Funeral Costs (Hansard, 6 February 1989)

§ Mr. Lawrence Cunliffe (Leigh)
I have no doubt that the Minister will have read early-day motion 258, supported by 61 right hon. and hon. Members, asking for a specific and detailed inquiry by a Select Committee into the A to Z framework of the funeral industry. That motion quotes official figures from the Office of Fair Trading in the last three weeks showing that 75 per cent. of funeral directors ignore the very code of practice agreed between Government, this House and the industry's associations in respect of advising arrangers of funerals of their rights—particularly in respect of estimates.
This is a delicate and sensitive subject, and one that is regarded as being taboo. No one likes talking about funerals in terms of being a commercial proposition, but I shall do so this evening. Neither does anyone like talking about something that should usually be addressed in sympathetic and diplomatic terms. One is talking about distress, bereavement and other matters of delicacy.
It can be readily understood that the subject of death is largely taboo, and that the ordinary funeral arranger has traditional methods of dealing with the local funeral director. These are established family firms, with which—generation after generation—bereaved families have dealt. But certain problems have now arisen.
I use the word "arrangers" to describe those who "negotiate", as it were, on the type of funeral desired by the bereaved. The "industry" is now turning over £2,500 million a year in funeral costs and roughly £1,000 million a year in ancillary costs—flowers, obituary notices and so forth. It is big business, by any stretch of the imagination. And, as the OFT report points out, a monopoly is being created. Local firms are constantly being taken over by larger companies, while still operating as the same local family firms in the community. Ordinary people believe that they are still dealing with the same undertaker, well established for many years and with a local system, character and tradition.
According to the OFT report, funeral charges have escalated in the past 12 years at a rate of some 28 per cent. above that of inflation. Some 18 months ago I received a complaint from a constituent whose father had died. The funeral was arranged and the bill paid. Within three and half weeks the mother also died and exactly the same arrangements were made, but the bill differed from the first by £106.
When the funeral arranger and I asked the reason for such a discrepancy in a period of three and a half weeks, we were told that the firm had been subjected to a takeover bid: a larger company had bought it out, leading to an increase in overheads generally and an increase in what could be described—;unfortunately—as "profit margins".
I then conducted an inside investigation—a modern technique. I spent some time with a couple of coffin manufacturers. I visited their factories and saw the investment that they had made in modern machinery. I examined their labour costs, which they willingly showed me, and also the supply costs to the directors and the various organisations that were now part of the monopoly.
I was astonished to find that the cost of a simple coffin—including all the trade names—to be used in 777 crematoriums showed, when prices were compared, that the profit margin varied by between 500 and 1,500 per cent. That is bringing the profession into disrepute. The selfish profit margin has been increased to a degree that most people, deplore.
According to the report, prices for a coffin vary from £19.50 to £27, depending on the type and grade of coffin. The OFT report did not probe profit margins. It said that that was not its remit. It referred to 2,500 firms of funeral directors in the United Kingdom trading through nearly 4,000 outlets. There have been about 650,000 funerals each year during the last decade.
The report pointed out that the average cost of a funeral was £586. That figure enables us to work out the industry's approximate turnover. That turnover leads to considerable doubt about whether the industry is obtaining a reasonable profit margin. However, many independent funeral directors run their businesses with the dignity and respect that ought to accompany funeral services. Nevertheless, we are concerned about the big businesses that are creating monopolies. I intend to refer fairly and rationally to a few of them and to draw some comparisons.
The report refers to the code of practice that has been adopted by the National Association of Funeral Directors. It points out that 75 per cent. of funeral directors do not honour their code of practice. It says that if they cannot get their act together within the next six months, the Government ought to consider legislation to bring some discipline into the industry.
The report stated: Under the code funeral directors should 'provide clients with full and fair information about their services…The funeral director must explain to his client the types of funeral he has on offer, and their cost, and relate these to the wishes and needs of the client"'. Clients are understandably confused and distressed at such times. People usually accept what they are offered under such circumstances without questioning. But the association is not imposing and implementing the code.
The report describes how certain enterprises obtain monopoly control. Some firms still operate under their traditional local names. I am a member of the racing of bloodstock all-party committee. We know that four major firms control about 86 per cent. of dog and horse-race betting, but at least when those firms bought out the thousands of local bookies they had the common decency to use their own trade names. Hundreds of independent local funeral directors are being systematically taken over, but their new trade names are not shown. People still honestly believe that they are dealing with local established family firms of undertakers—but that is a myth. Deception and trickery are being practised. The sooner we open the doors of this highly secretive industry, the better.
The report says that estimates should be itemised before a funeral takes place so that the arranger can choose the type of funeral he wants according to what he can afford. That is not being done; 75 per cent. of firms do not do it. A constituent of mine asked twice for a estimate for a funeral that took place on 19 January 1989. I quote: Professional …charges …£350 … Supplying Worcester Coffin …£158". Disbursements are then listed. Funeral directors have no control over these, admittedly.
The bill was for a simple, dignified funeral. I shall list its basic elements, as agreed under the code of practice. My 778 constituents had asked twice for estimates, but none had been forthcoming. So she decided to ask other firms and chose one of them—Monks—because of the shortage of time. The total cost was £791. I remind the House that the average cost for the whole country, according to the Office of Fair Trading, is £586. This was a simple dignified funeral—what we call a basic service and what the association calls a basic service.
I want to explain what happened. Because estimates were not forthcoming, quite understandably the woman had to accept that the sooner the funeral could take place the better. Later this lady received from a competitor firm an estimate for exactly the same amount.
The Bolton Metropolitan borough council—described as a very forward-looking, progressive authority, prudent with its finances and its ratepayers' interests—along with the Wigan Metropolitan borough council, is offering an exactly similar low-cost dignified funeral service: the embalming, the dressing, the plate, the funeral undertaker's chapel of rest, conveyance, arrangements for the crematorium or cemetery, hearse, following limousine, basic funeral staff, floral tributes if required, oak-veneer coffin, engraved plate and handles, fees for doctors arid clergy, any particular religious request, and transport of the deceased to the church or chapel. The cost is £366. That woman would obviously have accepted that estimate, but she did not have the opportunity because what the code of practice of the National Association of Funeral Directors says was not delivered. In my view, that is contemptible.
I am not saying that the majority of funeral directors behave in that way, but I do say to the Minister that if undertakings given by the national association are not honoured this House is duty-bound to examine what is going on and, if necessary, to legislate. Even the report of the Office of Fair Trading says that if something is not done within six months to ensure satisfactory performance, in terms of open advertising of cost and code of conduct, some action will have to be taken. There is increasing public anger about escalating funeral costs and about the veil of secrecy in the industry, and unless something is done public reaction and mistrust will become greater and greater.
I hope that the Minister will respond positively. His civil servants put a query to me this evening, and I had the common courtesy to tell them that the report of the Office of Fair Trading would be the main basis of my remarks. I exhort the Minister to consider what has been said and to examine the industry, about the framework of which I have talked, and the high degree of secrecy—in particular Hodgson Holdings raising from one-twelfth to 6 per cent. its share of the total market. In the case of the funeral service I mentioned, the lady could have saved about £500. We really should be asking whether a monopoly is developing in the industry. I hope that the Minister has taken note of what I have said and will recommend to the Secretary of State that action be taken.

§ The Parliamentary Under-Secretary of State for Industry and Consumer Affairs (Mr. Eric Forth)
I congratulate the hon. Member for Leigh (Mr. Cunliffe) on bringing this important subject to the House's attention. I hope that, in the eight or so minutes left to me, I shall cover as many of the points that he raised as possible.
779 The hon. Gentleman rightly concentrated on the recent report by the Office of Fair Trading, which reviewed the operation of the National Association of Funeral Directors' code of practice, which has prompted a great deal of interest and, as the hon. Gentleman said so eloquently, some concern. We are all conscious that a funeral is not like any normal transaction. The House does not need to be reminded of that.
I would like to remind the House of the context of the OFT report. The Director General of Fair Trading has a duty under the Fair Trading Act 1973 to encourage associations to adopt codes of practice providing a standard which promotes and safeguards the interests of consumers. There are currently 26 such codes endorsed by the director general and they form a valuable part of the consumer protection framework. The Government are convinced that effective self-regulation is better than regulation.
The director general's involvement does not end with the satisfactory launching of a new code. In practice, he keeps an eye on its working and his mailbag and the various statistics he collects are often a good sign of whether problems are continuing. Periodically, he will do a formal monitoring exercise. The recent report on funerals is just one of these.
A sample survey was undertaken of recent users of funeral services by the Office of Population Censuses and Surveys for the OFT. The questions asked in the survey were linked to the key requirements of the code of practice and therefore covered the quality of service, the price charged, and the quality and detail of information provided. The results form the basis of the director general's recommendations for improvement in the working of the code.
The conclusion of the survey, done in 1987—that the average funeral director's bill was £586 and that this represented an increase of 28 per cent. above the rate of inflation since 1975—has attracted much attention. The hon. Gentleman dwelt on aspects of that. The comparison is with another sample survey done by the OPCS in 1975 for the Department of Health and Social Security. The OFT report is careful to point out important factors qualifying the figure which it uses.
For example, the funeral director has little control over the cost of disbursements included in his bill, funeral directors' own costs such as staff and equipment may have risen above the costs of inflation and the two OPCS surveys are not directly comparable. Indeed, I do not read the OFT report as necessarily suggesting that funeral directors are overcharging, but it highlights the fact that the cost of a funeral is substantial, and that the bereaved sometimes find the final sum larger than they had anticipated. The hon. Gentleman gave examples of that. Those involved need more information at the right time and in a suitable form.
It is important to note what the report does not cover. The director general did not carry out a survey of funeral directors, and collected no information about their costs and margins. As I have already mentioned, the cost of a number of the elements which are part of a funeral service, such as local cemetery charges, the attendance of a minister, flowers, and notices in the press, are outside the funeral director's control. Disbursements to third parties 780 normally account for about 30 per cent. of total costs. The arranging of a funeral is a very labour-intensive service, and this also has a significant impact on costs.
The fact that during the past few years a number of small independent funeral director firms have been taken over—the hon. Gentleman stressed that development—is perhaps an indication that profit margins in some parts of the industry are low.
The hon. Member for Leigh expressed concern at the increasing concentration of the market, particularly in local areas, but the report tells us that the Co-op is the largest supplier of funeral services, with some 25 per cent. of the market. Hodgson Holdings has 6 per cent., Kenyon Securities has 4 per cent. and the Great Southern Group has 4 per cent. I do not think that those figures show excessive monopoly, although it is a trend which must be watched closely by the appropriate bodies and my Department. It is going too far to say that the market is in any way overwhelmed or dominated by that small number of companies. I am confident that the Director General of Fair Trading will remain alert to what is happening in the market and be ready to take action if and when the need arises. He has discretionary powers to refer abuses of monopoly and anti-competitive practices to the Monopolies and Mergers Commission. Indeed, the commission investigated the acquisition by the Co-operative Wholesale Society Ltd. of the Scottish funeral businesses of House of Fraser plc in 1987. It concluded that the acquisition would result in choice for the consumer being severely limited in certain areas in Scotland and the Co-operative Wholesale Society was required to dispose of certain companies it had acquired from House of Fraser. That shows that the mechanism is in place to deal with such developments as and when they arise.

§ Mr. Alan Meale (Mansfield)
Will the Minister please respond to my hon. Friend's request for some action to be taken on the cost of coffins, which range from £19.50 to £27 but are sold for £150 or more?

§ Mr. Forth
The report has been produced and the OFT is examining carefully what is happening. It has already been in touch with the National Association of Funeral Directors and a meeting has been arranged for 22 February. That demonstrates the degree of urgency. There is no doubt that, as the association's national public relations officer said in a recent interview on Radio 4, the National Association of Funeral Directors is very disappointed about some of the aspects that have come out of the report".
It is clear that the association is taking the matter very seriously. The OFT is following it up with the association and I am confident, indeed optimistic, that the association now has every reason to address the problems that were dealt with in the report and the difficulties that the hon. Gentleman has raised. If it does not do so within the time scale mentioned in the report and by the hon. Gentleman, in six months' time further action can and may be taken by the OFT. My Department certainly will be watching developments very closely indeed.
In conclusion, may I thank the hon. Gentleman for raising such important matters and for drawing to the attention of the House the report, which I believe is very useful. I undertake that we shall watch very carefully the 781 OFT's discussions with the NAFD in the hope that they will lead to a very real improvement in the position that he has described.