reason in law why a direct contract could not exist between a stamp company and a customer who has received its stamps from a retailer. A contract requires basically offer, acceptance and "consideration". An advertisement by a stamp company would normally amount to a continuing offer to all members of the public that if they purchase goods at shops issuing stamps they will obtain stamps which can later be exchanged for "gifts". The customer would accept the offer when he buys goods and obtains stamps at such a shop. The buying would be a good consideration.
The precise legal liability of the company to the customer would depend upon the arrangements under which and the circumstances in which the stamps were issued. These may vary from case to case and the rights of the customer in any particular case would finally be determined only 751 by the courts. I admit, however, that legal difficulties could arise. Subject to this, there is no reason why the customer's purchase of goods in connection with which stamps are issued should not give rise to a binding legal contract between herself and the stamp company, so that in the event of a breach of contract by the company the customer would have the normal remedy of an action for damages.
We have put this point to both the leading stamp companies and both have agreed that the arrangements under which their stamps are at present offered to the public could be construed as giving rise to contractual rights by the stamp saver against the company. Although this has been accepted by the two leading companies, the hon. and learned Member for Northampton might well tax me with certain exceptions that a hypothetical company might put in its offer of sale. Of course, each case has to be looked at by the courts on its merits. What I have just said is, however, the opinion which I have been given as to the general situation.
With that in mind, I come to Clause 6, upon which I have an open mind, although in its present form I do not find it easy to accept. The method of licensing proposed in the Clause leaves it wide open to the Board's discretion to impose either such onerous conditions as to kill stamp trading outright or such minimum conditions as to make it meaningless. Surely, this form of legislation is in itself undesirable.
I am sure that the House would wish to give the Executive some principles on which to act and to impose limits on its authority. I know that my hon. Friend is aware of this objection and that he excluded more detailed provisions from his Bill in the interests of brevity. We will have to go into this in greater detail in Committee. However that may be—
§ Mr. Darling
Can the hon. Gentleman say—I quite understand if he cannot at this stage—whether it would be the intention of the Board of Trade to suggest that the licensing rules of which he has been speaking should be in the Statute and not in the regulations?
§ Mr. Price
I have left the narrower point and am going on to wider considerations in relation to this problem. 752 In the first place, what are the potential mischiefs that licensing would be designed to prevent? To the consumer, the worst that could happen is to be disappointed about some gift or pleasure for which she has been saving stamps for a long time. Can we, however, compare this with the possible hardship that might be caused if something went wrong with an insurance company or a unit investment trust, which might mean a real money loss, possibly of the whole of an individual's life savings? Comparison has been made between the proposed regulations and the Board of Trade's power in respect of unit investment trusts.
Quite apart from the major cases of insurance and investment, there are other forms of trading in which the consumer pays money in advance for goods to be delivered or services to be rendered later, and nobody has yet suggested licensing in these cases, although one knows of certain directions in which the risk of loss appears to be great. Equally, the retailer might be left with worthless stamps for which he has paid and the cost of which he might not be able to recover. This, although a genuine risk, is only one—and not, I suggest, the greatest—among other risks which a retailer has to take in the normal course of his business and for which the law provides him with no special safeguards. None the less, I am sure that we would all agree that it would be bad for traders and consumers alike if insubstantial stamp trading companies were to emerge like mushrooms and then fail to meet their liability.
Secondly, how can any licensing system be certain of ensuring that no disappointment arises? We might require the stamp companies to provide detailed accounts at stated intervals and try to ensure by scrutiny that there was always a margin of assets above those required to meet all known liabilities. But much could happen in the period between such scrutinies.
Or we might require the companies to provide deposits or guarantees by collaterals. But could these ever be large enough completely to cover the redemption of all outstanding stamps if the stamp company had ceased to trade?
§ Mr. R. J. Maxwell-Hyslop (Tiverton)
I do not think that my hon. Friend has quite seized the point. If a company goes bankrupt through incompetence but not criminal activity, its directors suffer no criminal penalty. If, however, it is a requirement of the law, with a criminal sanction provided, that they should hold certain reserves to meet their commitments and the directors personally suffer the criminal penalty for failing to do that, that is completely different from a commercial body being unable to meet its normal commercial commitments.
§ Mr. Price
I accept that. My hon. Friend is not, however, advancing the consideration which I put to the House on my previous point, that we have far tighter control over the two examples of insurance companies and unit investment trusts, because, on the whole, the individual's stake that is at risk in those two classes of enterprise is, I suggest, far greater than what an individual may have at risk if a trading stamp company cannot fulfil its obligations.
§ Mr. Stonehouse
Will the hon. Gentleman accept that if stamp trading grows to the extent that it has done in the United States—to something like 20 per cent. of retail turnover—it will reach serious proportions and will need control?
§ Mr. Price
I am not saying that there is not a case for some form of licensing of stamp trading companies, but I suggest that it is not of the same order as the problem with insurance companies or unit investment trusts. I am trying to put the matter into perspective.
I am dealing with the point hinted at by my hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) concerning the question of collaterals. Another possibility might be to require that stamp companies should have a minimum paid-up capital. The Jenkins Committee on Company Law considered this in general, although not in the particular relationship of stamp trading companies. That Committee came to the conclusion that the purposes of such a statutory requirement would be too easy to evade and it could not recommend it.
§ Sir C. Osborne
Would not my hon. Friend agree that in the specific case 754 of which I spoke—a company with a registered capital of £100 but only £2 paid up—if more money had been paid up there would have been less likelihood of its going wrong?
§ Mr. Price
That is undoubtedly true, but I suggest that the deposit or collateral has probably to be made very large to give real security. I quite agree that it might help in stopping spivvy little companies, but I do not think that it would give the security which, I understand, the promoters of the Bill would like.
The right hon. Member for Orkney and Shetland again asked what this would involve for the Board of Trade. I can only say that licensing would clearly require extra staff. The number would depend upon the complexity of the system of licensing Therefore, until we know what it is, it is difficult for me to estimate.
My final thought on this point is to ask the House to consider whether the resultant system might not be disproportionate in terms of manpower and effort to the results which it is likely to achieve. May there not be other fields in which special protection to the consumer and the public may not be more necessary? I can only report to the House that, as far as complaints from consumers are concerned, we get far more complaints about door-to-door salesmen than we do about the activities of stamp trading companies. However, we will consider the arguments which have been advanced and we can discuss them further if the Bill goes into Committee.
§ Sir Ian Orr-Ewing
We have some anxiety about the present drafting of this Bill, and very considerable arguments have been put forward. Could my hon. Friend say, if not now, then possibly at the end of tie debate, whether the Board of Trade will be sitting in on the Committee and will give assistance at that stage?
§ Mr. Price
Yes, I can assure my hon. Friend. I will put it another way. It would be very difficult for me to escape the Standing Committee.
There are just two other points which I want to mention briefly. The hon. Member for Hillsborough made a 755 passing reference to Clause 7. I must say that Clause 7 does savour to me a little of Dickensian times in providing that any stamp trading company which fails to meet a civil debt, possibly through not having sufficient coin of the realm readily available, should be liable to imprisonment. That is a Committee point which we can consider.
Finally, the promoters of the Bill have evidently had great difficulty in defining a trading stamp and also the words "to redeem". I do not want to go into detail now, but I would say that the lines drawn between one kind of coupon, voucher, or stamp and another seem somewhat arbitrary. But these are Committee points.
I would sum up by saying that from the Government's point of view we see merit in my hon. Friend's proposals about the cash option. We have an open mind on his licensing provisions and will certainly take into account what has been said in the debate. Clause 3 we find quite difficult in principle and almost impossible to accept as it stands at present. Nevertheless, we would not on that account recommend the House to reject the Second Reading of my hon. Friend's Bill today.
§ Sir H. Legge-Bourke
I wonder if my hon. Friend would answer this question? Would he be prepared to consider alternative means of bringing discipline into this business by the registration of firms with the Registrar of Friendly Societies?
§ Mr. Price
This is a new point. I do not know. It does not seem quite relevant, but I have not considered the point. This is the first I have ever heard of it. Off the cuff, however, I do not think it would be appropriate, but my hon. Friend may give me reasons why this would be desirable, although at the moment I cannot think of them.
§ 2.53 p.m.
§ Mr. Antony Buck (Colchester)
In view of all the circumstances I shall seek to make only a very brief contribution to this debate, because I am most anxious that, among others, my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) should be able, if he so desires, and if he should have 756 the good fortune to catch the eye of the Chair, to have appropriate time in which to deploy any ideas he has about friendly societies and other matters concerning the Bill.
As one of the sponsors of the Bill I would, first, say that I have been authorised by its chief sponsor, my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn), to say about that troublesome Clause 3 that we are prepared to entertain ideas of a full revision of it—or even, possibly, its elimination; in accordance with what has been said by many Members on both sides of the House— to revise it to make it more satisfactory. To be frank with the House, I would say that this Clause has caused the proposers of the Bill grave concern from the beginning. We would hesitate to define what is a proper relationship, or, indeed, what an improper relationship is.
It is clearly a tricky and difficult matter to define. At one stage we thought in terms of indicating guiding lights for the Board of Trade, to enable the Board to determine what is a proper and what is an improper relationship, but, in view of what has been said on behalf of my hon. Friends, I would say that we are only too glad to see in Committee that the Clause is substantially amended to meet the points which have been raised by hon. Members on both sides of the House, so far as they are reconcilable. We have by no means closed minds on that issue.
Another matter raised was the redemption of trading stamps, on Clause 2. My hon. Friend the Member for Hendon, North (Sir Ian Orr-Ewing) saw the difficulty that a stamp trading company would be put in by the overall provision that the stamps must be redeemed on presentation at whatever hour. There was another defect in Clause 2 pointed out by my hon. Friend the Member for Sudbury and Woodbridge (Mr. Stainton), who cannot be here today as he is attending a memorial service for a former Member of this House. Had he been here he would have supported the Bill, but he asked for revision of Clause 2 to provide not only that stamps have to be presented, but that cash has to be demanded for them if cash and not goods are wanted, otherwise we might get the situation where, on the stamps being presented, a 757 kettle or an electric toaster might be given to the customer, who wants one, and he might come back some time later to demand money on the ground that there had been failure to give money on the presentation. There might be an Amendment there.
As to Clause 6, once again the promoters of the Bill look at this with a very open mind, and are quite prepared, in Committee, to accept substantial Amendment of this Clause, to see that the whole thing is tightened up so as not to put too onerous a responsibility on the Board of Trade. Similarly with Clause 7, it does seem right that this should be amended so that a person does not go to prison for a civil debt. We have certain draft proposals to meet this point in Committee. The sponsors of the Bill are only too prepared to do their very best in Committee to make the Bill totally acceptable to the House in general and to make substantial Amendments.
Two things, in my submission, emerge clearly from the wide-ranging debate which we have had. One is that we owe a great debt of gratitude, which we must acknowledge, to my hon. Friend the Member for Hallam for introducing the Bill. He has spent hours and hours in preparation of the Bill and he has done it for no better reason, and there is no better reason, than that he believes, as I am sure a majority of the House do, that this is a Bill which is in the public interest.
It is my second submission that indeed it is in the public interest. It is in the interests of the housewives, and it is in the interests of the traders who wish to trade fairly and honestly, who wish to trade confident that they can meet their obligations, and wish to deal with the public fairly and honestly, confident that what they have to offer should be clearly presented. It is, therefore, in the interests of these categories of persons that I would respectfully commend the Bill to the House and ask that it should be given a Second Reading.
§ 2.59 p.m.
§ Sir Harry Legge-Bourke (Isle of Ely)
I would, first, say to my hon. Friend the Member for Colchester (Mr. Buck) that I entirely accept his personal 758 assurance which he made in his speech about the motives of my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn) and of other Members who are supporting the Bill. I am absolutely certain that they are genuine in their belief that they are serving the public's needs, and that they are doing it in a completely selfless manner, and I should like to congratulate my hon. Friend the Member for Hallam for the very broad-minded way in which he presented the case—which is all too often presented in a singularly narrow-minded way.
However, to me, who has absolutely no connect on, financial or in any other way, with a stamp trading company, the Bill is misdirected, because it is looking to the wrong people. The people we ought to be looking at are those retailers who having got the advantage of a franchise from a stamp trading company, then proceed not only to go back a little on their undertakings which they gave before they got their franchise so far as the promoting company itself is concerned, but also cheat other retailers in competition with them.
I would be only too glad to see a stop put to that kind of practice straight away. May I give an example of the way in which this can operate? Although the Parliamentary Secretary did not give the figures today, there are, I think, 4,500 garages or petrol filling stations which are operating trading stamps. One way in which they can get round their franchise obligations is by giving stamps for petrol only and refusing to give them for oil or for on the sale of any accessories which the casual motorist cares to buy.
The franchise has obliged them to give stamps on all these three things; otherwise the stamps might not have been given. Any motorist who pulls up at a roadside filling station proclaiming that it is giving Green Shield stamps, and who finds that the attendant who fills the tank will not provide the necessary stamps for oil as well as for petrol, is perfectly entitled to report that station to the stamp promoting company, and it will, I think, deal with it very severely.
The principle on which stamp trading is based is the most difficult thing to get people to understand fully. There is a genuine belief—otherwise, I do not 759 believe that hon. Members would have said what they said today—that the customer is bound to pay in the end for the stamps. [HON. MEMBERS: "Of course."] I know that many people genuinely think this. My hon. Friend read from the report—I am grateful to him if he was responsible for circulating it to us—of Professor Dickinson, professor of economics at Bristol University, entitled 'The True Face of Stamp Trading".
I picked him up on the final paragraph which he quoted. He said that Professor Dickinson said that there were three general conclusions. The second of these was:It is difficult to see what gain can accrue to the consumer seeing that in the long run he must pay the whole cost of the goods that he buys, plus that of the gifts, plus that of the non-inconsiderable administrative and publicity apparatus of the trading stamp scheme.I can see how an economist would arrive at that conclusion, sitting back at a university and working it all out himself. The fact is that this is not an accurate conclusion to draw. I would put it this way. If, in fact, the retailer decides to accept franchise to sell stamps, and then put up his prices to cover the cost of purchasing the stamps, he stands a very grave risk of losing custom on branded goods.
The advantage here which the consumer gets is that, thanks to the existence of the stamp promoting company, it can buy, not only at wholesale prices, but even cheaper, at ex-works price, goods that are then put into the redemption shops and made available. That is, to me, an advantage to the consumer. Where the cost of the goods is primarily borne is in the margin of difference between the cost ex-works charged to the stamp promoter and the value attached to the item in the redemption shop where the retailer's customer finally collects it.
It is worth while seeing how these values work out. I know that some hon. Members are genuinely worried about what a book of stamps is worth. A book containing 1,260 stamps is worth about 15s.; that is, a person who has collected that number of stamps is entitled to goods to the value of 15s. That works out at one-seventh of a penny 760 for 6d. That is the rate given in the stamp negotiation. There is no attempt to hide this. Even the most elementary mathematician—I am little better than that— has only to count the number of stamps, the number of pages of stamps and the number of stamps that are required to redeem articles, to find the answer. That is all that is involved; the mathematics are as simple as that.
Yet when one looks at the catalogue of goods available one sees that the value ranges considerably, from about 16s. to 25s. for one book. That is what is represented by the value of the goods in the shop. Therefore, having bought from the retailer goods which would probably have been bought in the ordinary course of grocery shopping, and collected 15s. worth of Green Shield stamps, the collector goes to the redemption centre and will get, by using the stamps as the currency, something worth 16s. to 25s. The average is between 16s. and 17s. over the whole range.
I do not regard that as cheating the public, or as meaning that the stamp collector is footing the bill for the operation. What it means, simply, is that certain people have enabled some of the retail margin not to be passed on to the consumer in the retail shop. The new creature who has come into being is the stamp promoter with his redemption shop. If I thought that there was anything wrong about this and that it was an evil practice, I should say that we probably ought to do something about it. But is that an evil practice?
The more I look at the Bill, the more I cannot help feeling that it comes to us in the guise of a guardian angel, but what it really is is Mistress Killjoy dressed up as the wolf in Red Riding Hood. Whose voice is really speaking behind this? It is the voice of the real opponent of trading stamps, whoever he may be, whether Lord Sainsbury, a Member of the House of Commons, or anyone else. That is the voice behind the Bill.
My hon. Friend has been extremely frank. He is right to say that the Bill as drafted, or as it may be amended on Government advice later, does not end stamp trading. Nor is it intended to. But a number of hon. Members who are supporting the Bill obviously have 761 vested interests which would lead them to be only too happy if stamp trading ended, not least the hon. Member for Wednesbury (Mr. Stonehouse).
I am always a little suspicious when I see hon. Members, including hon. Members on this side, who call themselves good Tories, ganging up with hon. Members opposite who are ardent Co-operative Wholesale Society supporters. While I certainly believe that there is a very clear distinction always to be made between the Co-operative Party and the Co-operative Wholesale Society and that by no means all the members of the Co-operative Wholesale Society are members of the Co-operative Party, thank goodness—while one has to make that distinction, nevertheless, when those who are members of the Co-operative Party or the Co-operative Wholesale Society pretend that there is anything more in the practice of issuing and collecting and redeeming stamps than there is in giving Co-operative dividends, I think that they are indulging in a highly spurious argument.
§ Mr. Stonehouse
The hon. Gentleman does not understand that there are over 800 retail co-operative societies and, therefore, that this matter cannot be restricted, as he thinks it can, to the Co-operative Wholesale Society. In these retail societies the profits are shared among the members, who actually control them. This is vastly different from the operations of a third party—the stamp trading concern—which comes between the trader and the consumer. The operation of retail co-operative societies is wholly in the interests of the consumers who own them and, in the end, get cash from the profits which they can use as they like.
§ Sir H. Legge-Bourke
The hon. Gentleman reaffirms his objection to stamp trading in principle. At least we know where he stands. He is against stamp trading and is, presumably, supporting the Bill as a move a little nearer to abolition of stamp trading.
§ Mr. Stonehouse
The hon. Gentleman is misrepresenting my position. At no time have I ever said that stamp trading should be banned. I have always submitted that there should be adequate 762 control so that the consumer can be free to make his or her own choice.
§ Sir H. Legge-Bourke
I hope that the whole Co-operative movement will sooner or later share the hon. Gentleman's view. I do not believe that it does at the moment.
The fact is that stamps constitute just another sales promotion, another weapon in the armoury in the constant battle going on in every shopping street in order to attract customers. My hon. Friend the Member for Cleveland (Mr. Proudfoot), who made such a good speech, which I enjoyed very much, referred to the "stamp war." It is not a stamp war. It is merely part of the everlasting battle for customers. The only time one gets a stamp war is when stamp companies fight each other. Perhaps the phrase is a journalistic simplification of the long-term process of attracting customers.
I suggest that the ordinary consumer wants, first, quality, secondly, service and, thirdly, fair prices. Those are the things which matter to most people. Stamp trading is just another way of attracting customers, just like spending money on window dressing or show cards. I see nothing more iniquitous in it than that. The logical conclusion of the objection to stamp trading is opposition to advertising in principle. That may be an absurdity but, nevertheless, it is the logical end to the argument.
I am as anxious as anyone to see that people are defended against wrongful practices. Last Session, I endeavoured to ensure that crooked estate agents did not get away with the deposits—often representing life savings—of people wishing to buy houses. My Bill was rejected by the House. I do not believe that this subject is anything like so serious or as unfair as that.
Indeed, the ordinary customer appears to enjoy stamp trading. I cannot help being reminded, particularly in view of today's full page advertisement in the Press, of the arguments used when there was the question whether or not we should have independent television. If people do not like stamps, then they should not bay goods from a shop which uses them. If, on the other hand, one finds oneself in such a shop by mistake and refuses the stamps we all know what will happen. One of the assistants or 763 the proprietor will collect these stamps hoping to buy a fur coat or whatever it is for his wife. I have no doubt that this will happen.
§ Mr. Victor Goodhew (St. Albans)
This is rather a serious matter since, as the proprietor of the firm would have been able to charge the costs of the stamps as business expenses, he would have got tax relief on them. If so, the Inland Revenue should investigate my hon. Friend's suggestion that someone is charging his stamps as an expense for running his business but appropriating them for his own use.
§ Sir H. Legge-Bourke
I will deal with that later, but that was not the point I was making. I do not think that the Treasury could possibly establish that trading stamps were losing it revenue.
§ Sir Stephen McAdden (Southend, East)
When my hon. Friend was speaking about using stamps to buy a fur coat, did he mean buying a fur coat for his wife or whatever it is, or a fur coat or whatever it is for his wife?
§ Sir H. Legge-Bourke
My hon. Friend must make his own choice.
If someone goes into a shop and does not like trading stamps, not having realised before entering the shop that they would be offered, he would have to make about £31 worth of purchases in order to have enough stamps for quick redemption in the redemption shop. That is the total value of the purchases which he would have to make to fill up a book of 1,260 stamps. There are some redemption shops which take half books and in that case he would have to make only £15 worth of purchases. If he had one book, it would be worth 15s., and that can hardly be described as vicious wicked exploitation of the public.
The public is perfectly capable of deciding to exchange the 7s. 6d. or 15s. or whatever it is and never go into a trading shop again; so that this is not a major exploitation of the public nor dangerous to an estate of the Realm. It is this sort of bulldozer approach to crack the tiny walnut which I find most obnoxious about the Bill.
§ Sir C. Osborne
My hon. Friend is saying that 15s. is only a small matter, 764 but it is 15s. multiplied a million times every week, and that is an important matter.
§ Sir H. Legge-Bourke
Of course it will not happen. More and more people are collecting stamps because they enjoy doing so. I am told that about 7 million people now collect them. What does the Bill offer in place of that? It offers the right to a stamp collector having 5s. worth of stamps to cash them for 5s., which is the minimum amount.
We have some experience from the United States. In an article in New Society in November, 1963, Mr. Patrick Coldstream showed that in seven States of the United States where the cash alternative had been made obligatory only 2 or 3 per cent. of the collectors had opted to take the cash instead of the goods, because they found that the goods were so much better value. In other words, the discount when they took the cash value was lower than the discount on the same number of stamps for goods in the redemption shop. I also understand that in Kansas, where trading stamps were eventually abolished after a cash alternative had first been made obligatory, the price advantage was only 0.6 per cent.
Which would consumers sooner have? Would they sooner have the 2½ per cent. discount through the stamp system, or a saving of 0.6 per cent. in prices in general? I should have thought that it was not demonstrable that there would be any advantage in having this cash alternative. Sooner or later, it would become very unattractive.
§ Mr. John Hall
Would my hon. Friend agree that the 0.6 per cent. rise in prices in America could not be shown to be due to stamp trading?
§ Sir H. Legge-Bourke
I think that that is perfectly true. It may well be due to other reasons. My hon. Friend the Member for Hallam was fair about that. He pointed out that all the information from America on this matter is very inconclusive.
I have no doubt that if the House gives the Bill a Second Reading there will not be a wild rush towards cashing stamps for cash instead of goods in the redemption shops. If people propose to start doing that they should be told here and 765 now that it is inevitable that the face value of the stamps will be a great deal lower than it is when exchanged in redemption shops.
I think that it was the hon. Member for Dundee, West (Mr. Doig) who was extremely worried about how the consumer would be saved from having to pay the cost of the stamps and how any retailer could think it worth while giving stamps unless the consumer was to pay. What matters is the number of customers which a retailer has in his shop. To work on very simple round figures, say that a purchase by a retailer of £100 worth of goods earned him £110 when sold. At the present rate of stamps, all that he would have to deduct from his £10 profit would be £2 10s. for the stamps. That would be the diminution in his profits. If, as a result of selling stamps, he increases the number of his customers to 200, so, accordingly, will the number of stamps increase. But I should say that he would always get a very nice improvement in his profitability because of the increased number of customers who would go to his shop as a result of his offering stamps.
This is what the opponents of the Bill find difficult to understand. Lord Sainsbury, over Christmas, started saying, "Be wise and save money, not stamps." How much wiser it is to save both. The proof of the pudding is in the eating. During Christmas, in spite of the slashing of turkey prices, the firm of Tesco, when it took up the stamp business, was able to offer turkeys at a lower price per lb. plus the stamps.
I do not blame Lord Sainsbury or anybody else for being a manufacturer and retailer of the same sort of commodity; good luck to them. What I object to is the idea that there is something wicked about this stamp business in general. I do not think that there is. As my hon. Friend the Parliamentary Secretary to the Board of Trade said, many people enjoy collecting the stamps. In view of the drudgery of household shopping week after week, the little extra spice of enjoyment which this gives seems to me desirable.
I turn now to the point raised by my hon. Friend the Member for St. Albans (Mr. Goodhew) about the possibility of tax evasion. I am satisfied—and I have made inquiries about this—that no case 766 whatever can be made to show that as a result of stamp trading the Revenue's income has fallen. The bigger the sales the bigger the profits, and the bigger the profits the bigger the amount of tax paid on them. Whether those profits are made by the stamp-promoting companies or in the retail shops does not matter to the Revenue. The Revenue gets the money just the same. If only it would spend the money which it does get as well as the retailers and stamp companies, how much better off this country would be.
This is what worries me whenever the House of Commons discusses a subject like this. If we could solemnly put our hands on our hearts and say that we have looked after the public wealth with such exemplary perfection that we are in a position to dictate to others how they should run their business, I would, perhaps, feel that we were entitled to have our opinion heard.
Looking back over what we have done to the currency by perhaps not thinking things through to their logical conclusion often enough, it ill-becomes us to tell the stamp companies how to run their business, or to back up multiple grocers against stamp companies. This is not our job. Our job is to find whether real damage is being done to the public. If it is, we must do something about it. We have not found that it is, nor have my hon. Friends who supported the Bill proved that it has happened. If they had, I should feel far more inclined to support the Bill.
Again I say that where abuses are happening is at retail shops and petrol stations where the franchise is not being fully honoured and a little is kept on the corner for somebody in the show, instead of being given to the customer in the way it should be. This is an abuse. Who should put it right? Is it for Parliament to set up machinery through the Legislature to deal with this, or is it for the promoters themselves to tackle? First, it is for the general public. If they find that retailers are not giving what they should, those retailers should be reported to the stamp companies.
§ Mr. A. P. Costain (Folkestone and Hythe)
Is it not correct that the Bill will help the public to ascertain whether they are getting real value?
§ Sir H. Legge-Bourke
I would hope that it would, but I am unconvinced that it will, because I think that it deals with the wrong people. As I said earlier, if the Bill had tried to ensure that all the rules laid down by stamp promoting companies were being abided by, I would have far more sympathy with him. I have yet to see that stamp promoting companies are doing something injurious to the nation. I believe that their life, with the boom success they are now having, may well be not as long as they hope it will be. As my hon. Friend the Member for Cleveland said, there is a decline in America now. I do not think that it automatically follows that what takes place in the United States will happen here, or, for that matter, that what happens anywhere else in the world will automatically happen here.
I know that some stamp companies are better than others. I hope that whatever type of stamp company we have in this country it will take account of the likes and dislikes of the people and will not imagine that we are just going to be put into a straitjacket based on the American system. The most successful company now operating in this country is a British company.
We have known this practice from way back in the 1880s. There have been times when it became dangerous, but obviously what happens in a time of great austerity is very different from what happens in a time of affluence. There is no doubt that stamp promoting companies today have caught the public fancy and provide a service which the public want. Have we the right so to restrict them that they may crumble away? This is the salient point we must bear in mind in any criticisms we make of the Bill. Were the Bill passed in its entirety, would it make the disappearance of stamp trading more likely or less likely, or leave it where it is? Does it affect the future of stamp trading? I think that it does. Quite a number of hon. Members regard the Bill as the thin end of the wedge for the virtual abolition of stamp trading.
§ Sir H. Legge-Bourke
The hon. Member is very much against it. He is perfectly 768 entitled to be against it, but I do not think that the case has been proved in the debate that stamp trading is bad. My hon. Friend the Member for Hallam went out of his way to emphasise that although he does not want stamp trading the Bill is not intended to end it.
Is the Bill likely to diminish stamp trading or to allow it to prosper? That, I think, we are entitled to ask. I am prepared to estimate that the Bill is intended as the first thin end of the wedge in the total abolition of stamp trading. I do not know whether my hon. Friend the Member for Louth (Sir C. Osborne) is talking to me or not, but I saw his head nodding up and down and I thought that he was agreeing that the Bill is the thin end of the wedge.
§ Sir H. Legge-Bourke
I am sorry if I misunderstood my hon. Friend. I would only say that I respect his view. If he does not like stamp trading, all right, but let us not have any pretence about the Bill.
There is no love of stamp trading in the minds of those most in favour of the Bill. The people who are supporting it have rather a nasty suspicion that stamp trading is a beastly business. I deny this very hotly. As I have pointed out, I have no connection with any of the stamp trading companies, but I dislike it when the House of Commons acts as a killjoy.
§ Mr. George Wigg (Dudley)
I do not want to invoke your Ruling too harshly, Mr. Deputy-Speaker, but surely there must be a limit to the number of times that the hon. Gentleman can say the same thing.
§ Sir H. Legge-Bourke
The hon. Member for Dudley (Mr. Wigg) is, if I may say so, a fine one to put forward that proposition. It is a case of Satan rebuking sin. I would really claim a little more brevity than he can possibly claim. I have always been told that if one wants to get a point home, one first has to say what one wants to say, say it, and then say what one has said, when, perhaps, someone might remember something about it.
769 I really am very worried about the Bill, because I think it will be misunderstood in the country.
§ Sir H. Legge-Bourke
I think that the Bill will be misunderstood in the country, not least because the known opponents to the idea of ordinary free enterprise retailing are supporting it. When members of the Co-operative Party support the Bill, that is no encouragement to the small retailer in the village shop. War was declared on the small shopkeeper long ago, and those who declared it are supporting the Bill. They know perfectly well that it is not going to help the small retailer. Smallness for smallness' sake is always a bad argument. The point is whether the small man can make himself efficient like the big man.
My hon. Friend the Member for Cleveland regards this practice of stamps as the lazy man's way out of it. I wonder whether that is really fair. I do not believe that it is. I believe that many retailers have supported the giving of stamps because their customers have asked them to. I think that a great number of retailers have done so especially in the more rural areas, because their customers have said to them, "Let us have some of these stamps Come on, let us have them. Why don't you enter the scheme, too?". I am sure that that has been said by many customers. Is it only the lazy man who says, "I will"? It could be the industrious man.
§ Mr. John Hall
Would my hon. Friend not agree that far from being the lazy man who adopts the scheme, in fact its adoption causes the trader a good deal of extra work?
§ Sir H. Legge-Bourke
That is precisely the point I was going to make. It is very relevant, and, obviously, even the stamp promoters would agree that the most suitable premises from which to run a stamps scheme are those where there is a checkpoint out, such as one gets in a self-service store. This is one of the reasons why Lord Sainsbury finds it very difficult to use trading stamps. There are large counters in his shops which were erected many years ago, and there are a lot of assistants serving 770 behind them. It would be difficult to run an effective stamp scheme under those conditions. This is why he is moving out to supermarkets.
I am quite certain that there are physical difficulties about shop premises and the less modern the premises in which a stamp system is operated the more difficult it is for the retailer. That may account for some of the extraordinary disparities in the experiences of different people who have traded with stamps which was referred to by my hon. Friend the Member for Cleveland. It depends a great deal on the type of premises. If that be the case, it reinforces what was said by my hon. Friend the Member for Wycombe (Mr. John Hall) that a small business man who operates a stamp scheme must be industrious, and it would be very unfair to accuse him of being lazy. It is easy to make sweeping generations based on inadequate information.
No one asked me to do what I am doing this afternoon. When I heard that my hon. Friend the Member for Hallam was proposing to introduce the Bill I thought to myself, "Oh, dear, here is another piece of 'nanny' legislation which is designed to look after people who ought to be capable of looking after themselves." The more I studied the Bill the more I realised that it was precisely that sort of legislation which infers that the housewife is such a "ninny" that she is likely to be rooked right, left and centre because she cannot count the stamp spaces in her book or how many stamps she has been given by a retailer.
It is obvious that many people are content with the operation of the trading stamp scheme. It is those lazy people who have not taken the trouble to find out how the scheme works who are making the biggest outcry. It needs only a simple mathematical calculation to discover what one's stamps are worth. I have not yet filled a book, but I have one which I have had for two or three years. I use it only when I call at a petrol filling station where Green Shield stamps are sold. It is now very nearly full. It can contain 1,260 stamps each worth one-seventh of a penny, which amounts to just over 15s. and, if I exchange them, I may get something worth 16s. or 17s. It all adds to the 771 spice of life and I cannot see why we should hamper such an operation.
I was delighted to hear what was said by my hon. Friend the Parliamentary Secretary to the Board of Trade who gave an extremely fair answer to my hon. Friend the Member for Hallam. It went a long way to satisfy me of the correctness of my objection to the Bill. It has been indicated to me that it would be a good idea to have some form of registration that the stamp companies would not find obnoxious, and a code of conduct. It is immaterial to me whether the code of conduct is drawn up by the Registrar of Friendly Societies. Hon. Members may recall that last Session, when I attempted to introduce legislation in respect of estate agents, I favoured registration rather than licensing. The same consideration would apply here. In my view, registration is the correct procedure, and it is very important that a code of conduct should be clearly laid down.
I am by no means satisfied that the standards of those who come from America would operate over here. I would rather take advice from those who have experience of carrying out these operations in Britain, than simply adopt the American pro forma which is in modern use over there.
There is only one point remaining for me to deal with, and that is the question of protection. I believe that it was the hon. Member for Ogmore (Mr. Padley) who visualised the possibility of this finishing up with Chicago-type gangsters doing a protection exercise on those whom they have in their clutches. I have been into this matter in some detail, and as far as I can see, the only thing of which we can accuse stamp companies is doing the same sort of thing that is done by practically every other person who buys and sells. The suggestion is made, "If you do not buy from me I shall go somewhere else, and be certain that if I go somewhere else it will hurt you."
That argument is used every day, in respect of all sorts of commodities. It is even used in house purchase. An estate agent may say, "You ought to take this house. I have another purchaser. If you do not buy it, he may. I 772 cannot wait very long". We have heard that argument over and over again. It is not very impressive when it is trotted out in the rarified atmosphere of this debate. But stamp companies are no worse than anybody else in this respect.
It is the old business of "cut-the-cost" competition at the retail level. As the hon. Member for Ogmore said, in a way this is a new entrant into wholesale-retail trading, but it is none the worse for that. The Government say, "Let us abolish resale price maintenance," but some of those who support the Government say, "For Heaven's sake let us see that there is not too much competition." We have to be all or nothing in respect of competition. Either we believe in competition on all fronts or we restrict it on all fronts.
In this case I see no argument for restricting it. But the onus of ensuring that the stamps which retailers give across the counter are likely to be honoured rests fairly and squarely on the shoulders of those retailers, in the shops, just as when they are selling goods which have guarantees attached to them. It is the duty of the retailer to see that an honest offer is being made to his customers. Why, in this Bill, do we place the whole onus not upon the retailer behind the counter, just in front of the customer, but right back with the trading stamp promoter?
If there is any need for legislation in this matter I want to make sure that it primarily concerns the retailer.
§ Mr. John Hall
The trouble about this is that we now have special legislation being introduced to place the liability and onus upon the trading stamp companies, whereas no similar onus is placed upon cigarette manufacturers who give coupons, in exactly the same way, to be exchanged for gifts.
§ Sir H. Legge-Bourke
My hon. Friend is quite right. It is the same thing, to some extent, although I know that the hon. Member for Wednesbury will not agree. It is another arrow in the quiver—one of the many arrows in the battle that is going on in the shopping street. It may mean that a calculated risk is being taken, but it is the kind of calculated risk that co-operative societies have to face, and who blames them for taking it? Heaven forbid that this should 773 ever be a country in which nobody is prepared to "chance his arm" now and again. Here is a very creditable story of enterprise which pleases the public and can cost the public no more than it would have paid anyway, and which in many cases is giving even better value.
To illustrate that, some notoriety was given the other day to the famous carpet cleaner Bex Bissell. In that case, thanks to the operation of this practice, the Bex Bissell is available in a Green Shield shop at about 6s. less than under r.p.m. in any other shop. If we say that we are against r.p.m., and I qualify my opposition to it, we cannot possibly argue that stamps are undesirable. In fact, they are tending to bring prices down. When they have to compete with shops which are now operating stamp trading, big companies have to bring down their prices. God bless stamps for that, I say, and I believe many housewives say the same.
I do not want to be unfair to the House. I know that some of my hon. Friends are in trepidation lest I should talk this Bill out. I must confess that until I heard the speech of my hon. Friend the Parliamentary Secretary to the Board of Trade today I was seriously contemplating doing that, but he has given me so many reassurances and treated the case of the stamp promoting companies so fairly that I feel it would be wrong of me now to abuse the very kind attention the House has given me.
I conclude as I began, by saying that I do not doubt the motives of those who solemnly believe that the Bill is in the public interest. I hope that they will accept mine in believing profoundly that it is against the public interest.
§ 3.47 p.m.
§ Mr. John Howard (Southampton, Test)
My hon. Friend the Member for Isle of Ely (Sir H. Legge-Bourke), even though he has not filled his book with Green Shield stamps as a result of buying from petrol stations which enjoy that franchise, has at least the consolation that he has filled a great many columns of Hansard this afternoon by the exposition of his views.
At this hour, I do not want to detain the House. I am one of the supporters of the Bill and, in general with many hon. Members who have accorded praise 774 to my hon. Friend the Member for Sheffield, Hallam (Mr. J. H. Osborn), I thank him for the work he has done and for the fact that today he has left on the record in Hansard the results of his researches. He put the case very fairly for and against stamp trading and gave good reasons why the Bill should receive a Second Reading.
I was glad that the Parliamentary Secretary indicated that the Board of Trade at least favours a Second Reading of the Bill, although it might have some reservations about certain provisions in Clause 3 and 6. My hon. Friend the Member for Hallam has indicated that he knows the Bill is deficient in a number of respects and he and other supporters will be only too pleased to accept workable modifications when the Bill reaches Committee.
My hon. Friend the Member for Isle of Ely asked whether the supporters of the Bill imagined that it would diminish stamp trading. I say at once that that is not the purpose of the Bill. The purpose of the Bill is to regulate stamp trading. One the regulations have been written into the Bill and in due course reach the Statute Book, it will be up to each consumer and retailer to make up his mind in the light of those regulations whether or not he is favour of an increase in stamp trading. If he thinks that in the prescribed limits laid down by the Bill stamp trading can flourish, he will increase the use of stamps. The consumers, too, will go to the shops where trading stamps are offered.
I regard as one of the essential points of the Bill the need for stamps to have a cash value for redemption. I say this for two reasons. First, it will give the shopper an opportunity to assess the discount which he or she receives on purchases. Second, the trader who has adopted trading stamps will have an opportunity to withdraw if people who have acquired their stamps in his shop can cash these stamps when the trader ceases to use stamps.
There is no doubt that trading stamps have come to stay. Many traders have thought about the proposition. Some have jumped in and accepted trading stamps. Others have considered the franchise and have decided that trading stamps are not for them. A few traders have tried to withdraw. There is not 775 the slightest doubt that trading stamps are a method of sales promotion. They are a perfectly legitimate method of buying turnover. It can be an expensive method. There is the cost of the stamps. I understand that the experience in America is that the cost is between 2 and 2½ per cent. of turnover.
In addition, there is the cost of administering the stamps and the cost of extra time in checking them. My hon. Friend the Member for the Isle of Ely referred to the supermarket as an ideal vehicle for trading stamps inasmuch as the stamps could be kept in a drawer of the cashier's register. In fact, it has been calculated in the United States that the cost in time of issuing trading stamps is very similar to the cost in time of giving an extra lot of change. In other words, the time at the desk can, in many cases, double as a result of the issue of trading stamps. This is one cost which the trader must weigh.
Other supporters of the Bill hope to speak, so I shall not take very much longer. The hon. Member for Ogmore (Mr. Padley) spoke about the number of stamps redeemed. The House may be interested to know that in America it is accepted for tax purposes that about 95 per cent. of stamps are eventually redeemed, although, presumably, as this is accepted for the calculation of tax, it is possible that a very much lower figure applies.
I hope that the Bill will receive a Second Reading this afternoon. I hope that the Clauses dealing with conversion of stamps into cash will successfully survive the Committee stage. I hope also that, once the Bill reaches the Statute Book, even though there may be consumers unable to differentiate between the value of gifts and price reductions—they are probably the same people who cannot tell Stork from butter—it will at least give them a chance of differentiating between gifts on trading stamps and cash redemption.
§ 3.54 p.m.
§ Mr. James Allason (Hemel Hempstead)
I am grateful to my hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) for his courtesy in giving others time to speak.
776 This is not a Bill to abolish stamp trading. It is a Bill to regulate it in the interests of the public and, therefore, provided that it is well drawn, I cannot see why there should be objection to giving it a Second Reading.
Has the Bill been well drawn? Clause 3 has been discussed a good deal already. I should have had grave doubt about supporting the Bill had it not been for the undertaking that Clause 3 will either be withdrawn altogether in Committee or will be so substantially changed as not to bear recognition as it stands now. After all, this is a very grave encroachment on the rights of ordinary traders. It would be the thin end of the wedge for any trader to find that his books had to be opened to the Board of Trade and that his profit margins were to be checked by the Board of Trade. He would have to declare his buying prices and his selling prices. This is intolerable, and it is all found in Clause 3.
It seems to me that the root of the Bill is security against failure, and in Clause 6(g) we have the arrangement of bonds or some form of security—an important part of the Bill. One question is whether we put the value on the face of the stamp. That is only a matter of arithmetic. We know the value of the filled book and can work out that the stamp is worth roughly .15d. But it is well worth having. I do not agree with the suggestion that merely by putting the face value on the stamp we should kill stamp trading. I am sure that it would not do so.
I am worried about Clause 4(1), which has the requirement that on every page of the catalogue the value of a filled book shall be shown in order that one may see, for instance, when getting a lampshade for 1½ books, what is the value of the lampshade. That may help in the case of the lampshade but in the case of proprietary goods with a normal fixed price in the market, the public will be rather concerned when they see the great difference between the price when they obtain the article on redemption and that which they pay in the ordinary retail shop. They will go to the ordinary retail shop and ask, "Why are you charging so much more when I can get this for so much less with stamp books?" This will do harm to the retail trade and I hope that the point will be remedied in Committee.
777 But in view of the undertakings which have been given, I welcome the Bill, and I hope that it will receive a Second Reading.
§ Question put and agreed to.
§ Bill accordingly read a Second time.
§ Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).