Westminster Blog

David Cameron’s suggestion that the government could be run more like Tesco has not gone down well in all quarters.

A group called Tescopoly (set up to defy the grocery giant) points out:

“We are very interested in these comments seeing as previously Cameron has spoken of the need to make trade fairer between supermarkets and farmers* and publicly supported calls for a watchdog.

Regarding the supermarkets cutting costs (and continuing to post record profits during a recession), we need to ask the question of who is paying for this? The answer is suppliers and farmers – and in the long-term consumers.”

Tescopoly’s members include Friends of the Earth and the GMB union.

In April 2008 the big supermarket chains were criticised in parts of a Competition Commission report into the industry.

The commission found:

* “Suppliers receive the lowest prices, on average, from Tesco and obtain the highest prices from small wholesalers and buying groups”

* “Grocery retailers’ buyer power is of benefit to consumers since part of the lower supplier prices arising from this buyer power will be passed on to consumers in the form of lower retail prices…However, the transfer of excessive risks or unexpected costs by grocery retailers to their suppliers is likely to lessen suppliers’ incentives to invest in new capacity, products and production processes. We concluded that, if unchecked, these practices would ultimately have a detrimental effect on consumers.”

Tescopoly argues that this is at odds with the Cameron view of supermarkets reducing costs to ‘make their service to their customers better’.

* I’ve checked out what David Cameron had to say on the issue a year ago:

From the FT, May 2008:

The Conservative leader used the address to renew his criticism of the big supermarkets and to hold out the prospect of cuts in taxation and red tape for their smaller competitors.

“If small independent shops have a greater social value than chains or larger shops, then it makes sense for them to benefit . . . from an advantageous tax and regulatory regime which tips the balance back in their favour against the larger retailers,” Mr Cameron said. But he failed to specify any details of such an “advantageous” regime.

In contrast to his praise for independent retailers, the Conservative leader criticised the relationship between the big supermarkets and farmers as “another example of inadequate regulation”. While the supermarkets’ “habit of using their market power to squeeze the margins” of suppliers could produce welcome price cuts, Mr Cameron warned about abuse of that market power.