WEDNESDAY 3 NOVEMBER 1999

MS PATRICIA HEWITT, MP, MR BRIAN HOPSON AND DR ANN EGGINGTON

  300. You are outlining possible barriers to competition. I was expecting almost a standard response such as A, B and C are the vital factors in establishing a healthy and competitive retail sector in the UK. I am not being too specific. These are big general points.
  (Ms Hewitt) I think they have to do with the structure of markets. As I have said, in any sector if you are going to have flourishing competition you have to make sure that there are not unjustifiable barriers to entry. You need to create the broader conditions that will enable a number of businesses to survive and to thrive. You need to make sure that there is not a monopoly or near monopoly, that there is not abuse of dominant position, that there are not anti-competitive agreements and so on. We have created a strong legal framework to promote competition.

  301. Do you take the view that excess profits are a driver or not a driver to competition?
  (Ms Hewitt) That is a matter for the Competition Commission and what we have done is to strengthen the plans of the Competition Commission.

  302. I think the most surprising thing you have said this morning is that there is no need for conflicts between the competition system and the planning system we have. Would you like to reconsider that?
  (Ms Hewitt) I think what I said was that there need not be any conflict between them. Clearly you need to have a planning regime and I believe we have now a better planning regime in this country than we used to have three years ago.

  303. How has it changed?
  (Ms Hewitt) I think Nick Raynsford elaborated on that both in his evidence and his memorandum.

  304. It is imaginary.
  (Ms Hewitt) We need to have a planning system that will both protect and promote the protection of our environment, that will ensure that people without cars can access the variety of facilities they need and that people with cars have a wider choice of other modes of transport to use and in particular, we need a planning regime that will ensure that we have vital town centres. That need not have anti-competitive effects. There is a separate competition regime which is designed, as I indicated, to ensure that anti-competitive behaviour is identified and stopped, that there are proper incentives to competition and also, that we strengthen the power of consumers by better labelling, better information, better advice to consumers because well-informed and active consumers are also a very important spur to competition.

  305. You say there is no need for conflict, it need not have an anti-competitive impact. It is incredible, is it not, that the whole nature of the planning process is to restrict the use of land and to say you can do something here and you cannot do something there. That is almost inevitably going to have an impact on the price of something and whether people can compete in the same neighbourhood, is it not? It is generally recognised that the reason house prices are higher in this country than they are in, say, France is because we have a much stricter planning regime on the one hand, that probably accounts for about 50 per cent of the price increase and the other 50 per cent is because there is a lot more land in France. I think that is generally accepted both in government and academically. It is a pretty extraordinary statement to say that the planning system need not have an effect on competition, is it not?
  (Ms Hewitt) You are a very practical expert and I certainly am not. The point I was making is really the one that Nick Raynsford was making in evidence to this Committee and I agreed with him, i.e. that within the planning framework you can have and you should have healthy competition. Clearly we have much less land.

  306. It is a different point, is it not? Within the planning framework, depending on how it is working, you clearly can have competition, but the essence of planning is to have an impact on competition which is why I find the statements that you are making surprising. I also find them surprising in an historical context because I am very glad we have not got the same Government policies that we had until 1997, but even so it has been the view in the DTI that the planning process has inhibited competition. It was part of the process that went into the creation of enterprise zones in the early 1980s. What you seem to be telling us is that that view in the Department has been put on one side. I would like to know if the Department does or does not have a view on how planning affects competition, but if it still has a view on how the planning system impacts on competition I would like to know what the departmental view is either from yourself or your officials.
  (Ms Hewitt) I think there are issues that ought to be of concern to all of us about how long it takes to get planning decisions and that can be a source of immense frustration to companies who want to expand their operation or to locate in a new site. I think that certainly is an issue that has an impact upon our ability to compete and to grow new businesses. I was not contemplating a theoretical situation in which you might have something—

  307. What I was trying to get at, Minister, is that everything to do with shopping is either put into the MAFF basket because they sponsor food or it is put into the competition authority's basket because they have got an inquiry, so all we are left to ask are questions about what is the general view of the Department because you straight bat questions in those two areas. I find it incredible that you say there is no need for conflict between the planning system and competition because you gave a good example of where the speed of planning was not done quickly enough, but actually the nature of drawing lines on maps and saying you cannot or you can is bound to have an effect on competition. I am just trying to get at what the Department's view is on the drawing of those lines on maps which prohibits certain things, what its general view is on competition in the country. I am astonished if the Department does not have a view on that.
  (Ms Hewitt) I was simply making the point that there need not be a conflict, that you can have healthy competitive markets within a planning framework and I do not take and I do not think the Department takes a theoretical view of competition which says that we should have some kind of theoretically perfect competitive market with unconstrained land use. That would be wholly undesirable for a whole range of reasons to do essentially with sustainable development.

  308. I accept that. There is bound to be a cost of protecting the countryside, protecting city centres and part of the costs may well be inadequate competition. I am trying very hard, although not very successfully, to get a view out of the Department about what weight and what value you put on that issue in terms of the damage it may do in approaching a more highly competitive situation which might drive prices down.
  (Ms Hewitt) As I think I have indicated, our priority is to strengthen the legal framework for competition and through the variety of measures we set out in the consumer White Paper, to strengthen the information and advice that is available to consumers so that we can get better informed and more demanding consumers. I do not know whether Mr Hopson could add anything to that.

  309. Mr Hopson, are you aware of a policy in the Department?
  (Mr Hopson) On the planning versus competition issue I would only echo what the Minister has said which is essentially that there ought be a cost-benefit balance for any policies which impact one upon the other. I cannot see that it is possible to say that 25 per cent of weighting should be given to that and 75 per cent to this. I would have thought you must work within a practical framework.

  310. Who makes the framework?
  (Ms Hewitt) The Department of the Environment in the context of planning. They create the planning framework and we create the competition framework.

  311. This morning you have more or less told us that the Director General of Fair Trading and the Competition Commission can undermine government policy without you doing anything about it. Is that right?
  (Ms Hewitt) No.

  312. You just said that they were independent and can make up their own mind.
  (Ms Hewitt) The Director General of Fair Trading and the Competition Commission are independent bodies. They conduct the investigation. If they make adverse findings it is then for the Secretary of State to make the decision about what action to take, if any, as a result of those adverse findings and he has a variety of powers under the 1973 Fair Trading Act. He can either order various companies to alter their behaviour or he can seek undertakings to that effect.

  313. Should not the Secretary of State intervene at the beginning to say that certain things are unacceptable if they are destroying the government policy?
  (Ms Hewitt) What the Secretary of State should do in my view is to wait for a thorough and independent investigation that establishes the facts of the situation and then to decide on the basis of that evidence and on policy grounds what action to take.

  314. Would you not agree that one of the key parts of government policy is to get an urban renaissance to bring back vitality to our city centres?
  (Ms Hewitt) It certainly is an objective of government policy and one that we will share to restore vitality to town centres. That is why we have the amended planning framework that we have.

  315. Is it not important that there should be planning certainty if you are going to achieve that?
  (Ms Hewitt) I think planning certainty is very helpful to the commercial organisations as well as to consumers.

  316. As long as this inquiry is going on there must be some uncertainty that the planning rules might be changed as a result of the inquiry.
  (Ms Hewitt) The Director General of Fair Trading has raised the planning question. It clearly falls within the terms of reference of the Competition Commission, and the progress report that was published on Monday by the Commission indicates their awareness of the need to complete the inquiry as quickly as they can but within the confines of leading to a proper and thorough job.

  317. When do you think the Government will make a decision on that?
  (Ms Hewitt) We will make a decision as quickly as possible after we receive the report.

  318. Let us have a timescale. Are we expecting a decision by Easter?
  (Ms Hewitt) We do not know at this stage when we are going to get the Competition Commission report. As you know, the normal period is 12 months which would take us to 7 April next year. The Competition Commission has not sought an extension to that time. The standard time-frame for responding to a Competition Commission report is ten weeks. It could be less, it could be more depending upon the complexity of the issue that arises. On the planning question, as I said earlier, if the Competition Commission were to make recommendations or adverse findings on the planning issue that is something which the Secretary of State for Trade and Industry would have to discuss with the Secretary of State for the Environment because the policy decisions would fall to the Secretary of State for the Environment.

  319. So we could have uncertainty for anything up to another 18 months, could we not? So if I owned a substantial piece of land on the edge of a town centre where I put in a planning application for a supermarket and it has been turned down particularly on the needs test and if I was certain as to what was going to happen I would have to look reluctantly at taking perhaps a lower price for housing to go on it, part of the regeneration thing or perhaps even for industry to go onto it, but as long as the uncertainty exists it is worth hanging on to that piece of land, is it not, sterilising it as far as the community is concerned because perhaps the planning regulations will be relaxed as far as supermarkets are concerned and I might get permission to have a supermarket on it in 18 months' time?
  (Ms Hewitt) Companies have to make their own commercial judgments. I think any Minister dealing with this area is aware of the difficulties that any uncertainty in the policy regime can cause, which is why the Competition Commission has indicated they will pursue their inquiry as quickly as possible and it is why we would seek to make decisions as quickly as possible on the basis of this report.

  Mr Bennett: If you really want to get on with the urban renaissance ought we not to tell the Commission about that as far as planning changes are concerned, they are unacceptable to the Government, we want certainty, we want an urban renaissance?