ABOLITION OF FIDELITY BONDING (Hansard, 22 May 1968)

§ Mr. Edward Milne (Blyth)

I beg to move, That leave be given to bring in a Bill to abolish fidelity bonding and similar practices in the retail and distributive trades; and for connected purposes. The really iniquitous part of bonding is the manner in which the bond is used by some employers in the retail and distributive trades, and could be used by all, as a means of insuring the employer's stock in a retail establishment at the expense of the manager's integrity and his future employment prospects. If there is need for a fidelity bond, it should be confined to the personal integrity of the manager, and not utilised as an instrument for insuring the stocks in the various retail distributive outlets of the country.

The practice in the retail and distributive trades at present is mainly confined to the retail footwear and retail wines and spirits sections. The system is that where a person is employed as a branch manager the employer indemnifies himself in the event of any loss being sustained through shortage of stock or cash. The employer takes out a bond with an insurance company and himself pays the premiums. The difficulty is that in many instances—in fact, nearly all—the branch managers are in complete ignorance of the procedure and what it can mean if such a bond is claimed upon.

While the system gives protection to the employer, it inflicts injustice upon a branch manager who finds himself with a substantial stock shortage, although he has exercised all reasonable care and supervision. I will endeavour to show in the short time at my disposal how these difficulties can arise.

If the employer seeks indemnity under the bond, the insurance company has to be notified, and this is where part of the practice which we seek to abolish is so unfair. Although it would seem that the reimbursement of the loss by the insurance company is precisely what the bond is intended to provide, and for which the premiums have been paid, the insurers may, after satisfying themselves as to the validity of the loss, demand that the branch manager shall make repayment for the loss.

540 Whether this is done or not, in most cases in the retail distributive trades the manager's services are terminated. The insurance company, in that case, can refuse to issue a further bond to a prospective employer covering that branch manager. Therefore, severe hardship can be inflicted on the employment prospects of the branch manager.

Another harsh aspect of the system is that a branch manager who knows that he has taken every care to avoid a stock shortage may be faced with such a shortage and, rather than take the risk of the bond held against him being claimed upon, he pays up what is charged against him. This makes him appear to be guilty. He prefers, in the prevailing conditions in the retail distributive trades, to pay for the loss out of his own pocket rather than run the greater risk to which I have already referred.

It is perfectly correct that a branch manager, on taking up his appointment, accepts responsibility for stock, and the remuneration he receives is supposed to be adequate to cover such responsibility, but, in the rapidly changing conditions of the retail distributive trades, he is in a more vulnerable position now than was his predecessor in the much smaller outlets of retail distribution for which bonding was introduced.

In addition to the overall supervision of his branch, a branch manager has to spend more time dealing with customers because of the staff shortage. There is a big turnover of labour, and mistakes made by inexperienced staff in the prices charged and in attention to stock may result in shortages arising at the time of stock-taking. Stock-taking is often done by people who have no intimate knowledge of the difficulties experienced in the particular shop where that is being done.

I do not want to deal with clerical errors, customer pilferage, and so on, but they are all the responsibility of a branch manager and with the changing pattern of retail distribution, a single individual finds it extremely difficult to keep pace with these matters. We know, by our shopping experience, what those changes are. There are difficulties experienced not only by branch managers but also by the customers, as we have seen from the increasing number of prosecutions. Clerical errors can arise in the branch, 541 the head office, or the warehouse, but in the last analysis the error has to be faced by the branch manager.

An added burden is put on the branch manager by all this inexperience and carelessness, at whatever level it may occur. Increasingly, relief managers are appointed, because of the size of retail outlets and the methods of retail distribution, and such relief managers are out of touch with the shops which they are called upon to manage.

This is why the Union of Shop Distributive and Allied Workers, acting on behalf of its members who are employed particularly in the retail footwear trade, have had discussions with the Multiple Shoe Retailers' Association on the question of altering this system, which appears to be heavily loaded in favour of the employers and severely detrimental to the branch managers.

I do not need to tell the House about the development in the retail distributive trades and about the introduction of Selective Employment Tax, which have added to the complications of a branch manager's existence. The purpose of the tax was to reduce the number of employees in the retail distributive trade.

§ Mr. Milne

I have been keeping a very careful watch on the clock, and I think that I am looking at the same clock as you are, Mr. Speaker. I am reasonably well inside my time at the moment.

The purpose of the tax is to compel many people who are working in the distributive trade to move into the manufacturing industries, and it has led to depleted staffs in many sectors of the distributive trade.

The increase in consumer spending has resulted in many mergers and monopolies in the distributive trades. Increases in sales of 38 per cent. to 40 per cent. are reported. All these things add to the pressures on the branch manager. Many responsibilities which the branch manager 542 entered into on taking up his job are not among those now being encountered by the branch manager in his day-to-day tasks of management.

Board of Trade statistics on the census of retail distribution would show exactly how the present trend in mergers is accelerating. The real revolution in retail distribution is in the increasing power of the multiple store, both in the number of stores, and in the increasing turnover of the retail trade. A multiple shop manager is not, in the main, responsible for altering or for buying the stock. This is usually determined for him at a distance and from a central warehouse.

Following discussions with the Multiple Shoe Retailers' Association and representatives of the Union of Shop, Distributive and Allied Workers, a recommendation has been issued to the Association members to inform employees, if they are bonded, of the extent to which the bond applies, so that at least now the retail shop manager will know what type of bond is being issued and taken upon his behalf.

This is a big step forward, but it is all the more necessary to have legislation to eliminate the evils of bonding and bring the distributive trades in Britain into line with the second half of the century.

In accordance with the Ten Minute Rule covering the presentation of a Private Members' Bill, I conclude by asking the House to give me leave to introduce what is a very necessary Measure.