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Shane Frith: Conservatives should not be attacking supermarkets, but seeking to further deregulate that sector

Go Shane Frith is director of the classical-liberal think-tank Progressive Vision. He has worked for Conservative MPs in the UK and National Party MPs in his native New Zealand.  He is a former chairman of the International Young Democrat Union, linking young people involved in centre-right political parties worldwide, including the Conservative Party.

This is the first in an occasional series of articles exploring the need for a pro-economic growth policy agenda.

Last year, the chairman of the BMA accused government health “reforms” of attempting to make hospitals operate like supermarkets.  I responded at the time that we wished the NHS operated more like supermarkets on the grounds that supermarket customers can buy a wide and diverse range of products, at very reasonable prices and can expect minimal queues or waiting times to get what they want.

Yet, despite the success of Britain’s supermarkets in delivering good service and great products at a fair price, it remains common practice to attack supermarkets – including from prominent members of the Conservative Party.  Primarily the call is for government regulation to limit the ability of supermarkets to open new shops and, perversely, to force supermarkets to weaken their negotiating position with certain suppliers.

The farming lobby, not content with living off taxpayer subsidies, has been very effective at complaining that supermarkets negotiate too hard.  Well, diddums!  If Tesco negotiates hard with a Chinese manufacturer of widgets, we wouldn’t criticise them.  If Waitrose drives a hard bargain with a New Zealand wine supplier, we don’t hear them crying into their Chardonnay.   The free market is competitive and this is the world supermarkets inhabit. 

Tesco may be at the top of the tree today with a 31 per cent market share, up from 21 per cent in 1998, however the next decade could see them following Morrison’s fall of over 14 per cent since 1998. There would be no bailouts (I hope!) and little chance of an EU subsidy.  If a supermarket fails to respond to technological change or a new competitor, they can close.  As a supermarket customer, I hope they negotiate hard with farmers and pass on some of the savings to me – and if they don’t I’ll go to a competitor.

The Conservative Party is a supporter of the free market, yet 15 of its MPs have signed an early day motion complaining that supermarkets “transfer excessive risk” to suppliers.  This has frightening parallels with policy makers in the US who complained that banks were being unfair and weren’t lending to poor people. As a result the government forced banks to lend to poor people – the rest is history. 

Rather than seek to further regulate supermarkets, a future Conservative government should be seeking to encourage more competition and better service to the public.  It could start with repealing the law preventing shops over 280m2 from opening longer than six hours on a Sunday.  This is an anachronistic policy which has no place in modern Britain.  Surely the decision on where to shop on a Sunday (or any other day of the week) should be for the individual to decide, not a politician in Westminster? With high unemployment, the increased jobs created should be reason enough.

Likewise, Britain’s planning laws inhibit the opening of new shops.  Tesco’s so-called “land bank” is minuscule compared to the existing supermarkets in the country.  Yet, planning restrictions do far more to restrict the supply of new shop space (and housing) in this country.

Of course, we can all find examples of where a particular supermarket may have a dominant position in a local market (seldom a monopoly, despite the regular misuse of that word), but as Philip Booth pointed out last week, many local butchers, green grocers and corner shops also enjoy local dominance in certain areas.  The best remedy is the ability for competition to flourish.  If these retailers exploit their dominance too much, they will encourage competition – often now online.

We receive great service from the supermarket sector – we can look at the alternatives by looking at state-run institutions in health and education.  Politicians of all parties should be celebrating the success of our supermarkets – some have even opened branches abroad (Tesco in 15 countries alone).  It is time we stopped bashing this industry and removed the shackles that harm both the retailer and consumer.


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