Retail Sector

Drew Hendry Excerpts

Wednesday 6th June 2018 Commons Chamber

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is always a genuine pleasure to follow the shadow Secretary of State and, indeed, the Secretary of State in these debates, particularly when they are on very important subjects such as retail that go right to the heart of our towns, cities and communities. As a former retailer myself, I should like to start by paying tribute to those sore-footed legions who go home every night having served us in their shops and stores. They perform an absolutely vital function, and that should not go without being underlined today and I mean to do that during my contribution.

Retailers always try to create the conditions to attract customers. The environment that they work in and that they present to consumers is extremely important for them. They will spend a long time working out whether they should concentrate on high-density product placement, low-density product placement, special offers and the placing of those offers. They know that the environment in which people shop is extraordinarily important to them. They approach that in a range of different ways. I do not want to major on the actual high street itself, but I do want to focus on it, because it is something that was perhaps glossed over by the Secretary of State today.

The success of retail depends on the wider economic environment—or the context, as the Secretary of State called it earlier. That is why the unrelenting situation that we have over austerity causes so much difficulty for high street retailers, and retailers in general. Store closures, such as the ones announced by Marks & Spencer, are just another indictment of what happens when these policies are brought forward, and they drive consumers away from the high streets. If people do not have a disposable income, they are not able to go and spend in the shops.

The Scottish Government continue to support the Scottish retail business, especially the crucial small business retail sector, with initiatives such as the small business bonus, and I will return to that matter shortly.

[Ged Killen]

The hon. Gentleman is talking about the Scottish Government’s assistance for small businesses. In my area, three businesses have had to close as a result of the treatment they have received from landlords, the most recent being The Big Coffee Cup. Does he not think that it is regrettable in Scotland that there is no statutory or common law right for a commercial lease to be renewed? These businesses were told that they had to close because their lease was not going to be renewed.

--- Later in debate ---

[Drew Hendry]

I would love to give the hon. Gentleman a direct answer, but I have not come across that situation myself. I will happily look into it. I will not come here and make up something that I do not know anything about, so I will look into the lease issue for him.

I will come back to what the Scottish Government are doing in Scotland later in my speech. In tough times, the last thing that retailers need is for costs to rise. When prices go up, the number of customers goes down. It is a natural cause and effect. The biggest current risk to the Scottish economy and the retail sector comes from the hard Brexit that is on the table now from this Tory Government. We still do not know what the Labour position is. [Interruption.] Well, we still do not know what the Labour position is on a hard Brexit. Hopefully, we will find out soon.

[Stephen Kerr]

rose—

[Drew Hendry]

Oh, Madam Deputy Speaker, have I ever refused the hon. Member for Stirling (Stephen Kerr)?

[Stephen Kerr]

And the hon. Gentleman maintains his record of giving way, so I thank him. He says that the biggest threat to the retail sector in Scotland is a hard Brexit, which is, I am afraid to say, all too predictable from the Scottish National party spokesman. That is not what the director of the Scottish Retail Consortium, David Lonsdale, says. He says that the devolved Administration’s increase in surcharges and business rates inflexibility have served to make it more expensive to operate shops in our town centres. We cannot go to a higher authority than the Scottish Retail Consortium to describe what is wrong with Scottish retail.

[Drew Hendry]

Of course, if the hon. Gentleman wants to trade in higher authorities, let us see if we can find one. Let us go to the Governor of the Bank of England, Mark Carney, who says that a hard Brexit will cost each family £900 per year—a reduction in income that people simply cannot afford and that will not aid anyone, especially retailers. Let us go to the Office for Budget Responsibility, which says that lower economic growth is predicted in each of the next five years—lower than the 1.7% in 2017.

The single market and the customs union remain vital for Scotland’s economy. It is a Herculean task to find a business person or a business organisation in Scotland that does not agree with that. Hard Brexit not only threatens the cost outlined by Mark Carney and others, but, according to the SPIE 2 report, means that costs will reach £2,300 per person per year compared with remaining in the EU. Report after report highlights the economic folly of the hard Brexit approach. All of that sucks up disposable income—the lifeblood of the high streets.

Let me return now to austerity and its effect on retail. Austerity is a choice. Dealing with a deficit can be done by encouraging growth, not by austerity. Between now and 2022-23, the Scottish Government modelling suggests that the Chancellor could provide an additional investment in Scotland of around £5 billion while still meeting the UK Government’s targets on structural deficit and debt reduction. These policies disproportionately affect the least well off—the very people who spend more of their income in local shops. On welfare cuts, the Resolution Foundation states:

“The coming year (2018-19) is set to be the second biggest single year of welfare cuts…(after 2012-13) at £2.5bn.”

Having been in a pilot area for universal credit for more than five years now, I can testify to the effects that it has had on the local economy by draining the ability for people to spend in their local shops. The people of Inverness in my constituency are all too aware of these consequences.

Of course, there is another effect that is likely to cause great problems and to be a damaging issue for retail. Retail needs people—to buy and to sell. The unique selling point of being in retail, particularly high street retail, is that customers can speak to staff and staff can show customers products. The Government’s proposed approach to immigration could mean that real-terms GDP in Scotland is 9.3% lower by 2040. That affects tax and employment not just for shops and businesses, but also for public services.

Over the decade to 2019-20, Scottish Government funding has been cut by £2.7 billion, which is 8.4% in real terms. The Scottish Government will only receive 2.5% or £37 million of the £1.5 billion funding for Brexit preparations allocated in 2018, so when we look at support for business, it is against a background of lower funding. The Scottish Government’s recent budget set out how reforms of the business rates, for example, will ensure that Scotland provides the best possible environment for business. Rates relief for small business in Scotland is more competitive than in England. We provide the most competitive reliefs package in the UK, worth a record £720 million—up from £660 million in 2017-18. From 2018, we will introduce a business growth accelerator that will see no bill rise for 12 months as a result of improvements or expansion of existing business property. It will also ensure that no rates are paid on new builds for a year when they are entered into the valuation roll.

Earlier I mentioned the small business bonus scheme, which was protected in the 2018-19 Scottish Government budget and has saved businesses almost £1.5 billion cumulatively since it was introduced in 2008. The scheme has provided record relief to almost 104,000 recipients over the past year. The estimated total relief under the scheme, which removes or reduces rates bills, rose to £230 million—an increase of £43 million from £187 million last year. This amounts to an average saving per property of £2,000. The maximum savings that a business can achieve through the scheme will increase next year from £6,990 to £7,200 a year. That is a record level of small business support. Andy Willox, the Scottish policy convener for the Federation of Small Businesses, said:

“Without this rates help, Scottish firms tell us they would scale back investment, and their plans for growth. This vital scheme forms the centrepiece of the Scottish Government’s package of help for smaller firms.”

The Secretary of State rightly talked about the need to diversify in retail, and we have to ensure that we take that factor into account. As he rightly said, most successful businesses are able to adapt and change with the circumstances they face and the opportunities that arise. Many successful retailers—small and large—have adopted online platforms alongside their traditional face-to-face retail. In fact, they are finding that a double benefit: not only can people find and access their products, but they also know somewhere where they can go and get direct advice about those products. It is of course important to set the environment to ensure that that can work properly.

Although the Scottish Government have committed to extending superfast broadband access of 30 megabits per second to Scotland by the end of 2021, the UK Government really have to up their act and understand that 10 megabits is not good enough for the rural parts of Britain that are not covered by the Scottish Government’s actions. The UK Government appear intent on cutting Scottish consumers out of the broadband universal service obligation completely, despite the fact that they are being asked to pay for it alongside consumers in other parts of the UK. In Scotland, we are investing £600 million through the first phase of our Reaching 100%, or R100, programme to achieve our goal of superfast broadband access for all. Procurement is under way and deployment will begin during 2019. Even though telecoms is reserved to Westminster, the UK Government’s contribution to R100 is just £21 million—only 3% of the total.

Figures provided by thinkbroadband show that the UK Government have met their target of 95% superfast broadband coverage, at the UK definition of 24 megabits and above. But, in fact, using the same data used by the UK Government and our own internal data, we have confirmed that we exceeded our target of 95% fibre broadband coverage across Scotland by the end of 2017. Our Scottish 4G infill programme aims to push 4G coverage beyond commercial roll-out by investing up to £25 million of public funding to deliver future-proofed 4G mobile infrastructure to help selected mobile notspots.

I agree with the Secretary of State that the quality of people’s working lives must be enhanced, and I join him in paying tribute to Aldi for making a commitment to being the highest paying supermarket. For too long retail sector wages have been too low for too many people. As I said in my opening remarks, working in retail is a rewarding job, but it is also challenging at times. Retail’s future workforce and customers are obviously going to come from the ranks of young people, so I will make the kind request that has been made eloquently in this Chamber by many other Members, for the UK Government to start to understand that they need to reward young workers, not punish them.

Research from the Scottish Parliament’s information centre shows that workers under the age of 18 would earn roughly £6,500 less than people who are over 25. The research further highlighted that 18 to 20-year-olds would find themselves £3,705 worse off—and apprentices £7,605 worse off—compared to workers over the age of 25. If the UK Government seriously want to reward hard workers, as they so frequently say they do, will they listen to the SNP’s demand and retract this deeply discriminatory decision that punishes workers solely for being young? It is a missed opportunity to provide economic empowerment to young people from lower socioeconomic demographics.

The SNP would encourage every employer to reward their staff fairly and, where possible, to pay the real living wage. Many of the most successful retailers, such as Aldi, are already committed to doing the best for their staff, and that is the right thing to do. The new national living wage rate of £7.83 an hour for over-25s came into effect on 1 April 2018, but the national living wage refers to average earnings, not living costs, and is therefore not a real living wage. The living wage differs in that it is calculated according to the basic cost of living, and therefore takes account of the adequacy of household incomes for achieving an acceptable minimum living standard. Incidentally, the Scottish Government were the first Government in the UK to become an accredited real living wage employer. Our young workforce and consumers—the very people who need to get into the habit of using retail and finding ways to stimulate the economy, and the people who will be paying taxes to support pensions into the future—must be included in a fair strategy.

To conclude, I ask Ministers—[Interruption.] I am getting some warm applause from the Tory Benches. How delighted I am to always find a few extra words to thank them for their attention during these exchanges! Will Ministers copy what has been working in Scotland with the small business bonus? Will they look at adjusting the rates system in that way? Will they finally listen to the endless stream of businesses and business organisations that have come forward to point out the perils of a hard Brexit direction? Will they listen to the people affected by the universal credit roll-out? This all cumulatively affects the future of retail and the ability of people to operate on the high street. It is time to help the whole of the economy. Listening to these points would definitely hit that mark. It is well past time to ditch the dogmatic approach to austerity.

[Several hon. Members rose—]

--- Later in debate ---

[Bill Esterson]

Indeed; as my hon. Friend the Member for Bishop Auckland also said in the debate, there is no such strategy.

In the response to the urgent question on Marks & Spencer on 24 May, the Minister for Energy and Clean Growth, the right hon. Member for Devizes (Claire Perry), said that the Government had set up a new Retail Sector Council, but why has that taken so long? Why did it take eight years to create that council? What is needed now is action. Business rates are a huge fixed cost for businesses in our high streets, and that is a disadvantage that their larger online-only rivals do not have to contend with. The Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Burton (Andrew Griffiths), will no doubt say that there have been changes to business rates, but those changes have made matters worse for many businesses, particularly smaller ones. Last year’s revaluation resulted in an average rates increase for smaller shops of £3,363 over the next five years.

The Government commissioned Mary Portas—remember her?—to tell them how to re-energise high streets. How is that going? Not so well. Her report recommended cuts to business rates, not the massive hikes that so many are experiencing. Meanwhile, ASOS reports its profits going up 26% while its rates bill fell by £30,000. Rates rises for our brilliant independent retailers alongside rates cuts for the multinational online retailers are hardly the stuff of fair competition or a level playing field. There was very little in the Secretary of State’s opening speech about independent retailers, yet smaller firms in all sectors, including retail, are crucial to the future economic success of this country. The Association of Convenience Stores has stated that

“the cost of business rates remains too high”.

And what about the fact that investors in retail are put off by the high cost of business rates? The Government should be doing so much more to ensure the right balance between high street, online and out-of-town retail, and we need to see that happening in the sector deal when it comes forward.

That brings me to the retail workforce. There are 2.9 million people working in retail and the sector is worth £94.6 billion to the economy. It is where many people develop their first experience of the world of work, and it is often the source of good-quality employment in businesses large and small, but the pressures on retailers are starting to show. We have seen job losses at Toys R Us, Maplin, M&S, Conviviality and maybe now House of Fraser, and CVAs and profit warnings at many others. We have seen 21,000 jobs go in the first three months of this year alone, and cuts in pay and conditions at companies such as Sainsbury’s, which has ended paid breaks and premium pay. Yes, there has been a rise in the hourly rate, but it has been offset by cuts in workers’ rights, adding up to a pay cut for too many people.

Ministers could and should be working closely with campaigning unions such as USDAW, GMB and Unite, which are doing such a good job on behalf of workers’ rights and on campaigns such as Freedom from Fear. It is in the interests of responsible retailers and of the whole economy for the Government to play their part in ensuring that workers are treated fairly. A high-pay economy is good for workers, but it is also good for business because workers are also consumers who buy goods and services from retailers. It makes economic sense to prevent the exploitation of workers, not least in the large distribution centres. It was simple complacency for the Minister for Energy and Clean Growth to imply in her answer to the urgent question on 24 May that M&S staff could just go and work at Amazon, complete with its airport-style security and unpaid toilet breaks.

I am afraid that it was also simple complacency for the Secretary of State to say earlier that retail employment was going up. There are 2,500 fewer retail stores than there were three years ago. According to the Office for National Statistics, 40,000 fewer staff were working in retail in 2016 compared with 2015. The British Retail Consortium says that its figures show from 2015 to 2017 the number of jobs fell by 73,000. Meanwhile, the average hours worked in January to March 2018 were 30.2 a week, which is a fall of 30 minutes on the previous year.

Those figures are a cause for concern, not complacency, and are indicative of an overall decline in retail employment. The Government should be doing so much more to improve productivity. As in other sectors, it is true in retail that skills and investment in infrastructure and new technology are the keys to better productivity, and that needs to lead to better-paid jobs as well as more profitable businesses. My hon. Friend the Member for Salford and Eccles (Rebecca Long Bailey) set out some ideas for how to boost pay. The British Retail Consortium has its “better jobs” agenda, and I refer the Business Secretary and the Under-Secretary of State for Business, Energy and Industrial Strategy to its excellent report. Productivity gains from cuts to workers’ pay and conditions or to the prices paid to suppliers are short term and characterise the lack of economic progress under the Government, not least in retail.

That brings me to our relationship with the outside world. Frictionless trade is vital for the import of perishable goods. It is vital for the supply chain in the car industry, where components cross the border multiple times. Car retailers need certainty, as do our supermarkets, because 79% of food is imported by retailers. Certainty is needed for retailers to plan for the trading arrangements post Brexit. Arrangements at the Port of Dover, Holyhead, Liverpool and across the country will play a huge role not only in business life, but in daily life, and retail is one of the sectors that most affects daily life.

Warnings of empty shelves need to be heeded. Consumer choice will be badly affected—dramatically so—if border arrangements are adversely affected. The Government’s failure to confirm their preferred negotiating position with our European partners is causing real problems. Many retailers rely on foreign workers. It is not just the highest-qualified EU workers who need assurances that they are welcome in this country. Workers in lower-paid sectors, including retail, need the same assurances and so do businesses. Some 22% of retailers report that foreign workers have left since the referendum. It is time for clarity.

[Drew Hendry]

Will the shadow Minister give way?

[Bill Esterson]

No.

The Government need to make up their mind, stop negotiating with themselves and start negotiating with the EU for a deal that puts jobs and the economy first and that is not just in the interests of a handful of extreme Brexiteers in the Conservative party. Let us have a proper sector deal that sees action, not just words. Let us see the Government make a proper commitment to retail. Three mentions of the sector in a White Paper do not inspire confidence in the Government’s commitment to retail businesses or workers.

Let us have a deal with thriving town centres, not crippled communities, and one that addresses the concerns of the British Retail Consortium, which describes a sector in stasis, where vacancies are going up. Let us see a deal that reverses the long-term decline. Let us see proper business rate reforms that include the switch to CPI-measured inflation, encouraging innovation and growth, that exempt new investment in machinery from valuations and that ensure businesses can access a proper, comprehensive appeals process. We need a deal that has smaller independent retailers at its heart and one that supports retail by investing in skills, in education and in an immigration system that brings in the skills this country needs. We want a deal that takes on board Labour’s plans for a catapult centre for retail, that listens to the views of employers and unions and that promotes the best outcomes for workers, communities, consumers and businesses.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Griffiths)]

It is a delight to get to the Dispatch Box at last, Madam Deputy Speaker, and I hope that you will indulge me and allow me to answer some of the important points that have been made in this excellent debate. I thank the Opposition for bringing it forward. It is clear that there is strong agreement across the House that the retail sector is vital to our economy, our local communities and the many thousands of constituents who rightly rely on the sector for their livelihoods.

I will quickly address some of the points raised by right hon. and hon. Members in this debate. The hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), in an interesting speech that particularly focused on Brexit for a change, raised the issue of austerity but forgot to remind the House that, as a result of changes to lift the lowest paid in society out of paying tax and as a result of the biggest increase in the national minimum wage and the national living wage for 10 years, those on the lowest pay are now £3,800 a year better off—that is thanks to the policies of this Government.

The hon. Gentleman understandably raised an important point about the pay of the youngest in society. I share his desire to ensure that young people are fairly paid, but he forgot to mention that unemployment among 16 to 24-year-olds is persistently higher than among those aged 25 and over—12.1% compared with 3.1% across the country. The unemployment rate for 16 to 17-year-olds is 26.9%. Increasing pay would make it more difficult for young workers, whose priority is to get their first years on the job ladder, to secure work.

[Drew Hendry]

Will the Minister give way?

[Andrew Griffiths]

I know the points the hon. Gentleman will make, so I hope he will forgive me if I do not allow him to intervene. Time is pressing.

The hon. Member for Ellesmere Port and Neston (Justin Madders) made an interesting speech in which he talked particularly about the loss of banks. Although I share his concern, he will know the Government have invested some £370 million in the post office network, which now provides both business and retail banking. I am sure he values the contribution that that is making to the important post office network across our communities.

The hon. Member for Bishop Auckland (Helen Goodman) had a shopping list of questions, which is apt in a debate on retail, but, as with all shopping lists from the Labour party, it had a huge price tag attached. She asked for Boxing day to be a bank holiday for retail workers, but she forgot to mention that that would cost employers an extra £1.2 billion.

The hon. Lady raised the issue of competition policy and the banks being able to share premises. As I understand it, there is no competition policy issue that would prevent banks from sharing premises—they would obviously have to be careful about sharing data and personal information. If she has other concerns, I will be delighted to talk to her. Perhaps she could drop me a little note on her concerns.

My hon. Friend the Member for Torbay (Kevin Foster) made an interesting speech, particularly on “Love Your High Street,” which he is championing. I hope he will be getting free beer at the Peaky Blinders bar after he mentioned it. He made a particular point on the need to revitalise our high streets and change the way they are purposed, and I absolutely agree.

My hon. Friend the Member for Stirling (Stephen Kerr) raised the sad loss of The Boozy Cow and The Fat Cyclist Café, which are a great loss to us all. He also raised the important issue of the need for innovation in our town and city centres.

The hon. Member for Great Grimsby (Melanie Onn) again raised the Grimsby town deal, about which she cares passionately. She also raised the issue of coffee shops and said that surely we cannot eat any more cake—there are hon. Members present who might disagree. My hon. Friend the Member for North East Derbyshire (Lee Rowley) made some particularly important points, for which I am grateful.

Let us reflect on the recent structural changes in the sector and on the announcements we have had of late. There has been a shift in consumer behaviour, and we need to be aware of that shift. The move towards new technology is a great innovator and it provides great opportunities, but it also provides great challenges. I commend my hon. Friend the Member for Mansfield (Ben Bradley) for his campaign for free parking, which is an excellent proposal. He is standing up for his local residents.

My hon. Friend the Member for Redditch (Rachel Maclean) mentioned Labour’s yellow brick road, and on the folly of the Labour party, I point to the problems of Cannock Chase District Council, which is now trying to charge hard-working independent retailers £85 just for having an A-board to advertise their shops. That is the Labour party getting in the way of private business, as usual.

Many Members mentioned the key issue of business rates. The Government are aware of the wider business rates concerns and are looking to address them. We undertook the last fundamental review of business rates in 2016, announcing reforms worth £9 billion. A further £4.3 billion package was announced at the spring Budget in 2017, including £110 million to support 16,000 small businesses. I hope that Members from across this House will join me in celebrating Small Business Saturday later this year to try to support small high street retailers.

The Secretary of State mentioned the Retail Sector Council, which I am chairing, and the hon. Member for Sefton Central (Bill Esterson) asked whether we were working with USDAW. I should point out to him that USDAW sits on the RSC and is making a great contribution, and we are grateful for its support. The RSC will look at the issue of business rates, as per our manifesto commitment.

We all recognise the importance of retail and the contribution it makes, not just to the UK economy, but to our communities up and down the country, and the people it employs. I reassure the House that we will continue to work with the unions, the retail sector, local government and everyone else concerned to make sure that the retail industry across the UK has a bright future.

Question put and agreed to.

Resolved,

That this House notes that 21,000 jobs were lost in the retail sector in the first three months of 2018 due to store closures and company administrations, with more announced since; further notes that the retail sector is one of the largest employers in the UK and contributed £94.6 billion to the UK economy in 2016; regrets that the Government’s industrial strategy contains only three references to the retail sector; further regrets that the Government has presided over the biggest squeeze in wage growth in a generation, is failing to provide certainty around future trading arrangements after Brexit and has failed to ensure a fair business rates system; and calls on the Government to urgently publish a strategy for the retail sector.