My final suggestion re this discussion is even simpler than my original answer (i.e. reforming Business Rates into Land Value Tax , and scrapping as many other taxes on business as possible, starting with VAT and then Employer's NI) as outlined here.
As we know, Tesco is two quite distinct divisions - a hyper-efficient and good value retailer/decent employer; and a ruthless and cynical property owning/developing side which games the planning system for all it is worth and f***s over lots of other businesses in the process.
It's a question of getting the good bit (the retail) without the bad bit. So, if a Tesco were to approach a local council and ask whether they can open a new store, the council should just say:
'Yes of course! We've identified and acquired an ideal site, give us the specification of the kind of building and car park you'd like, and we'll build it for you allow you to build it for us for a fixed price and we will rent it back to you under a normal commercial tenancy agreement - inclusive of Business Rates. By the way, so that there is no funny business, we'll build the building in such a way that we could convert it into smaller industrial, commercial or retail units.
And as you usually prefer a large store on a single storey, you won't mind if we maximise our return and build a block of flats above it - like above the Pavilions Shopping Centre in Uxbridge? Obviously, unlike there, we wouldn't have the entrances to the flats in the middle of the store!"
With Tesco's property division shunted out of the picture, no doubt the retail division will be able to come to some sort of mutually satisfactory rental agreement, and instead of having to argue over the Business Rates, the council can just collect the full rent and/or give them notice to quit. There is usually local opposition to Tesco (heck know why) so at least the council can point out how much rent is going into the municipal coffers to pay for 'stuff'.
Of course, there will be back-handers and bribes at every turn, but it's got to be better than what we've got now.
Thursday, 24 June 2010
Lola's Tesco problem
Here endeth.
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29 comments:
There is usually local opposition to Tesco (heck know why)
There's a number of reasons:-
1. Shopkeepers who don't want the competition.
2. Rich people/foodies who like the choice of shops that they have who know that Tesco will put some of them out of business.
3. Econutters who believe in some golden halcyon past.
4. Old people who are often better served by smaller shops.
5. People who will sign petitions from one of the above groups rather than telling them to piss off.
There's also a certain amount of NIMBYism about it. If you live in an old town like Charlbury or Crowthorne then you don't want a thumping great Tesco built which will ruin the general aesthetic of the place. Of course, you don't mind going down the road to the next town to use it...
JT, ta for list. What I mean is, if people really didn't like them, they wouldn't shop there. And the council in this example is perfectly entitled to tell them to naff off.
The thing is that it's generally quite a small and vocal minority, and also quite self-righteous in how they express themselves as "Trumpton Against Tesco" rather than "About 20% of Trumpton Against Tesco".
Most of Trumpton don't care that much, or are used to the fact that Tescos get built regardless of protest so don't mount pro-Tesco campaigns.
JT, yes of course.
By definition, rent-seekers are always the small, vocal majority, and if they want to keep Trumpton Tesco-free, good luck to them. But most rational people will move to the area where the Tesco is and where the local council has got loads of extra money to spend on 'stuff'. And in the meantime Trumpton will wither and die.
The last thing I want is for local authorities to get involved in is property development. Have you no idea how inefficient they are? They would probably end up losing money hand over fist. They seem to have massive cost over-runs on most building projects they undertake. Losses which would then have to be made up by the council tax payers. No thank you.
S, OK. I know perfectly well about cost over-runs (where people get money that they didn't earn fair and square aka waste aka corruption). We can fix this by making councils publish every single expense* item on-line.
Alternatively, the council could allow Tesco itself to carry out the construction for a fixed price for a fixed rent. That's the clever bit.
But allowing Tesco's property division (who get money they didn't earn fair and square aka corporatism aka corruption) to rule the roost is even worse.
In any event, whatever deal they strike re the rental agreement would be money coming in which they could use to subsidise the council tax payer; and not money going out
* The same applies to the terms of the bid for the construction of the supermarket plus car park. If they offer to spend £100 million on a supermarket in exchange for £1 million rent, then the council tax payers would vote it down.
"There is usually local opposition to Tesco..."
Which is why so many of those new Tesco's stand empty, no-one willing to shop in them, and...
Oh. Wait. Doesn't happen that way, does it? ;)
I am concerned that what we have here is replacement of a near monopoly with government interference in things that really need not concern them. Is that actually going to be better?
Looking in Wikipedia on UK supermarkets ( http://en.wikipedia.org/wiki/Supermarkets_in_the_United_Kingdom#List_of_current_UK_supermarket_chains ) it seems Tesco have over 30% of the market. Splitting them in half, by monopoly legislation, would still leave both halves within the top 4, at between 15% and 20% of the market.
And would not the upcoming retirement of Sir Terry Leahy as Chief Executive be a good moment to do that? Being clever chaps, they might even have a plan to hand, on how to do it.
Best regards
I'm having some difficulty working out how Tesco Eyesores and Properties building a supermarket/mall and renting it out is in any way different to the Little Fiddling in the Till Council building a supermarket/mall and renting it out.
You are all wrong .
The answer is Resale Price Maintenance which was relegalised in the US a couple of years ago (so spare us the absurd-fringe-idea brickbats).
If branded goods are sold at the same price everywhere (RPM) the small shop is not put out of business by predatory discounting.
We had RPM until the same bunch of Tory modernisers clobbered it ,at the same time they clobbered Schedule A so ushering in the present mess.
It is incredible that in this country you can with a stroke of the pen destroy working economic systems but that you can't reverse the process .
Two things,
1. I am glad that my 'tescos poser' got the old thought juices flowing mr W and..
2. Damn, beat me to the council build and rent back idea. Which if I have got my thinking right is in effect just the same as LVT. Ireally don't care which way it pans out as long as (1) I get a super efficient retailer and (2) I capture the rent premium from the landlord for 'the community' (yurgh - but I know what I mean)
DBC Reed,
It is incredible that in this country you can with a stroke of the pen destroy working economic systems but that you can't reverse the process .
What doesn't work about the current supermarket setup in this country? We have a number of competitors out there, the largest of which has 30% of the market. I've got a choice of half a dozen different supermarkets as well as at least a dozen small shops, specialits and delis. Plus farmers markets, organic veg box deliveries, Ocado online and so forth.
DBC Reed.
Don't really agree with price controls. They always seem to backfire and make people pay more than they need to. It costs us money.
JM, exactly, I am a big fan of their retail side.
NS, the supermarkets are in fact quite competitive as against each other, it's the Tesco land owning division that is a series of local monopolies. Seeing as their sites are inevitably a local monopoly, why shouldn't the local council reap those monopoly profits.
DBC, price fixing is a terribly idea, as JT and L explain. What about Tesco own-branded goods for a start? Competitive forces are quite enough to prevent overcharging, and smaller convenience stores/corner shops provide exactly that - convenience. They get away with charging a few pence extra because they're, er, convenient.
L, exactly - renting from 'the state' (Crown Estates, council house, council premises) is even cooler than LVT as no dispute between 'freeholder' and 'state'.
L, to clarify, it's the building that has to be built, sold and rented back. The council only gets the monopoly land profits if it owned the site already.
Go to the trouble of reading the American Supreme Court's findings on RPM: the case is docketed as Leegin Creative Leather vs PSKS (trading as Kay's Closet).
The argument's are all there: put by economists (from Univ of Chicago) as well as lawyers.Not that it was reported over here.
RPM is where LVT was ten years ago in the UK .
What right has Tesco's got to sell goods at below the price the manufacturers set,esp when it screws up the manufacturers distributors? NB the old rallying cry of American People's Party:
left to themselves the markets fall under the control of the middlemen ,not the primary producers especially in agriculture.
DBC,
1. Even if we had RPM, what's to stop competing manufacturers setting the price at whatever the supermarkets dictate?
2. If somebody is prepared to buy my stuff and sell it at a loss, why is that my problem? That's a subsidy to me, surely?
3. Even if we could devise a perfect, non-distortionary RPM system (which we can't), that would just depress the amount the council can collect in rent (in this example), so it's cutting off your nose to spite your face.
DBC Reed,
What right has Tesco's got to sell goods at below the price the manufacturers set,esp when it screws up the manufacturers distributors?
Because it's no longer the manufacturer's product. It's Tesco's.
"There is usually local opposition to Tesco (heck know why)
There's a number of reasons:-
1. Shopkeepers who don't want the competition."
Years ago, when I was on the town council for the town I lived in, one of the big supermarket chains wanted to build a premises on the high street. They employed a local estate agent to go round all the shopkeepers and ask them if they were for or against the new supermarket and why. Apart from the two existing supermarkets (Co-op ans Somerfield), there were only two others against it, and one of those was opposed for pretty spurious reasons. Everyone else realised that a supermarket that attracted people who would otherwise shop in the next town along (which already had a huge Tesco) had to be a good thing, especially if it meant there was more free parking in the centre of town. Increasingly, nowadays, there are so many supermarkets that additional ones are competing with each other as all the people who drive to the supermarket to do a weekly shop have long since stopped using the smaller retailers already.
Its a pity nobody's prepared to do any homework on RPM.
MW's points. Can't follow No 1. RPM is not the same as cartel(or horizontal ) price-fixing,if that's any help.
No 2 people selling your stuff at a loss is a complete nuisance.Once the punters see your brand sold at Tesco's at an unrealistically low price they are not going to buy it when its sold at a realistc price anywhere else.Tesco's end up chopping down your distributors to just them.
Don't forget the supermarkets don't pay the producers full whack but make the manufacturer (and farmers particularly) accept a reduced price,in effect making the producer subsidise the discount.
Supermarkets also charge producers
for prime point-of-sales positions in the store.
Point 3 RPM restores high streets to what they were (before the Tories kiboshed it in 1964 ,despite the warnings of the small shopkkepers who were once their strongest supporters.)What you lose on rents/land values in out of town superstores,you gain in
a renewed town centre.
@JT Thats the way Tesco's see it.They can make a product appear cheap and nasty by massive discounting,when the whole strategy of the producer's
marketing has been to make it appear up-market and reliable.(See why Leegin did not want their belts etc discounted.)
Also I am not sure that supermarket shopping is that much cheaper.You have to do it by car,so the cost of this and the storage/freezers etc has to be factored in.You are subsidising supermarkets by i) your time (people used to buzz round the shops in their dinnerbreaks in the old days)2) transporting the stuff about by car 3)duplicating freezer facilities.(In Paris people very often buy stuff and eat it fresh the same day).
"Also I am not sure that supermarket shopping is that much cheaper."
I'm sure you're right, people have been saying this for years, also that it is better to have people actually living in town centres, like in France, so they can walk to the shops, instead of having a retail desert. However, nobody listens and nobody does the maths. Everyone goes for the myth of cheaper supermarkets, which isn't really true unless you shop at Aldi or Lidl (and not always then).
DBC Reed,
@JT Thats the way Tesco's see it.They can make a product appear cheap and nasty by massive discounting,when the whole strategy of the producer's
marketing has been to make it appear up-market and reliable.(See why Leegin did not want their belts etc discounted.)
Just don't sell to Tesco, then. No-one's forcing you to.
DBC: "Supermarkets... charge producers
for prime point-of-sales positions in the store."
We keep coming back to a land-owner's monopoly profits, don't we? Reclaim those and everything else falls into place. Apart from that, see what JT says.
B, which 'retail desert'? It is quite clear that supermarkets put fishmongers, greengrocers etc out of business, but then instead of a high street full of fishmongers and green grocers, we get a supermarket or two and all sorts of businesses with a smaller 'minimum efficient scale', such as estate agents, hairdressers, cafés, beauty salons, pubs, second hand bookshops, launderettes, computer repair shops etc etc. What's not to like?
This is a utopian view of supermarkets:that they are near high streets and surrounded by other shops.I have known city centre supermarkets,for instance in Swindon but they were
by accessed by no stopping roads with double yellow lines so no one could park outside the little shops that lined them and which were consequently dying out.(In my time ,doubtless things have since reached a state of perfection).Elsewhere
supermarkets are out of town fortresses with little in the way of small-shop remora (little fish that feed off big fish).If you were serious about cutting car use you would re-introduce RPM.If you were serious about reversing the decline of towns you would introduce RPM.If you were serious about decentralisation you would bring back RPM.But since the fantasy of the free market dictates we live in suburbs and drive along deserted canyon streets to shop at cartel shops miles away,then that is what we will doubtless get.Funny I thought monopoly was the enemy.
DBC, that's the trouble with basing everything on anecdotal evidence. I live in the east end of London were everything is close to the High Street, there is no 'out of town' and I observe very much a 'remora' effect (thanks, that is the word I was looking for).
But you aren't answering the question - why go through the rigmarole of introducing LVT, when the council can simply become the landlord and cut out the middleman? The council can just as much be the landlord of 'out of town fortresses' (like Bluewater or Lakeside) can't it?
The same applies to council housing - if they just built so much council housing that there was something for everybody (from council owned executive villas down to council owned bedsits via council owned farmsteads) at very low rents, wouldn't that chop off Home-Owner-Ism at the knees?
@MW You are calling my evidence e anecdotal and adducing anecdotal evidence of your own. I wager my evidence is more typical: round here there are so-called Tesco towns with only one supermarket reached by car from outlying villages.Where there are two they divide the business down the middle and work as local monopolies.More anecdote :my local DIY superstore collects customers post codes for market research (I trust!).Since you can see the lists in front of the till girls and they are very gabby, it becomes obvious that most of the customers are from roughly the quadrant of the town the store is in.The town's DIY stores are not in any real competition and are geographically dispersed to client estates.
I must confess that I did not take your proposal for local government to build shopping centres and lease them out very seriously.This sudden conversion to Shaw's municipal socialism or the Joe Chamberlain radical liberal scheme for Birmingham leaves me bewildered.What is the difference between this and local authority owning and running them,say on a John Lewis partnership basis?Or to make money as a source of local government revenue. Once you deal with natural monopolies with some element of local control you may as well go the whole hog.
At least under local control ,you might get some kind of RPM .
(I am naturally perplexed because returning the railways to public ownership as suggested recently raised a dense cloud of objection and an encomium to this natural monopoly remaining entirely in private hands.)
BTW County councils once bought and let out farms to young farmers.I believe this bright idea from the past suffered the fate of all good schemes once attacked by "free-market" fanatics.
DBC: "You are calling my evidence e anecdotal and adducing anecdotal evidence of your own."
Exactly. It's all anecdotal. Maybe yours is more typical. But I grew up in W Yorks and it was much the same there as in E London.
"Once you deal with natural monopolies with some element of local control you may as well go the whole hog."
Nope, why? The state can do what it does best (act as monopolist) and private sector can do what it does best (making and seling stuff)..
@MW fresh in from Harry Pollard on land cafe who ,not incidentally,favours private-sector fire brigades:" It should be in bold capitals in Economics 101 that you never turn a public monopoly into private hands,no matter the regulations that are put into place to control it."
I think Tesco is a rather unpleasant, low quality shop, and I was annoyed that when they opened in our part of London we got the shite area white signage, rather than the posh area black signage.
But there was never any doubt it was going to be better than the crappy corner shop that was there before.
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