§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. McNulty.]
1.12 pm§ Mr. David Heath (Somerton and Frome)It is a great privilege to be able to address the House on this important issue although I confess that some of the subject matter may resemble that of the previous debate, as I shall concentrate on some of the smaller businesses in the retail sector. I hope that that does not mean that we shall have too much of a good thing. There is rather more time available for the debate than I had anticipated, but I do not expect to over-stay my welcome and hope that we shall finish at a reasonable time.
It is impossible to overstate the importance of the retailing sector in the British economy. Hon. Members know the details. The sector represented 23 per cent. of the gross domestic product last year. It employs 3 million people. Indeed, it employs almost 9 per cent. of the work force in my constituency. We are dealing with an important sector.
I have a little experience in the sector, having run a high street business—albeit not a standard retailing operation—in my former profession as an optician. I am extremely aware of the importance placed on a thriving retail sector not only by business people in my constituency but also by ordinary constituents. They want shops in their towns and villages. They want the convenience of obtaining products locally without necessarily having to travel to what are nowadays rather quaintly described as sub-regional or regional shopping centres. Such places can seem a long way away from people in rural Somerset.
Because of the importance of the local retail sector, I want to concentrate not so much on the larger retailers and supermarkets, or the high street multiple stores, which are found across most of the country. as on something that we talk about rather less—the independent retailer and the smaller shops that are trying to survive in our villages, smaller towns and market towns, as well as on the periphery of urban centres.
Too often, we concentrate on the retailing centres in the middle of towns and completely ignore the fact that many people and many shops are trying to subsist on housing estates, on the edge of town and in some of the old shopping plazas, which seem redolent of the 1930s and have often not improved a great deal since then. It is time to pay more attention to those retailers.
Most people who are trying to run small independent shops would identify three main enemies, the first of which is the monopolies or oligopolies, or the would-be monopolies or oligopolies, that threaten them, either by competition or through their direct dealings with them. The second enemy is the activities of criminals. That is becoming an ever-increasing problem for many people who run retail businesses. The third enemy—I use the term advisedly—are the Government, although I wish it were otherwise. Local and central Government can place impositions on retailers' business.
Added to those three principal groups of enemies is the vulnerability of so many small businesses, whether in the manufacturing or the retail sector, to events that are entirely beyond their control. The classic example, which 1100 is very current in my constituency, is foot and mouth disease and its aftermath—a very serious issue. If a company is big enough, it probably has the reserves, capability and ability to weather the storm, but those trying to run a one or two-person business probably do not, and they will go under unless adequate support is provided.
I shall deal with each of those sectors in turn, beginning with the monopolies or large businesses. Competition is a good thing; it is a motor of retail business. We should not be afraid of competition or of saying that consumers vote with their feet. It is very easy to say that the big supermarket chains, for example, are always the enemies of the piece, without realising that most people in most towns clamour to have one of the large supermarkets in their towns. At the moment, many people want Asda to relocate to Frome, and they are looking forward to that happening. It is absolutely right that the local community considers planning and other issues.
People should consider whether large retailers should move into the town centre to reinvigorate it, or whether they should be allowed to build on a greenfield site on the edge of the town, so destroying the town centre. The argument about such things has gone on for many years now, and it is a key part of public policy. While recognising the effectiveness and efficiency of large retailers, we should also recognise that they sometimes have advantages that are not entirely fair over smaller independent retailers. Some of those advantages are to do with the management of the supply chains.
Large retailers obviously have enormous buying power, which squeezes out competition and has an effect on their relationship with primary producers. As a representative of a constituency that is still largely agricultural, I notice that effect in the dairy sector, in which there is a very unequal balance of power between the retailers, and even the processors, and the primary producers. The Government should examine the relationships in the food chain.
Before the election, the Minister of Agriculture promised me that he would study the milk chain. From an answer to a question that I asked about a week ago, I now understand that the new Department for Environment, Food and Rural Affairs is not considering such a study. I do not know whether that means that the matter has been hived off to the Department of Trade and Industry, which deals with competition policy, but I would be grateful if the Minister could tell me whether a study of vertical relationships in supply chains will go ahead, and if so, when we can expect results. I hope that the study will be more adequate than the report by the Competition Commission, which asked the wrong questions of the supermarkets and therefore came up with the wrong answers.
Advantages for large retailers are built into the regulatory framework, and the biggest of them is the uniform business rate. I make no apologies for returning to this key subject, which was mentioned in the earlier debate, because many small retailers simply cannot understand why they are penalised in the proportion of their turnover that they have to devote to paying that unavoidable overhead compared with large retailers, with huge floor space, on the edge of town. I have repeatedly pointed out that the uniform business rate needs fundamental reform to make it fair.
1101 If we cannot have such reform, let us at least make an arrangement to mitigate the effects of the uniform business rate on small firms. My hon. Friend the Member for Weston-super-Mare (Brian Cotter) has already outlined a mechanism, using the equivalent of the personal tax allowance, that would allow a given amount of a small firm's turnover to escape the business rate. That would benefit many small retailers, freeing them from an overhead that they cannot afford. Some arrangements for exemptions from the uniform business rate were introduced before the foot and mouth outbreak, and others were made in response to foot and mouth. They are all welcome, but they are complicated, and they are strangled by unrealistic turnover thresholds and definitions of qualifying businesses. A wider system of exemption or mitigation would be much more beneficial.
Finally, on monopolies, I want to deal with retailers' relationships with the banks. The banks, too, virtually have a monopoly. There is competition in the sector, but all the banks operate in a similar way. There is an urgent need to implement some of the recommendations in the Cruickshank report, particularly to establish a payments regulator. That could be an additional function of the Office of Fair Trading. Will the Minister tell the House whether that proposal will be included in the enterprise Bill to be introduced later in this Session?
Criminality is a problem for small retailers throughout the country. Town centres are increasingly lawless, and small retailers are experiencing more and more problems in maintaining the security of their premises and stock. The Government need to address that more adequately. They must deal with town centre crime and support retail crime-fighting partnerships, where they exist, but they must go further.
We want to see a police presence in our town centres, but many police forces are unable to maintain that presence. There is a need for town centre premises, or cop shops, for patrolling constables, instead of police stations on the outskirts of towns which were built for a previous era and have very few officers who are visible to retailers or customers. The Government could usefully provide tax relief for the security measures that businesses increasingly have to apply and local government planning authorities should be more tolerant of the measures that are necessary to make premises secure.
No one wins from shop crime. Costs are passed on to the consumer and insurance premiums increase sometimes to the point that a business in a town centre is not insurable. We need to tackle that problem.
The smuggling of products that carry excise duty makes a significant difference to the small businesses that sell them legitimately. More attention needs to be given to that problem.
We should also pay more attention to the impositions placed on small businesses as a result of policing the present system. Small business representatives often point to the proof of age regulations. Depending on the purpose of the item bought, the age of a consumer—be he 12, 15, 16 or 18—has to be established. However, there is no formalised system for the identification of minors and shopkeepers must bear the brunt of the consequences of that.
1102 As I have said, the changes that the Government could make to the uniform business rate are crucial. Regulation, however, is another problem. Businesses are overregulated and it is a truism or a platitude to say so. We are all against greater regulation, but we produce more and more of them. I therefore make a heartfelt plea to Ministers to curb that practice.
This place produces regulations as if they were coming out of sausage factory and we sometimes gold plate European regulations. 'That is a ridiculous habit of the British civil service even though the European authorities should not produce many of those regulations in the first place. I am a great believer in subsidiarity and one of the arguments for it is that regulations should not be produced to ensure compliance and uniformity when variety and diversity benefit the consumers and the businesses involved. 'That point should be taken seriously.
The Government can reduce the regulations and the impositions that they put on business people. Small businesses often say that they spend so long working for the Government—I do not just mean producing the money to pay taxes, but literally working for the Government by engaging in self-assessment and dealing with inspection and requests for inforrnation—that they have little time left to devote to running the business effectively. We must bear down on that crucial problem.
One suggestion is to have a single inspectorate—I call it an inspectorate because it has an inspectorate's role but I prefer to think of it as assisting compliance—that can form a relationship with small businesses. It should tell them everything that they should do but should place a burden on them only when they do not comply with those requirements. That would be a much more healthy relationship. We could also introduce automatic sunset clauses into regulations so that they do not continue to apply when they no longer have a function.
There is much positive action that we could take to support small businesses, particularly those in market towns, because many of those towns are dying on their feet. There are still too many boarded-up premises and too many businesses that cannot survive in the market-town environment. The regional centres are thriving, and there must be a better balance between the two. Not everyone can drive 50 miles to buy basic clothes. We need to revitalise our smaller towns. Convenience stores must receive our support. 'Their advantage is that they are convenient, so we should not put obstacles in the way of people using them.
Niche businesses also need our support. They are often the motors for trade. We cannot have a town that is entirely full of people selling ceramics, but a few shops in the niche markets will bring people in who will do other shopping. Mechanisms should be in place to encourage the establishment of such shops. In that context, what has happened to policy action team 13, which was mentioned last week in the Evening Standard? It seems to have died a death, but perhaps the Minister will disabuse us of that by confirming that it is involved in many good schemes.
Finally, foot and mouth has had an almost incalculable effect on businesses in my constituency. Although we have had no cases, many different businesses have been affected by the disease, which has had extraordinary ramifications. The support that the Government have stated and advertised is not reaching businesses, 1103 which are struggling to survive. Once the epidemic ends among livestock, it will continue as an epidemic among businesses. It will take us a decade to recover from the unacceptable series of business casualties that will occur in rural areas this autumn and winter unless action is taken now. It is in everyone's interest that that action is taken. If it is difficult for a firm to get through a fallow period in the winter and there are cashflow problems, we need to ensure that it survives to make a profit next year. We cannot allow it to go under because that puts people out of work and creates holes in the economy that are difficult to fill.
I am not sure whether the taskforce that was established in the dying days of the last Parliament understood the scale or complexity of the problem, or the fact that Ministers' good intentions were not being translated into activity on the ground. Many more shops will be lost unless aid is supported with cash, and we need to get that to businesses now. We cannot allow it to end up in a quango's sinking fund. We must get it to the people who can make it work so that they maintain their businesses.
I am grateful for the opportunity to raise such important issues of support for small businesses. I am not prejudging what the Minister will say, but the subject seems to breed platitudes: we all support small businesses; we are all against regulation; and we all want those businesses to get a new deal. However, year after year, under successive Governments, it becomes more difficult to maintain, create and develop a retailing business in this country. It is important that the sector thrives, and I hope the Minister will tell us what he intends to do to make that a reality.
§ The Minister for E-Commerce and Competitiveness (Mr. Douglas Alexander)First, may I pay tribute to the hon. Member for Somerton and Home (Mr. Heath) for securing the debate? He spoke forcefully—indeed, movingly—and from the bas s of a real knowledge of his constituents' concerns about the importance of small retailers. He raised several matters that I hope to address.
I assure the hon. Gentleman that the Government fully understand the vital role that retailing plays in the United Kingdom's economy. It contributes more than 5 per cent. to the nation's gross domestic product and employs nearly 2.5 million people, which is 11 per cent. of the work force. Some 58,400 new jobs were created in the sector last year, providing flexible job opportunities for women, part-timers, young people and returners to work among others.
More than any other sector, retailing affects our daily lives, as the hon. Gentleman, made clear. Not only does every household spend £144 a week on average in retail outlets, but the availability of suitable shopping facilities influences where people choose to live, the value of their houses and their environment.
At one end of the scale, the vibrancy and diversity of retailing in Britain attracts huge revenues from tourists, while at the other, access to the local shop is far more than just a convenience. It is an essential local amenity, and one that can help in the regeneration of our high streets and market towns, to which the hon. Gentleman referred, and in the rejuvenation of urban and rural communities in general.
Just as shops are an important part of any community, so is the local post office, a subject on which I had the pleasure of reading some of the hon. Gentleman's 1104 contributions to debates in this House. The local post office is more than just a retail outlet, especially in many rural areas. It represents vital human contact for many of its customers. This Government are committed to ensuring that the network is a viable business and that running a sub-post office is and remains an attractive business proposition. We are therefore introducing a range of measures to help post offices. One, which I had the opportunity to put before a Committee this week, is the establishment of a £2 million fund to make available subsidies in respect of the costs of establishing a sub-post office in settlements of fewer than 10,000 inhabitants.
The Government are also committed to assisting shops in rural areas such as the hon. Gentleman's constituency. The White Paper "Our Countryside: the future, a fair deal for rural England", published in November, announced a range of new measures to help rural services, including village shops.
Those measures include a £15 million community services grants scheme, administered by the Countryside Agency, which awards grants of between £500 and £25,000 to locally identified, innovative projects to improve access to services that may be declining or under threat; increased funding for market-town regeneration, which is expected to entail a £100 million programme for 100 towns to strengthen their role as service providers and growth points and to create a national beacon towns best-practice network; and new legislation providing 50 per cent. rate relief to all village food shops and new non-agricultural enterprises on farms.
I noted the hon. Gentleman's comments on uniform business rates. It was one of the pleasures of preparing for today's debate to read his speech in the debate on 30 April on that very subject. In last year's Green Paper, "Modernising Local Government Finance", the Government proposed a scheme to provide mandatory rate relief of up to 50 per cent. for all small businesses. We are currently considering the details of that scheme, in consultation with representatives of business, including small business bodies. We shall publish a White Paper on the next steps later this year. As the hon. Gentleman acknowledged, we have already implemented the Green Paper proposals to provide additional help to small retailers in isolated rural communities. Mandatory rate relief of 50 per cent. was extended to certain pubs and petrol stations in designated rural villages with effect from 5 April.
I turn next to retail crime, which the hon. Gentleman raised. The Government are particularly concerned about the level of crime, as described in the policy action team or PAT 13 report to which he referred, that small retailers are suffering in deprived areas. Indeed, the Home Office is working closely with the retail sector through a ministerial advisory group on retail crime and the retail crime action team to develop initiatives to combat such crime. That has led to the development of active retail crime partnerships, the best of which are delivering some impressive results in reducing crime and antisocial behaviour in city and town centres. My right hon. Friend the Home Secretary announced on 27 June a £15 million investment to improve the immediate environment of shops and enhance their security.
On the specific issue raised by the hon. Gentleman of proof of age, the Government do not believe that there is a case for introducing a national card. There are 1105 already some good voluntary schemes—notably Prove It, CitizenCard and Validate—which have the Government's support.
The hon. Gentleman spoke forcefully about the regulatory burden on our retailing sector. In creating a dynamic and competitive economy including the retail sector, it is of course important that we pursue the objective of light-touch and proportionate regulation—regulation only where it is justified and to the extent that it is justified.
One of the primary functions of my Department's Small Business Service is to find ways of reducing regulatory and administrative burdens on small businesses. The SBS will work to ensure that the "think small first" philosophy is applied across Whitehall in respect of new regulations. It will seek to reduce the impact of regulations by eliminating them where possible, by simplifying forms and procedures and by encouraging higher standards of enforcement. The SBS also encourages Departments to make information on regulations comprehensive and accessible, including through the SBS information and advice service.
Following a request from my right hon. Friend the Secretary of State for Trade and Industry to Lord Haskins, the better regulation task force agreed to report on the regulatory burden faced by small and medium-sized enterprises, including small retailers as a case study. The report has recently been published and my Department is now considering the recommendations and how to implement them.
On the specific issue of supermarkets, concerns have been voiced that the Competition Commission inquiry into supermarkets might not have gone far enough and that small shops are at a disadvantage. However, the success of the supermarkets cannot be attributed solely to the prices that they charge: consumer buying patterns and habits are changing and we are witnessing the growth of the desire for one-stop shopping, as the hon. Member for Somerton and Frome recognises.
In completing its report, the commission considered carefully the impact of supermarkets on rural shops. It identified a number of practices engaged in by the larger supermarkets that it felt were against the public interest because they adversely affected the competitiveness of some of their suppliers and other smaller retailers. The commission's report recommended that the most effective way of addressing those adverse effects was a code of practice. My right hon. Friend the Secretary of State for Trade and Industry has recently received advice on the code from the Director General of Fair Trading; that advice is now being considered.
Another major concern was that supermarkets might be involved in the practice of below-cost selling, which could have an adverse impact on small retailers. The Competition Commission examined the practice of below-cost selling in detail. It found that persistent below-cost selling took place only in relation to a small number of products, most commonly economy lines and a few other high-profile items. It was impossible directly to isolate and quantify any adverse impacts.
The commission accepted that persistent selling below cost could be damaging, but considered that there were good grounds for not taking action against it: for example, 1106 there were difficulties identifying legitimate exceptions to a prohibition, and there was a possibility that supermarkets would circumvent a prohibition by forcing down supplier prices to allow them to set lower retail prices. A prohibition might also lead to higher prices for consumers. The former Secretary of State for Trade and Industry, my right hon. Friend the Member for Tyneside, North (Mr. Byers), therefore accepted the commission's recommendation that no action should be taken in respect of persistent below-cost selling.
The location of large out-of-town supermarkets is the result of commercial decisions by retailers, albeit operating within the constraints of local planning regulations that are designed to encourage new growth within towns. The Government are committed to sustainable development that ensures the viability of town centres, and planning proposals are scrutinised against guidelines that strongly promote town centres as the focus for future retail development.
When drawing up their development plans and determining planning applications, and after giving consideration to the need for new development, we expect local planning authorities to adopt a sequential approach to the selection of a site: first preference should be given to town-centre sites, followed by edge-of-centre sites, and only then to out-of-town sites. The onus is on developers opting for out-of-town sites to demonstrate that all potential town-centre and edge-of-centre options have been thoroughly assessed.
I shall write to the hon. Gentleman on issues relating to the supply chain and the Cruickshank report. He specifically directed many of his remarks to the issue of small retailers. It is clear that retail delivers tangible economic benefits not only to the country as a whole, but to individual communities. The broader welfare advantages that it can bring were recognised by PAT 13, which confirmed that good neighbourhood retailing plays a vital role in improving community self-esteem, community engagement, skills development and training and social life. The maintenance of local retailing is vital to the lifeblood of a community, so I am extremely pleased to be undertaking that work in the Government. I acknowledge the progress already made in departmental implementation of PAT 13's recommendations.
For example, at our request, the better regulation task force examined the impact of the regulatory burden on small shops. Its report has been published and we shall give careful consideration to its recommendations on how to advance the issues. The SBS, through its franchises, is supporting initiatives to provide direct help to small retailers. For example, pilot projects are being supported in Surrey, where 800 small retailers are utilising e-commerce to achieve supply chain efficiencies, and in Birmingham, where inner-city retailers are receiving help in improving store standards and performance through advice on merchandising, training, customer service, health and hygiene, promotional projects and group purchasing. If successful, we hope that those projects and similar ones can be rolled out across the country.
Funding is available through the SBS Phoenix development fund, which is designed to encourage innovative ideas to promote and support enterprises in disadvantaged areas among groups of people currently under-represented in business ownership. Its purpose is to encourage experimentation, the evaluation of new ideas and the identification and spread of best practice in an 1107 area where there is currently too little knowledge. The second round, which has just closed, specifically identified retailing as a sector in which applications would be considered.
The report also stressed the need for locally developed strategies, with the local community playing a full part in the process and working together with local retailers. Through the establishment of the PAT 13 movers' group, consisting of people who are actively involved with promoting the sustainability of retailing in local communities, we are identifying examples of best practice. They will be disseminated in a conference in January next year with the aim of encouraging local people to set up or sustain retail businesses in difficult areas by highlighting support mechanisms that are available. A signposting guide to both local and national support mechanisms will be launched at the conference, and will be available via a DTI-supported website. I hope that the hon. Gentleman agrees that measures such as those sequential approaches help to provide small retailers with a more level playing field.
I turn to foot and mouth, which the hon. Gentleman raised in his conclusion. The Government continue their work in that area. We are already helping badly affected non-farming businesses to cope by deferring tax, VAT and national insurance contribution payments; we are providing extra funding for hardship rate relief payments; and are establishing a new regional development agency business recovery fund to provide grants to help businesses adjust and cope with the crisis. Already, more than 11,000 businesses have had tax, VAT and national 1108 insurance payments deferred without interest charges worth £71 million. However, I concede that work must go on across Departments to continue to cope with a serious crisis that has affected a large number of constituencies the length and breadth of the country.
I thank the hon. Gentleman for raising the issue, and I assure him that we recognise the difficulties that small retailers currently face in adapting to changing patterns of competition and consumers' buying habits. Our goal is the sustainability of a vibrant and diverse retail sector, both physical and virtual, which can serve the needs of all social groups in all parts of the country. It is not, however, our role artificially to keep businesses afloat through subsidies, but to help them become more sustainable through innovation and the adoption of new technologies and best practice. Much excellent work is being developed and undertaken in communities across Britain; we want to encapsulate that and encourage a wider spread of take-up across the country. I therefore warmly welcome the opportunity to demonstrate our commitment as a Government to the retail sector, to working closely with it in future, and to any initiatives aimed at promoting social inclusion and enhanced sustainability of social enterprises, in both of which retailing has played an important part. In conclusion, I pay tribute to the hon. Gentleman's success in initiating this debate in the House.
§ Question put and agreed to.
Adjourned accordingly at eleven minutes to Two o'clock.