PLANNING – A RETURN OF THE “NEEDS TEST”

Bristol is a proud city with a very long history. Once it was second only to London in the kingdom, a key port and trading centre, with many charters over the centuries to affirm its independent civic government. In the past Bristol has given a welcome or barred its gates to kings and rebels. In recent times, it was forced to become part of the newly created county of Avon. Bristol fought tooth and claw to regain its separate identity. It won. As a result, Avon no longer exists and Bristol has its own council again.

It is therefore quite remarkable when the Leader of Bristol City Council writes to Tesco in the following pleading terms:

Re: Former Jesters site, Cheltenham Rd, Bristol

Dear Mr Leahy,

You will no doubt know of the concerns we have about Tesco’s intention to open a store at the above site. We would like Stokes Croft to become a distinctive destination in Bristol and do not believe another chain store will help achieve this aim.

Tesco, we know, is proud of its pledge to “listen to people in the community from the moment we identify a site for a new store”. Tesco says it wants to “respond to suggestions and concerns people might have”.

We would like to take you at your word and seek assurances from you that you will consider backing down over your plans and allowing the site to be used by a community-owned alternative.

Some local groups feel very strongly that Tesco has failed to engage with them. They want to see the site used for something other than a supermarket. Will you meet them to discuss their ideas?

Yours sincerely,

Barbara Janke, Leader of Bristol City Council
Stephen Williams, Bristol West MP

This letter is amazing. Bristol City Council grants plannning permission to a development and then a couple of months later has to plead with Tesco to even talk to them.

Whatever the rights or wrongs of this particular case, it highlights in the starkest terms that the balance in the current planning system is just wrong. Local authorities are terrified of turning down applications from supermarket chains in case they end up with a massive compensation bill if ultimately the application is successful on appeal. The RSA does not usually concern itself with urban issues – the clue is in our name - but this is such a clear illustration of the national problem that we had to highlight it.

Tesco plans to open 2.4 million sq. ft. of new space in Britain this year, equivalent to about 80 superstores. The other leading supermarket chains have also announced big expansion plans. Sometimes local communities welcome these developments, often they do not.

The current PPS4 planning guidelines need to be modified to include a needs test to ensure that supermarkets cannot ride roughshod over local views. There can be too much supermarket competition as well as too little and we need a robust planning system that can distinguish between the two situations. The current planning laws need to be completely overhauled to get the right balance between the various pressures on the system. It is not being a Luddite to say that there is a need to ensure a variety of shop types and that a system that is slanted towards more large supermarkets with car-based customers is not a good model for a greener future.

Until recently, a supermarket chain had to pass the needs test before plannnig permission for a new supermarket wouyld be granted. This was not perfect by any means, but it meant that the applicant had to show that there was a good case for more retail space before receiving permission to provide it. The current PPS4 planning regulations have abandoned this requirement. Although only introduced recently, there is sufficient evidence already to highlight that they are just not working properrly.

The RSA is calling for a full re-evaluation of PPS4, based on a clear appraisal of what outcomes the system is trying to achieve, and a restoration of the needs test to help restore balance to the process.

MARKET POWER IN THE GROCERY MARKET - WHAT YOU CAN DO WITH £3.4 BILLION

The last five years have seen the big 4 supermarket chains increase their stranglehold on retailing in Britain. As a society, we now need to draw a line. Government needs to tell the country how much market share these companies are to be allowed. Tesco have a third of the UK grocery market. Is it in the national interest for it to be allowed to grow still further?

The Competition Commission’s Grocery Market investigation (final report: April 2008) showed just how much better buying terms the big 4 supermarkets obtain than their smaller competitors. The following figures are based on the table on page A5(3)-6 of the report. They compare average relative prices paid by customer groups over the previous 3 years with those paid by the four largest grocery retailers:

Other fascias +7%
Large wholesalers/symbol group +10%
Small wholesaler/symbol group +16%

In other words, smaller symbol groups are paying on average 16% more for their supplies than the big 4 supermarkets. This is an enormous difference, far greater than can be justified by bulk buying efficiency.

It is therefore vital that better buying terms are earned fairly and not just boosted by the big chains’ unfair use of their raw market power. Previous attempts to ensure that the big buyers do treat their suppliers fairly have floundered – suppliers have been too intimidated to use the systems to complain about their key customers.

The Competition Commission recommended the establishment of a Grocery Ombudsman to oversee a Grocery Supply Code Of Practice (GSCOP) to ensure fairness in the supply chain. There has recently been a public consultation on his precise role and powers and it is now time to act.

The RSA is convinced that the country needs a strengthened GSCOP with a determined Ombudsman to enforce it. The current proposals have been stalled for too long and we are calling on the new Government to appoint a strong Grocery Ombudsman with real powers as soon as possible.

NEWSPAPER DISTRIBUTION – AN UNIQUE INDUSTRY

Newspaper sales are a vital part of the business for thousands of rural retailers. As a product, it is something that many people want to buy very locally and it has the shortest shelf life of any product there is. The distribution industry for newspapers is unique, getting product to scattered retailers in a very short time window, an impressive achievement carried out day after day. It is a vital service to thousands of rural shops. For some, a quarter or even a third of turnover comes from newspapers and magazines. They are important to profitability in their own right and their contribution to customer footfall is also considerable.

The industry is unique insofar as the newspaper publishers appoint distributors to cover a particular territory and retailers have no choice at all over who they get their supplies from, despite the fact that it is the retailer who pays the bill. Over the years, the number of newspaper distributors in England has declined, until now just two companies, Smiths News and Menzies, cover nearly all of England. In a few places, such as Cornwall, a separate company distributes the News international titles. In practice this does not benefit retailers – they cannot start newspaper deliveries to their customers before they have all titles delivered to them. They also end up having to pay two sets of delivery charges.

The Office of Fair Trading has looked at this industry several times, concluding in September 2009 that at that time it would not refer the industry to the Competition Commission because it would not be feasible for them to properly assess how supply chains were likely to evolve and hence the impact of any possible remedies. This conclusion is as wet as a weekend in a hot tub, but at the same time it is very difficult to know where the industry should go. We are where we are.

Retailers often bitterly resent the fact that they have no control over which company they buy their newspapers from or the trading terms they are offered. Smiths News and Menzies operate a very difficult time-critical operation, but to judge from some of the anecdotal evidence from retailers, at least some of their depots do behave like the monopolies they are in terms of the service they offer retailers and their arrogant response to queries or complaints.

The solution may well lie in the hands of the newspaper publishers, although by allocating contracts to just two main distributors and allowing the third player in the market, Dawsons News, to fail, they have gone for a short-term cost reduction but probably weakened their long-term negotiating position considerably.

Newspapers are still an important part of our democracy and their distribution to the end consumer is therefore of more than normal commercial interest. The RSA is calling on Government to re-invigorate the OFT’s interest in this market with a view to coming up with a least-bad solution to protect the interests of retailers against their monopoly suppliers.

“THE MORALITY OF A CRACK DEALER” – THE BELOW COST SELLING OF ALCOHOL

Both parties in the current coalition government have similar views on the price of alcoholic drinks. During his election campaign, David Cameron said that deep discounting of alcohol in supermarkets was “encouraging irresponsible behaviour and we need to stop it”.

This reflected in the conservative manifesto, which included:

- Give local authorities and the police stronger powers to remove a licence from any premises causing problems

- Raise the duty on the drinks specifically linked to antisocial drinking

- Ban the selling of alcohol below cost

The Liberal democrats election manifesto included:

- Ban the selling of low-cost alcohol and apply minimum pricing

- Review the tax system to tackle binge drinking without penalising responsible drinking

The 2009 report from the House of Commons Health Committee on alcohol highlights a massive increase in alcohol consumption per head in the UK – up two and a half times since 1947 – and the impact this has had on the nation’s health. To take just one example, cases of cirrhosis of the liver are up by a factor of five times since 1970. The medical and social costs of excessive alcohol consumption are immense.

Although the Committee was not impressed by government’s attempts to create a “civilised café culture” to restrict excessive drinking, much of its criticism is reserved for the supermarkets. Most alcohol is now sold through supermarkets and other off licence premises. The reports highlights that 59% of the off-trade sales are made for less than 40p per unit. At the extreme, a 3litre bottle of white cider at 2.99p can deliver more than the recommended weekly alcohol units for a man in one bottle for less than 10p per unit.

The supermarkets sometimes sell alcohol below the cost of the duty on it, let alone below the cost price. Their attempts to justify this practice to the Committee seemed to come down to the morality of the playground; other supermarkets do it so we have to do so too. They also put forward the slightly contradictory view, that overall low prices do not make people buy more alcohol, merely switch brand. As Professor Plant put it, “Supermarkets are exhibiting the morality of a crack dealer”.

The Select Committee concluded that imposing a minimum price per unit of alcohol would be best way to combat aggressive discounting, since it is the most difficult approach for supermarkets to circumvent.

The RSA welcomes the Select Committee’s approach, to suggest limiting alcohol consumption by imposing a minimum price per unit.

For too long supermarkets have used the need to compete as an excuse for practices that can encourage excessive drinking. Their senior managers are decent human beings, but we need to change a system that can lead them inexorably to decisions that are clearly wrong for our wider society. The Competition Commission has defined its role by saying competition is all about low prices – hence selling alcohol below the level of the duty can seem a proper, even commendable, thing to do. They are wrong. The damage to society of alcohol being sold at prices considerably cheaper than cola, milk or bottled water is clear. Basic GCSE economics still works in this market – the cheaper the price of alcohol, the more is consumed.

The stances by the Conservatives and the LibDems in their manifestos seem considerably at odds with the reality of supermarket trading immediately after the General Election, as big retailers geared up for the football World Cup, selling cases of beer and lager way below cost price and hence incurring a considerable loss on each case sold. This predatory pricing is only possible for large companies with big macho egos and deep pockets, able to take short term hit in the expectation of longer-term gain.

The RSA is calling upon the new government to act quickly to prevent alcohol being sold at immoral prices – legislation to prevent selling of alcohol below the full cost of production and distribution needs to be implemented as soon as possible, ideally before the next big binge session – Christmas 2010.

TOBACCO – SUPPLIED BY A LEGITIMATE RETAILER OR FROM A CAR BOOT IN PUB CAR PARK?

No moral adult can object to effective measures to discourage children starting to smoke tobacco. But unfortunately the legislation brought in by the last government to ban tobacco displays was not soundly based on evidence and could even be counter-productive. The RSA has consistently argued that the evidence cited by the pro-ban lobby to link the type of displays found in the UK with increased tobacco use by young people was very weak indeed. The danger with a display ban is that it removes a key difference between legitimate retailers and other individuals selling smuggled or counterfeit produce, with no thought of proof of age or other niceties.

The Health Act 2009 banned the open display of tobacco but gave the minister power to allow exceptions – there was a recent consultation leading to proposals on the way the absolute ban would be tempered to allow practical store operation. However, the end result would still be an expensive adaptation or replacement of display fixtures and a more difficult operation for staff.

Three major tobacco companies have launched applications for a judicial review of the banning of tobacco displays under the Health Act 2009. Imperial tobacco are arguing that the law is unreasonable and disproportionate, BAT argues that it discriminates against smaller companies and hinders new entrants to the market, in breach of EC competition law, whilst JTI argues that the ban would encourage the illicit market.

These companies may well be pushing at an open door, since the Conservatives have committed to a review of the policy and the LibDems have also expressed reservations on the display ban.

Evidence from the first few months of a tight restriction on tobacco displays in the Republic of Ireland seems to show that it has made no impact on tobacco sales. Despite this, the Scottish parliament is going ahead to consider a very tight display ban, heralded in some quarters as the toughest in the entire world.

The RSA’s stance is that in the current period of uncertainty, the implementation date for curtailing the display of tobacco needs to be postponed (currently 2011 for large stores, 2013 for most rural retailers) and the issue looked at afresh. We call upon Andrew Lansley, the new Minister for Health, to act quickly on this important issue.

The RSA is the first choice, credible and trusted point of contact for the rural small store sector. Through a network of links with Government Ministers, politicians of all parties, civil servants, national and governmental organisations and the media the RSA …
         (1) represents the business interests of its members
         (2) ensures their views are properly heard
         (3) influences policy and opinion
         (4) lobbies for equity and proportionality in matters impacting upon our industry.

How?

- Proactive initiatives, getting in early and actually being able to influence Policy Making and decision makers in advance, are critical to our success in this area.

- The RSA’s Steering Group meets quarterly to discuss the output and its members, all experienced retailers representing a broad spectrum of rural stores, assist with developing RSA policy, action plans and campaigns.

- Regular Press releases (see ‘information’ section) to trade and national media ensure high profile and inform a wider audience.

- The RSA attends a quarterly meeting with Camelot, to ensure the interests of rural shops are represented

- The RSA Sounding Board is a panel of RSA members, who are consulted to provide data and feedback on ‘hot issues’ and give robust evidence for submissions.

- Formal written responses are made to the many lengthy consultation documents published in advance of proposed legislative change, which inform Government and decision makers, and flag up potential unintended consequences for the sector forming the basis of a Regulatory Impact Assessment.